Start-up culture catches on in India
About $6.5b has been invested in new firms in the country this year, up from $2.2b last year
In a sprawling wholesale market of timber, glass and marble, businessman Amit Gupta supervises workers loading sheets of glass on trucks for builders across India — his family business for five decades.
As plumes of sawdust float up, Gupta says he wants to play a role in the new economy. For the past year, he’s been reading newspaper stories about the booming start-up culture, with millions flowing in from venture capitalists and nerdy graduates of India’s tech universities becoming millionaires overnight.
About $6.5 billion (Dh24 billion) has been invested in start-ups this year, up from $2.2 billion last year, according to the National Association of Software and Services Companies, an industry group. Three to four tech start-ups are born every day in India, it says.
Gupta’s family has for years invested in land. But this year they decided to take $700,000 and invest in start-ups.
Two decades of India’s information-technology success and the large pool of English-speaking engineers have created fertile ground for e-commerce companies and innovative tech start-ups. Angel investors and venture capital funds are mushrooming.
Many Indians who traditionally invested in land, art, gold and stock markets are beginning to invest in start-ups, said Sunil Goyal, founder of Your Nest, a venture capital fund in Gurgaon, a suburb of New Delhi. This year, his firm has 140 such new investors, up from 35 in 2012.
It’s also a risky proposition — far more unreliable than a cache of gold or land. Even as Indians are celebrating the new millionaires, there are signs that at least its fledgling ecommerce companies are overvalued and the market may be slowing soon. In recent weeks, some restaurant and food delivery start-ups laid off hundreds of employees.
Investment activity
“Investment activity in startups is at an all-time high now. But it is also risky,” said Arun Natarajan, head of research service Venture Intelligence, in Chennai. Only three of 10 startups are likely to be super-successes, he said.
In recent months, India’s government, led by tech-savvy Prime Minister Narendra Modi, has launched a new initiative called “Start Up India, Stand Up India.” Authorities have set up a $300 million fund for start-ups and eased restrictions on Indians abroad who want to invest in venture capital funds here.
The e-commerce company Flipkart.com, an Indian version of Amazon, attracted $1 billion from investors, including the New York-based fund Tiger Global this year. The company is worth $15 billion today, and its two owners are featured in the Forbes India list of billionaires.
Another buzz-creator this year was Vijay Shekhar Sharma, 37, the founder of Paytm, a mobile payment company that was funded with $680 million from Alibaba and its affiliate.