2015 was the year of e-commerce with $40.4 billion funding and 1649 deals in Asia. 2016 is set to end with much lower funding and lesser no. of deals with $14.6 billion and 732 deals in the first half of the current year. According to global startup analytics firm CB Insights – India’s funding ecosystem saw a 46% fall in in the 4th quarter of 2015, compared to the previous quarter. Their latest report says funding to Indian startups dropped a further 60% in the second quarter of 2016.
But this ‘funding-detox’ is giving way to better startups – more space to grow. It isn’t stopping people from starting on an entrepreneurial journey and the investors too think there has never been a better time to start-up. Upside of funding drying up is that “hobby entrepreneurs” with nonsensical ideas are retreating and real entrepreneurs are getting a fair hearing.
E-commerce was the top-funded category in 2015 but this year its the B2B products in the space of Artificial Intelligence (AI), Internet of Things (IoT), Edutech, Fintech, Machine-Learning, Robotics etc. IT trade association Nasscom’s Startup Warehouse has already received 2,700 applications in 8 months of this year as compared to 3,400 applications received in the whole of last year. They expect to receive 2,000 more applications in the remaining part of this year which is in fact pleasantly surprising.
While the average age of the founders continued to be between 25 and 30 years; nearly 25% of Nasscom’s applications are from repeat entrepreneurs. Many entrepreneurs who failed in the previous venture have learnt from their mistakes and are trying again. This time they are more prepared and understand the product-market fit.
Various popular startup-accelerators too continue to see growth in the number of startups applying for their accelerator programs by as much as 80% this year. Axilor Ventures, Jaarvis Accelerator, Microsoft Accelerator, TLabs and others busy are hearing pitches from startups.
Accelerators have also noticed that the percentage of founders with startup experience has gone up so there is a certain level of maturity in the market. The ecosystem has developed, the entrepreneurs know what products to build. For accelerators it is a good target group where the founding team has two to four years of prior startup experience. Second and third-time entrepreneurs are tackling bigger problems and building deeper technology products.
As it seems – for entrepreneurs who have done their research well on their super-solid idea – a downturn is a good time to start up. And for investors – it is a great time to invest. The next six months are crucial as smart investors might take contrarian bets.