Mumbai: Making it a year of start-ups, Indian and foreign investors have pumped in a whopping $8.4 billion in new ventures, including e-commerce platforms in 2015, through close to 1,000 deals, even as questions have begun to be asked about their hefty valuations.
Those opening the purse for Indian start-ups included industry titans such as Ratan Tata and NR Narayana Murthy as also marquee global investors like Alibaba and Softbank.
According to data compiled by domestic technology and start-up blog trak.in, as many as 936 deals worth over $8.4 billion have been inked this year – up from 304 deals worth $5 billion that took place in 2014.
The industry is looking at a promising 2016, though experts and even the investors anticipate correction on the valuation side. The sectors to watch out for include financial technology, health care and enterprise technology among others.
Also, the focus might shift a bit away from e-commerce companies towards some new areas including agriculture.
This year, the e-commerce sector, led by e-retailers like Flipkart and Snapdeal, and the taxi-hailing app Ola, dominated the start-up investments space.
Many of these firms commanded very high valuations, with marquee investors like Softbank and Alibaba among others doling out top dollar.
However, a debate has begun over the high valuations at which many companies have received funding.
Several industry titans including former Tata group chief Ratan Tata, Infosys founder NR Narayana Murthy and techie-tuned angel investor TV Mohandas Pai, have questioned the high price e-commerce companies are commanding for parting stakes.
Tata, who himself has personal investments in more than a dozen start-ups, took a dig earlier this year at the fledgling sector, saying “valuations” and not “evaluations” are driving the play.
Pai also believes that only about 10 per cent of the start-ups will succeed over the next few years, and about 25 per cent will stay afloat, while the rest are bound to fail, leading to consolidation.
The year has also seen several start-ups crumble after being pushed to scale up rapidly due to investor pressure.
Food-technology start-ups like Zomato, TinyOwl and Housing.com, which had to shut down operations in some cities and fire hundreds of employees, are among those having faced the pressure.
Currently, India is home to over 18,000 start-ups valued at $75 billion and employing 300,000 people. This makes India the world’s second largest startup ecosystem while the growth rate is estimated to be highest here.
On the regulatory side, the markets watchdog Sebi has eased rules for initial share sale by start-ups to allow investors to cash in on the e-commerce boom and to prevent such companies from going abroad for listing.
While there has been a slow take-off for such listings, three e-commerce companies including Infibeam, Matrimony.com, QuickHeal have got the regulatory go-ahead to raise money from the capital markets, which is now likely to happen early next year.