Are venture capitalists acting as a catalyst for the startup ecosystem?


As reported in the Startup India portal, India is considered the 3e the largest ecosystem in the world with more than 50,000 startups in the country, so much so that the number of startups is now increasing in level II and III cities, such as Ahmedabad, Pune and Kochi.

Industries have evolved considerably from what they were at the start of the 21st century. Previously, companies struggled to attract foreign investors to invest in their startups, but today there has also been a significant increase in investment from countries like Singapore, Japan and China. It is fascinating to note the projections made during the pre-coronavirus era, which showed that by 2025 the country would have more than 100,000 startups employing more than 3.25 million people and producing 100 unicorn companies, all with a total market value of $ 500 billion.

This slow but gradual boom in the startup world has been accelerated by the boom in the digital scene in the country, all the more so with the introduction of cheap and convenient internet access reaching even the most remote corners of the world. country. Additionally, India’s diverse religions, cultures and languages ​​have helped create diverse products, which in turn have become a USP for the country as they have attracted mass audiences, attracting likely investors.

That said, the journey of a startup is not all rainbows and butterflies. According to a study by International Business Machines (IBM), Oxford Economics and the Institute for Business Value (IBV), in five years, more than 90% of startups in the country fail due to a lack of unique business models and innovation .

Some of the other reasons include lack of market needs, lack of the right team, competition, and marketing. The pandemic also did not help the situation as a report from KPMG said that “in 2020, up to 70% of Indian startups had less than three months of track, while 35% of them saw their incomes drop by more than 80 percent. “

One of the biggest challenges a startup faces in its early years is funding. As noted on the startup India website, a startup may need funding for purposes such as prototyping, product development, hiring teams, working capital, legal services, and consulting, raw materials and equipment, marketing and sales, etc.

This is where Venture Capitalists (VC) comes in. Now, if you haven’t heard of VC sooner, let me give you a brief explanation. A VC is an investor who financially supports a startup that has the potential to reshape markets and grow rapidly in exchange for an equity investment. Apart from that, a Venture Capitalist also provides startups with mentorship and advice at different stages of their journey to truly unleash the potential of the business.

Speaking of benefits, a startup can access a VC’s resources, including its network of connections, industry expertise, and marketing strategies. Startups also have the opportunity to partner with some of the VC’s global connections, which will allow them to position themselves in the international market. Through this process, some companies with the right product will certainly reach the overseas market.

Statistics show that over the past two and a half years, India’s top 10 venture capitalists have backed more than 420 companies and participated in nearly 600 rounds of funding, and the numbers don’t seem to be slowing down any time soon. .

Even with the pandemic, a report from the Indian Private Equity and Venture Capital Association (IVCA) and Venture Intelligence said that between January and July 2021, venture capital firms added a total of $ 17.2 billion. $ worth of investment in the Indian startup ecosystem, which is far more than the $ 13 billion and $ 11.1 billion investments made by venture capitalists in 2019 and 2020, respectively. In recent years, SoftBank Corp has topped the VC charts with more than $ 3.5 billion in investments, followed by Tiger Global, Temasek, Sequoia Capital and Prosus Ventures,

Some of Venture Capitalists’ major deals include Lenskart, Udaan, Mamaearth, Zomato, Swiggy, Meesho, PharmEasy, Cred, RazorPay, Byju’s, HealthifyMe, Unacademy, and more.

It is now safe to say that the Indian venture capitalist ecosystem has really come a long way. From its humble beginnings a decade ago, when only a handful of them were active due to the lack of startups in the country, to one of the largest ecosystems in the world, behind superpower countries like the United States. United and China and home to more than 50 unicorns, 30 gazelles and 54 cheetahs.

That being said, our journey is far from over. With startups emerging from all parts of the country, the government is also expected to put in place more initiatives and programs to support young entrepreneurs who are desperate to take their business to the next level.

According to my assessment, venture capitalists are important because they play a vital role in the development of small businesses and help entrepreneurs turn their ideas into viable projects. This process also allows capitalists and startups to work together and promote different new and upcoming businesses of entrepreneurs.

As an investor myself, I am always on the lookout for early stage companies that have the potential to really reach for the sky, but due to low funds and lack of someone to guide them. in the right direction, they’re missing the opportunity to make it’s big and that’s where I come in. I also care for sick companies and help them turn around and make a new start in their professional journey.

(The author is the Managing Partner, Ansan Group Holdings PTE).


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