Start-up launches slump to 800 in 2017
BENGALURU: The number of new internet and technology startups launched in the first nine months of this year has slumped to 800 from more than 6,000 in all of last year, as start-up closures, the struggles of large internet companies such as Snapdeal and a slowdown in the growth of the e-commerce market took their toll on entrepreneurial activity.
According to data from Tracxn, a start-up tracker, the number of new start-ups has now dropped steeply for two years in a row. Mint reported on September 22 that while some investors are again interested in backing new consumer internet start-ups, there is an acute shortage of such companies.
The slump in new start-up formation is a worrying trend for the nascent Indian start-up ecosystem. It is a legacy of the go-go years of 2014 and 2015, when investors rushed to fund internet start-ups in the belief that the Indian internet market would turn out to be a gold mine in a very short period of time.
But as early as 2016, the expansion of the e-commerce market nearly halted. Since then most e-commerce companies, which had relied on deep discounts and extensive advertising for growth, have been struggling to find the right business models for a market that hasn’t lived up to their expectations.
Last year, the e-commerce market grew by less than 15% to $14-15 billion, according to RedSeer Management Consulting.
The fall in new start-ups is partly cyclical. Budding entrepreneurs who had flocked to start consumer internet firms in 2014 and 2015 have shifted to areas such as software as a service (SaaS), business-to-business e-commerce and fin-tech over the past 18 months.
If thee-commerce and consumer internet market pickup in a big way, entrepreneurs will again shift their efforts.
“The new promising spaces like SaaS and fin-tech in startups have higher filters for user adoption, revenue generation and funding compared to hyperlocal and delivery start-ups (that were in vogue in 2014 and 2015),” said Karthik Reddy, co-founder and managing partner, Blume Ventures, an early-stage investor. “That being said, because the filters are higher, you’re also seeing a better quality of entrepreneurs and ideas in these spaces. We continue to see a very strong flow of pitches every week from entrepreneurs.”