Making it a year of startups, Indian and foreign investors have pumped in a whopping USD 8.4 billion in new Indian startup ventures, including e-commerce platforms in 2015 through close to 1,000 deals, even as questions have begun to be asked about their hefty valuations.
Those opening the purse for Indian start-up s included industry titans like Ratan Tata and N R Narayana Murthy as also marquee global investors like Alibaba and Softbank.
According to data compiled by domestic technology and startup blog, as many as 936 deals worth over USD 8.4 billion have been inked this year — up from 304 deals worth USD 5 billion that took place in 2014.
The industry is looking at a promising 2016, though experts and even the investors anticipate correction on the valuation side. The sectors to watch out for include financial technology, healthcare and enterprise technology among others.
Also, the focus might shift a bit away from e-commerce companies towards some new areas including agriculture. This year, the e-commerce sector, led by e-retailers like Flipkart and Snapdeal, and the taxi-hailing app Ola, dominated the startup investments space. Many of these firms commanded very high valuations, with marquee investors like Softbank and Alibaba among others doling out top dollar.
“The technology and e-commerce sectors have been in the limelight in 2015, and our country is the fastest-growing startup ecosystem in the world, right now,” Indian Angel Network (IAN) president Padmaja Ruparel told PTI.
“Eleven of the 68 ‘unicorns’ globally, (companies that are valued at over USD 1 billion) are of Indian origin,” she added. However, a debate has begun over the high valuations at which many companies have received funding. Several industry titans including former Tata group chief Ratan Tata, Infosys founder NR Narayana Murthy and techie-tuned angel investor TV Mohandas Pai, have questioned the high price e-commerce companies are commanding for parting stakes.
Ratan Tata, who himself has personal investments in more than a dozen startup s, took a dig earlier this year at the fledgling sector, saying “valuations” and not “evaluations” are driving the play.
Pai also believes that only about 10 percent of the startups will succeed over the next few years, and about 25 percent will stay afloat, while the rest are bound to fail, leading to consolidation. Ruparel pointed out that following the meteoric rise in the first half of 2015, valuations have become more grounded in the second half, and investors are also more keen to find out the business parameters before backing a company.