Will tech startups bring in the next wave of disruption in India’s IT industry?

A NASSCOM-Zinnov report suggested that more than 1000 tech startups were launched in 2017, with the total number of tech startups now reaching around 5000+.
Will tech startups bring in the next wave of disruption in India’s IT industry?
Will tech startups bring in the next wave of disruption in India’s IT industry?
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The surge in the vibrant startup landscape in India has shifted perspectives for many companies around the world. They’re looking at India from a completely different light, now that several Chinese investors are investing in Indian companies as well. The 2017 NASSCOM-Zinnov report suggested that there were more than 1000 tech startups that were launched in the year, with the total number of tech startups now reaching around 5000+. The rapid rise of funded startups is going to increase further in 2018, with global investors looking to fund the future of the country.

Bullish view of India

R Chandrashekhar, President, NASSCOM, is bullish on the IT startup space.

“The Indian startup ecosystem is maturing, driven by young, diverse and inclusive entrepreneurial landscape. This is leading to emergence of focused domain solutions for verticals like healthcare, agriculture, and education. Findings of the report are a testimony to the potential of the start-up landscape and the scope of growth and opportunity that India presents. NASSCOM will continue its drive towards catalyzing deep tech start-ups, build category leaders and support start-ups to create for India.”

B2B tech startups have taken the cake with regards to growth in India in 2017. With Indian investors focusing on profitability and cash flow, B2B startups are an attractive avenue for investors to get good returns. Sectors like healthcare, fintech and logistics are providing much needed relief for investors who want “value” businesses to invest in. Almost 50% of all startups in 2017 were in the B2B segment, up from 34% the year prior.

Growth from Tier II & III

While Bangalore, Delhi and Mumbai still make up the bulk of the investments in the tech startup space, Tier 2 and 3 cities are also growing, making up around 20% of the tech startup space. This means that investors are looking inwards rather than on the surface to invest in. Brands that are solving local problems are being preferred, as they provide inroads to national expansion. It’s not just the startups themselves but the venture capital ecosystem as well. Around 40% of active business incubators and investment funds are located in Tier 2 and 3 cities. India’s witnessing a nationwide expansion of capital in IT.

Startups in the IT space that are focused on futuristic technologies like AI, Data Analytics and AR-VR have seen a 5-year CAGR of almost 30%. SaaS-based enterprise and SMB solutions make up a large proportion of that segment and funding has seen improvements in the space over the last few years.

Growth in investments

In H12017, investors pumped more than $6 billion of funding into Indian startups. What was most surprising is that just the number jumped from last year’s slump by almost 160%. With the influx of Chinese and Middle Eastern money into Indian startups, the space has received new life after initial slowdowns. Where Indian investors may be shying away from investing, Chinese investors have started to place strategic outposts for investing.

Need for further support

With regards to whether Indian startups are receiving all the support necessary, they might not be. According to Rajiv Sundar, Programme Director of Technology Deloitte Fast50 India 2017, India still needs support.

“India is lagging behind in terms of the infrastructure needed for accelerated growth for startups. Having said that, we saw a lot of maturity in entrepreneurs this year when compared to the previous editions of our programme.”

Deloitte’s Tech Fast50 combined a top 10 list of the fastest growing tech startups in India and the results are stunning. Multiple companies are growing beyond expectations with Byjus making huge waves across the world.

Fast paced & growth-minded

In the year 16-17, these brilliant companies recorded an average 3-year growth rate of more than 500%. That’s an incredibly large growth rate for any startup let alone one in the tech space. Seven of the 10 companies are repeat winners, meaning that they have been showing growth on a repeat basis. The top three companies even averaged a growth rate of 730% on a 3-year average. With the adequate support of the Indian startup ecosystem, IT startups can flourish globally.

The real impact of the startup space is felt in the economy of job creation. With more than 80,000 jobs being created because of startups, the IT startup space has taken the responsibility of moving India forward. With the continued support of global investors and local talent, the Indian IT startup space will grow fruitfully over the next 3-5 years. The IT industry is looking for a wave of disruption and the startup space is the one bringing it. 

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