The tragic turn in the Indian startup ecosystem

Start-ups in India has seen roller coaster ride in recent times. There are many ups and downs seen with India's start-up unicorn.

indian startup ecosystem

The Indian start-up ecosystem was named the third-largest in the world after the US and India. There are more than 50 Indian startups that carry the potential to enter the unicorn club (as of 2022), but the ground realities are different. Paytm Mall, which lost its status as a unicorn in 2022, is a notable point to be considered.

The funding crisis is also approaching, India’s biggest tech investor named, SoftBank’s Vision Fund has recorded a loss of USD 26.2 Billion. More than 5,000 employees have been laid off from some of the promising startups such as Meesho, Vedantu, etc.

But why has this happened?

Here are various reasons,

Lack of innovation, as per the study, it has been observed that more than 80 percent of Indian startups fail in the first five years, the major reason behind this is the lack of innovation

Minimal contribution to the open-source ecosystem

Over Regulations

Turbulence in the “Unicorn Arena”

Well! Things are not as bright for the Indian startup as compared to the last years, as per reports, India raised only USD 1.6 Billion in April 2022, which is estimated to be half of the capital raised by the same ecosystem in April 2021. No company entered the unicorn club this year whereas eight new additions were created to the Unicorn list namely PharmEasy, CRED, Meesho, ShareChat, Groww, Urban Company, Gupshup, and Chargebee. This is something not to worry about, though the companies are witnessing a downturn due to ongoing scenarios this will not last for a long time, the trend would be quite positive in the long run and we will see more unicorns this year.

Large funding round is one of the major issues for the decline in funding in April 2022, companies such as VerSe Innovation raised the biggest fund in the market with the valuation of USD 5 billion and bagged USD 805 million.

Ecommerce Company Meesho is trying to close another funding round at a valuation of around USD 8 billion but no investor is willing to collaborate with the company at the moment.

Cut the burn: Layoffs are the aid plan for various startups

Several startups have already started preparing for the worse, India has recorded massive layoffs for more than 7,000 employees in the first four-month of 2022. In May, Vedantu and Cars24 fired more than 1,200 employees, the list is long, taking into consideration, laid off 3,000 employees, Ola 2,100, Unacademy laid off 925, and Furlenco laid off 200 employees

The companies had to take this tough decision, as the capital may be limited in the upcoming quarters due to the ongoing war crisis in Russia-Ukraine, looming recession qualms, and hike in fed rates.

Another reason for the layoff scenario is the forced M&A, the investors will now force VC-funded startups to merge to lower their burn rates and rationalize the costs to generate a higher chance of surviving. This will lead to further layoffs, which will be more painful for everyone.

But as well know bad times will not last forever, maybe this can be the case till the next 12-18 months, but later, we are expecting the new normal for the economy till then the companies are required to take measurable action and business outcomes. Ride the Storm!!

Some of the interview questions were designed to explore and motivate the companies in the long run

What are some of the key decisions that a company could take to sail through this tough time?

The companies may observe low revenues in the short term but can find a way to mitigate the losses with consistent productivity and rationalized cost structure.

How to visualize the Indian startup ecosystem in the next 20-30 years?

With the improvised logistics structure, innovation, and technology acceptance will create more inclusive markets. This will make India more competitive in the global market.

Despite the scenario, are we expecting some more young entrepreneurs?

India has expressively established a prodigious rise in entrepreneurism, especially among youngsters. Young Entrepreneurs are very different from all the previous generations, as they have different mindsets, and aspirations and are fortified with trends, information, and technology. The Indian industry needs young minds to make headway as they constantly strive to offer the best value and services.

Reasons to inculcate optimism in such tough times? 

We have turned the challenge (COVID-19) into an opportunity with the integration of new technologies such as the Internet of Things (IoT), artificial intelligence (AI), data analytics, and remote sensing. Hence, radical innovations can be useful in the long run, which will lead the startups to reach consumers beyond the metropolitans and explore the multitude of opportunities that are available in the vast expanse of the country.