Problems beset India′s startup landscape | Asia| An in-depth look at news from across the continent | DW | 17.10.2016
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Problems beset India's startup landscape

The internet-based startup scene is expanding in India, with many new apps emerging to reinvent the way Indians live and do business. But there have been some hiccups too in this booming sector. Murali Krishnan reports.

Shankar Narayan, a 28-year-old engineer has been busy meeting potential financiers and promoting his new media platform called ClickMyDay.  It has taken him and his four-member team three months to build this mobile app. "What we are trying to deliver to our customers is a tool where they can plan their entire day, be it watching a movie, going out to a restaurant or ordering food," Shankar told DW.

After spending nine years in advertising, Shankar believes this is his real calling. He tried his hand working in earlier jobs but was somewhat unhappy. He is, however, not the only young internet entrepreneur to feel this way.

Spotting a business opportunity in the unorganized art market, Bharat Sethi, a 26-year-old Delhi University economics graduate, founded the e-commerce firm PosterGully three years ago. After studying the market, Sethi found out that artists usually find it hard to sell their work. This was often a result of inadequate sales and marketing skills.

"We have created an automated platform where a lot of people can come and within 15 minutes they can start selling their creative work in various categories, starting from fabrics, apparels, tech accessories to skins and decals. We have about 30 categories right now," Sethi proudly claims, adding that his app has been growing tremendously.

"Last year, for example, there were over six million visitors to the website, and we are now looking at a million dollar run rate. Meanwhile, we have grown in terms of the team size and raised two rounds of funding," Sethi noted.

Among the top five

In recent years, the Indian startup scene has taken off and come into its own - driven by factors such as increasing investment, evolving technology and a growing domestic market.

This has fueled a boom in thousands of startups that have created apps, thus reinventing the way Indians shop, eat and carry out business.

Figures indicate that India is among the top five countries in the world when it comes to startups. In 2015, the number of startups grew at an exponential pace - increasing by nearly 40 percent - taking the total figure to over 4,200 by the end of the year. This makes India home to the world's third largest tech startup ecosystem, trailing only the US and the UK.

Young entrepreneurs in the South Asian nation have been the major drivers behind this growth. Similarly, the number of incubators and accelerators has also increased dramatically, says Growth Analysis, a firm tracking startups.

Industry analysts say the booming startup culture is also reflective of the efforts being taken by the government to check brain drain and encourage young entrepreneurs to "Start in India and Stay in India."

A minor blip?

But there have been some hiccups too in this booming sector. A recent report by KPMG, a leading provider of tax and advisory services, pointed out that mounting investor hesitation and concerns of overvaluation, had led to a decline in investments in the first financial quarter.

"After pumping more than $9 billion into Indian startups since the beginning of 2014, investors started pulling back late last year because of a mix of global macroeconomic factors such as a growth slowdown in China, as well as concerns over massive losses incurred by startups," said the report.

"Many of the e-commerce companies' valuations are falling. Global investors have scaled down their valuations by 30 to 40 percent. That has created a mini negative sentiment for financing of startups," says MK Venu, an economic analyst. "Still, the ecosystem for startups - which is ideas - still remains robust in India," he stressed.

Listen to audio 05:20

India's internet entrepreneurs

But despite the minor downturn, just last year alone, nearly 100,000 jobs were created in the country by startups, according to data released by IT industry body NASSCOM. The association predicts that the number of startups will increase to 11,500 by 2020.

And global giants like Google, Facebook and Amazon are investing heavily to capture this new consumer segment. "I think we have just begun on this journey of technology entrepreneurship. So I am very optimistic that in the coming decades many problems India faces can be solved through technology. I am very optimistic about that," says entrepreneur Kashyap Deorah.

In his mid 30s, Kashyap set up his fourth company, Hypertrack, that positions itself as a track and trace service for local deliveries.  He is also the author of a recently released book - "The Golden Tap" - that tells the inside story of Indian startups.

It's clear that these new-age startups are currently making waves in India. And many hope the sector will continue to thrive, given the country's relatively inexpensive labor and the size of the potential market in the world's second-most populous country.

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