All isn't well for the Indian startup industry. While the Modi government thinks that startups is the future of the nation and is hence trying its level best to take the industry to a different level altogether. Global investors and venture capitalists are doing the exact opposite. After showing immense interest in the Indian startups for the last 6-7 years, these investors are now tightening their purse strings.
A new report released by CB Insights and KPMG reveals some startling facts about the Indian startup investments. According to the report, the fourth quarter of the year 2015 saw the venture capital investments dip to nearly a half from $1.5 billion in July-September the same year.
According to industry experts, there could be two main reasons for such startling trends. Firstly, it could be the effects of China's economic slowdown lap around the world. Or, secondly, it could be because of the investors realisation over a period of time that huge online sales are still clouded by soaring valuations (over-valuation) and profits that were still nowhere to be seen.
Such discouraging statistics from the Indian startup industry can hugely impact its overall reputation and potential in the global market.
Industry insiders reveal that all isn't as hunky dory in the Indian startup scene as it seems from outside. According to them, a majority of Indian tech startups have been for long making losses, not profits. This is mostly because their focus is generating more revenue from the customers that buy goods and services by following a business model which is discount-driven. They then use this growth in 'gross merchandise value' on their platforms as a fancy endorsement in order to attract funding from investors.
Flipkart and Snapdeal, two of the most epic Indian startup success stories have a strong backing of big names like Singapore state investor Temasek Holdings, Japan's SoftBank Group Corp and Accel Partners. These big names invested in these aforementioned startups by getting attracted by a huge growth potential in a country where only 252 million of the total 1.3 billion people currently have Internet access.
According to banking and industry sources, both these industry biggies have had huge losses in their race to compete for increasing sales and more market share through deep discount models.
Some startups have already detected the warning signs well in advance and have also started preparing for it. For example, food delivery companies like TinyOwl and Foodpanda have either shrunk their services or cut down on jobs.
What does the future hold for the Indian startup industry, is something which only time will tell but we would surely advice them to slow down, evaluate, introspect and then progress.
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