The Indian Startup Scenario

Trends over the past years

FUNDING

9$ bn

5$ bn

0.7$ bn 0.98$ bn
2012 2013 2014 2015

• The funding of Indian startups has increased by almost 80%.

• Ecommerce continued to have the largest share of funding followed by other consumer internet startups.
• As Ecommerce market focuses on their core businesses, logistics startups will have an opportunity for growth.
• Fintech and Hyperlocal startups had a great year in terms of funding.
2015 in review
2015 in review
Challenges to Funding
The investors are now more careful than
ever. Following are some major
challenges for the private equity industry:
• Mismatch in valuation expectations
• Volatile macro-economic factors
• Difficulty fund-raising
• Inability to exit
VC Trends-Global

 Global funding fell a further 8% vs. the previous quarter

 VC Trends-Global
 Deal share to seed-stage investments abruptly dropped in Q1’16, down
from 32% of the total in Q4’15 to just 28%. Series A deals continued to take a
strong proportion of deals with the 26% in Q1’16 representing a 5-quarter
high for A rounds.
 VC Trends-Global
 Internet and mobile once again took the majority of deals going to VC-
backed companies. These two major sectors accounted for 67% of all deals
in Q1’16. All other sectors remained fairly range-bound, with healthcare
taking 13% and non-internet/mobile software hitting a 5-quarter low at 4%.
 VC Trends-Global
 Asia saw another significant drop-off in funding to VC-backed companies
in Q1’16, with the $6.5B in total funding representing less than half of the
frothy Q3’15 peak
VC Trends-Global

 Digital Health offering real opportunities for investors

 The potential offered by ‘digital health’ solutions is creating a lot of buzz in the
VC market. Total VC investment in digital health was up significantly in Q1
compared to Q4’15 despite decreases in other sectors.
 Eyes on the Unicorns
 With high profile companies failing to live up to their private valuations, existing
and potential Unicorns are coming under more scrutiny than ever before.
 Investors focusing on performance over possibility
 VC investors are becoming more critical of potential investments, looking for
companies that can demonstrate revenue creation, positive margins, profitability
and an ability to control expenses
VC Trends- India
The rise in total funding(Tech Sector)
VC Trends- India
Surge in series A and series B funding
VC Trends- India
Funding in different sectors($ mn)
Sectors to look out for in 2016

 Internet of Things- According to Nasscom, in five years, the global

opportunity is likely to touch $ 300 billion and the Indian IoT market itself
could be about $ 15 billion. Startups like Smartron have already started
releasing products to the public
 SaaS- Indian SaaS companies are expected to reach the $10 billion
revenue mark in 2025. Practo, Freshdesk, RateGain are some of the biggest
Indian SaaS startups.
 Healthcare- India's healthcare sector is expected to be $280 billion in size
by 2020. Startups like Practo, Portea and Lybrate have already made their
mark last year and more are expected to come up this year.
 Education- India's online education market size is expected to touch US$ 40
billion by 2017. Startups like Byju, Genius are ready to disrupt this space.
Other startups also have a great opportunity in this market.
 E-Commerce
Big Players New Players Market Size Current Scenario
• Flipkart • Lenskart • Expected to reach • This is a highy competitive segment.
• Snapdeal • Tradus $38 billion by 2016 • Acquisitions have increased multi fold.
• The growth in this segment is certain. The
• Amazon • FabFurnish
uncertainity lies in profitability.
• Alibaba • FirstCry
• Jabong • CaratLane
• Infibeam

Investment
• Investing into developed areas is risky. The current players already have a huge customer base.
• Without a really strong business model, it will be hard to expand in these developed areas.
• Some areas like online drugstores, hardware, still haven’t found traaction. These will be the
areas of rapid growth in the future.
• Before entering this market, a good analysis of market is required. Last year saw the rise of
Lenskart and the fall of Jewelskart, Bagskart, Watchkart.
Ecommerce- Business Models

 Almost all the big players have a similar model. They act as a platform to facilitate purchase
between retailers and customers.
 Startups like Lenskart have a different business model where it itself acts as a retailer.
 These big players have yet to turn profitable.
 Most of the startups in this segment have focused on growth rather than profits. They have been
burning their fundings to increase market share. Unviable discounts to get customers on board
have resulted in huge losses.
 New players are emerging with a focus on differentiation. And not surprisingly, they focus on
vertical or niche categories.
Startups to look at

 Teesort- Teesort claims to have delivered more than 2 million orders so far. It
is growing at a rate of 300% YoY, expecting to achieve a revenue of Rs. 100
crores in this fiscal year. It is profitable and claims to have a gross margin of 40%.
 Mirraw- It will be touching INR100 Cr this year. It is growing at a rate of 10-12%
MoM. It plans to go deep into categories to build a wider inventory. One major
thrust will be on home furnishing as it is witnessing a demand for home décor
and Indian handicrafts.
 Flyrobe- Flyrobe is an online fashion rental marketplace. This startup has a strong
thinktank. Started by IITB alumni, this startup has experienced employs from firms
like Bain & Co., Inmobi, Cadbury and a HBS alumnus with experience in
companies like Amazon and Google. It has served over 4,500 customers till now.
 Helpmebuild.com-It aims to empower the consumer to actively participate in
the decision making process for their homes. It is a multi-vendor marketplace in
a market which is currently untapped- Interior Design and Architecture solutions.
 Fintech
Players Current Scenario
• India has all the ingredients for a fintech
revolution: A large and growing population
with low financial inclusion and a thriving
startup community.

Market Size
Online Financial Services market is
expected to be a 17,800 Cr market by
2020.

Investment
 The share trading segment is dominated by RKSV, Zerodha.

 Payments and Remttances is a highly competitive area. Players in this

area have grown over years to dominate the market. They have
advanced technologically too. Competing with them will be a difficult
task.

 Insurance, Crowdfunding, Lending are some relatively young areas with

high opportunity of growth
Fintech-Business Models
 Lending services: These lending service startups are looking to disrupt the traditional
lending mechanisms and are using alternative methods to provide faster access to
capital. Eg. Faircent follows a P2P lending model and charges a percentage of the total
transaction amount.
 Payment services: These startups aim to integrate payment processing into websites and
mobile apps without having to maintain merchant accounts. Players like PayTM and
Mobikwik have burned funding money to provide cashbacks to gain a customer base.
 Remittance services: A few startups have come into existence to revolutionize remittance
services in India. E.g Instarem.
 Personal finance / retail investment services: These are the companies that help individuals
manage their own finances. E.g Policybazaar.com compares various financial policies for
the consumers.
 Equity funding services: Crowd funding provides early stage companies a platform to raise
capital from the retail market. E.g Catapoolt
 Cryptocurrency: Cryptocurrency has not seen much traction in India in comparison
to other international markets. There are a couple of bitcoin exchange startups in India
though – unocoin, coinsecure and zebpay to name a few.
Startups to look at

 Shiksha Finance- It is co-founded by chartered accountants - Jacob

Abraham and V L Ramakrishnan. It helps the low income families in paying
school fees for a small interest.
 Hyperlocal
Big Players New Players Market Size
• Grofers • Taskbob India Hyperlocal Market is
• UrbanClap • Opinio Expected to Reach INR
• Delhivery • Big Basket 2,306 Crore by 2020
• GoJavas and many more.
• Zomato
• Ola Cabs

Current Scenario
• The Hyperlocal market in India has grown at a growth rate of 71% in number of orders.
• Over 22 per cent of the deals by the top 10 investors in 2015 were in the newly emerged
on-demand industry.
• Busy lifestyles and relatively better incomes are driving the growth of on-demand
services.

Investment
 Within a short span, the on-demand beauty service segment has had significant
adoption, and given their busy working schedules, more women are opting for
them. So this area should be on the lookout for investors.
 Ecommerce has paved the way for high growth in Hyperlocal Logistics sector
with key players like Delhivery, GoJavas, Rivigo, Ecom Express etc. This segment
will soon start consolidating.
 Even in this sector, areas like pharmaceutical, alcohol delivery haven’t grown. So
these might be good areas to look at.
Hyperlocal- Business Models

 These startups also have the same story. Burning fast through the funding
cash led to the shut down of startups like PepperTap. Tiny Owl and Zomato
had to cut jobs. Now Tiny Owl is now merging with another hyperlocal
logistics company.
 They are facing increased costs and an inability to cut them because of
lack of scale — companies typically operate on wafer thin margins in the
retail business.
 There is still a question of what the correct business model is, should you
hold inventory, or just aggregate orders.
 The logistics business has been relatively successful. Players like Delhivery,
GoJavas etc. have tied up with ecommerce giants to grow in this sector.
Startups to look at

 TruckSumo- The startup is an aggregator of mini-trucks and connects businesses having local
logistics needs in real-time with service providers who can fulfill those needs. They are currently
doing 17,000 orders in a month and have onboarded 900 customers. The team is bootstrapped
and is looking for funding.
 Quifers- Quifers is targeting both the logistics and the labour market. Quifers uses technology as
an enabler to aggregate LCVs in order to provide hassle-free and high speed goods transfer
service to people. It has raised Rs. 2 cr in funding from IAN.
 AVN Business Solution- AVN Business Solution is growing on an average rate of 50 % (mom). Till
date, it has delivered products worth Rs 350 million. They offer two products Shipyaari and
eRunnerz.
 Fixmasters- an on-demand repair and maintenance service that helps users get verified and
qualified service providers for repair tasks at home and office. Company passes on 80 per cent
of the revenue per fix to the service provider while retaining 20 per cent for itself.
 Dhobhiwala- Dhobiwala offers plenty of options: steam ironing, washing and ironing, stain
removal, and starching.
 Tooler- This one will not only do your laundry but also clean your shoes and sofa. It was doing 100
orders a day back in Nov 2015.
 Healthcare
Key Players New Players Market Size
• Practo • Attune The market size of
• Portea • WelcomeCure healthcare sector of
• Lybrate • Goqii India is projected to
and many more. reach $160 billion by
the year 2017.

Current Scenario
• This segment is relatively young when compared to other segments with only a few successfully
growing startups.
• These startups have been facing various challenges like
• Slow Growth
• Complex Industry
• Doctors are tough
• Monetization
Investment
 Innovation is the key to this industry. Startups will have to tackle the inherent problems with the
healthcare system in India through innovative ideas to succeed.
 This segment has a lot of potential. With a successful business plan and right amount of patience,
a startup has a very good opportunity to succeed.
Healthcare-Business Models

 Healthcare discovery: These platforms connect customers to doctors and

hospitals, and help them book appointments too. Examples are Practo
Search and CrediHealth.com.
 Medical devices and diagnostics: These companies usually use intelligent
technology to simplify diagnostic procedures. Examples are Perfint
Technologies and Biosense Technologies.
 Digitizing and tracking: These platforms help in integrating all medical
records of patients and putting them in one place. Examples are Practo
Ray and eKincare.
 E-commerce: These websites help people order medicines and healthcare
equipment from various vendors. Examples are HealthKart, Medidart and
Medist.
Startups to look at

 Mapmygenome- With the exponential growth in the field of genetic

engineering, there is a tremendous future for this sector in our country and
Mapmygenome looks promising.
 CareOnGo- CareOnGo claims to be India’s first mobile chain of co-
branded pharmacy stores. The company claims to have grown by 200
percent since it’s inception. CareOnGo’s customer app is adding 25,000
chronic patients every month onto the platform. It also provides an
analytics platform, ‘Pharmalytics’ as a B2B offering.
Foodtech
Key Players New Players Market Size Current Scenario
• Zomato • Swiggy The food services market is • In 2014 and 2015, around 55
• Foodpanda • Petoo touted to be a USD 50 food technology start-ups
and many more billion market that’s raised $373 million.
growing at 16 to 20 per • Firms such as Zomato,
cent YOY. FoodPanda, SpoonJoy and
TinyOwl have scaled down
business. Others such as Dazo
and Langhar have shut shop.

Investment
 As urban India sees a growth of double-income families, as well as a large population of young
singles with busy work schedules, there’s clearly a big opportunity for food ecommerce.
 Foodtech has struggled in the past year.
 The primary reasons are funds crunch and a flawed business model — where start-ups offer
economically unviable discounts to get more customers on board.
 Despite the setbacks, this segment remains an attractive choice for investors, given a viable
business plan.
Foodtech- Business Models

 Most of the startups are based on two business models:

 Food Delivery- Startups like Zomato, Tiny Owl act as a search platform between
customers and restaurants. They charge around 10% of the transaction value.
 Online Kitchen- These startups have their own kitchen and provide on-demand
food delivery. We haven’t seen a successful startup in this category yet.
SpoonJoy and Dazo were shut down last year.
Startups to look at

 Yoga Bars- With a growing market for fitness, Yoga Bars falls bang on the
target market. They are selling over 30,000 units monthly in Bengaluru
Market.
 Snackible-The team claims that they are currently growing at 25 per cent
weekly, have customers from 38 cities across India, and have processed
over 6,000 orders.
 Travel
Key Players New Players Market Size
• MakeMyTrip • OYO Rooms The estimated value of
• Yatra • Tripoto online travel industry is
• RedBus • V Resorts around $12 bn
• Ixigo • ZoRooms
• Cleartrip and many more

Investment Current Scenario

• This is a rapidly growing segment. Over
 As the smartphone and internet
150 startups have been founded over
penetration increases, social media will
the last 5 years.
also help drive this sector. Consumers will
• The funding has also increased over the
want to go out, take pictures, share them
past few years.
and feel good about it.
• Over $300 mn have been invested so far
 These startups have been relatively in this industry.
successful because they have targeted
very specific markets.
Travel-Business Models
 Many out-of-the-box ideas like food tourism, fishing tourism etc. have
helped this segment evolve.
 Startups have emerged in a plethora of niches. Some of them are:
 Online Travel Agents- MakeMyTrip, Yatra
 Hotel Booking- Stayzilla, Hotels Around You
 Vacation Rentals Marketplace-TripVillas, Roomnhouse
 Asset Light Hotels- OYO Rooms, V resorts
 Travel Agents Marketplace- Zostel
 Local Activities-Mygola, Thrillophilia
 Local Guides-SeekSherpa, GuideTrip
 Content-HolidayIQ, AudioCompass
 Community-Tripoto, 365Hops
 Planning-TripHobo, Triptern
 SaaS solutions-RateGain, Hotelogix
 Others-Mowgli Bus, MyTourPhone
Startups to look at

 Pickyourtrail.com- It is an online platform for personalized vacation

planning and posting quotes for personalised travel itineraries. Post
confirmation of the travel, the booking engine of the platform takes care of
the bookings. The company claims that its revenues have been growing
every month and making 1 crore+ revenues in less than 6 months.
Real Estate
Key Players New Players Market Size Current Scenario
• 99Acres • Housing The estimated size • A lot of startups have emerged in
• Magicbricks • Commonfloor of Indian Online this sector and quickly
• Investors Clinic • Proptiger Real Estate Services revolutionised the real estate
• Nestaway industry in India.
• Ghar360 is around $5 billion. • This segment has attracted a lot of
funding in the recent years.

Investment
 There is a marked slowdown in the sector with homes remaining unsold as
supply exceeds demand in several major cities.
 This has created a ripe situation for consolidation.
 Thus it will be difficult for new startups to disrupt this segment.
Real Estate- Business Models

 Research and consulting work is mostly dominated by international property

consultants like JLL and Knight Frank and it is mostly B2B. There is a big
opportunity for consumer consulting in real estate.
 Listings and lead Selling is the most overheated space at the moment. Startups
like Housing and Commonfloor have completely disrupted the segment. Even
general free classified sites like OLX and Quikr are entering the real estate
game.
 Developer marketing is an emerging market as there is a significant shift in the
developer’s marketing budget from print to online. Players are focusing on
features like 3D glasses, drone views, virtual walk-throughs etc.
 Primary Sales is the most lucrative market at this moment. Developers offer a
sales commission to the channel partner ranging from 2 to 5 per cent on
primary sales. Some of the key players in this sector are Investors Clinic, Square
Yards, Prop Tiger, and Indiahomes. In this space, aftermarket services like resale
assistance and portfolio management are yet to see some growth.
 Resale and rentals is the biggest market. It is still dominated by brokers and
there is no disruption in sight from any online player.
Startups to look at

 InPod- The Mumbai-based bootstrapped startup has patented its modular

building system.
 Bricks Property Investment India Pvt. Ltd.- It enables consumers to partially
own apartments in Bangalore and get monthly rentals on their investments.
 Ed Tech
Key Players New Players Market Size Current Scenario
• Educomp • Byju India's online New players have
continuously emerged but
• Meritnation • UpGrad education not a lot of them have
• Toppr • EduKart market size is been able to make a mark.
and many more expected to
touch US$ 40
billion by 2017

Investment
 Ed tech is a hard nut to crack in India where education is highly regulated
by government.
 This sector has a high opportunity for growth. As the smartphone and
internet users grow in India, EdTech startups will play a key role in delivering
education in India
 Byju has recently disrupted the test preparation area but other areas still
remain stagnant.
Ed Tech- Business Models

 Classroom space- This area has been dominated by Educomp. Educomp is

under large dept which has stopped it’s growth. Differentiated startups might
be able to successfully tap this area.
 Online Courses- SimpliLearn and Upgrad are recent startups in this area. They
both are focused on professional training with certifications focused on career
development.
 Online Test Preparation- These websites feature multimedia tutorials, interactive
exercises, tests and analytical data reports to point out strength and
weaknesses. Meritnation and Toppr have dominated this segment in the past.
Byju is a relatively new startup which has completely disrupted the ed-tech
industry. The reason for their success has been the quality of the content and
availability of application on mobile platform.
 Microschooling- These startups have developed a new way of schooling which
focuses on optimized learning experience for students
Startups to look at

 Genius micro schools- It is founded by Advitiya Sharma(co-founder,

Housing). The product aims to optimise the individual learning experience
by continuously varying the content based on feedback. Genius will run
micro schools with about 5-8 students and the institutes will be hyper-local
in nature. The company is mirroring the path of US-based AltSchool. The
start-up will hire 500-800 teachers in different cities and train them
separately.
 Digital Media
Key Players Market Size Current Scenario
• Inmobi • There are more than 250 startups in gaming industry. With increase in
• Gamiana number of mobile users, this industry has a high opportunity of growth.
• Hashcube Tech. Startups like Octro and Moonfrog Labs received $15 million in funding.
• Saavn. • Homegrown Indian digital startups like ScoopWhoop etc., have enjoyed
• Scoopwhoop far more impressive growth than their foreign competitors
and many more. • A lot of niche startups are growing in AdTech space like AdSparx,
Silverpush etc

Investments
 As the smartphones and internet users grow, digital media has a huge opportunity.

 There hasn’t been a disruption in gaming or internet industry.

 Music industry has some big players like Saavn and Gaana in streaming services. Niche
startups still have a great chance in this industry.

 AdTech space is highly competitive with players like Inmobi. There is still a possibility for
niche AdTech startups to emerge.

 Lack of innovation and automation can create problems for AdTech startups. Vizury laid
off 80% of it’s employees whereas Admagnet shut down it’s operations.
Digital Media-Business Models

 Gaming Industry- This industry is growing on the back of growing mobile

industries. The market is mainly mobile-driven. The revenue is generated
from in-app purchases and through advertisements.
 Internet Industry- With the rise in number of internet users and social
networking, internet has become a major platform for content creation.
Startups like Scoopwhoop have successfully grasped this opportunity.
 Music Industry- Companies like Saavn and Gaana.com are rapidly growing
in this segment. Revenue is generated through ads and premium
subscriptions
 Advertising Industry- AdTech space has seen big growth in the past few
years. Innovation and Automation remain the key factors in success of
AdTech startup. Adtech is a game of niche or a game of scale.
Startups to look at

 Lipikaar- In the first eight weeks, they crossed 1 lakh monthly active users.
They also have bulk licensing deals with companies like HCL and ITC
 Muzenly- Muzenly is a global community based platform that allows music
festival goers to car pool, share accommodation, post extra tickets, and
book Music Festival Packages.
Investing Framework

 Products and ideas- Early-stage companies with just an idea carry the
biggest risk. But you can also find companies with an idea and a prototype
(or something else tangible), or even a clear path to revenue, or a
seasoned executive team with a history of finding ways to generate
business.
 Investors should focus on the next big product or service coming down the
research and development pipeline.
 You can lower the investment risk by betting on companies with a deep
inventory of fresh ideas.
Investing Framework

 Competitive Advantage- Competitive advantage is an advantage that a

firm has over its competitors, allowing it to generate greater sales or
margins and/or retain more customers than its competition.
 Cost advantage, is a firm's ability to produce a good or service at a lower cost
than its competitors, which allows thee firm to generate a larger margin on sales.
 Differential advantage is created when a firm's products or services differ from its
competitors and are seen as better than a competitor's products by customers.
Investing Framework

 Market performance- Every company is unique, but individual success also

depends on trends within the business sector as a whole. The startup which
targets a sector with growing demand has a lesser risk.
 Market analysis reports can be helpful in determining the market trends. The
market risk is also something which should be taken into account.
Investing Framework

 Financial Performance- Financial statements like Income statement, Cash

flow statement and Balance sheet can be used to arrive at a fairly reliable
measure of value.
 Past performance is not an indicator of future results but past performance
will give you a better sense of the level of risk you are taking.
Investing Framework

 Team- Studies shows that younger founders and founders with prestigious
educational backgrounds or prior experience in large technology
companies tend to be more successful.
 Companies that are led by solid management teams with experience,
knowledge and complementary skills are more likely to be successful.
 First-time entrepreneurs who have tremendous enthusiasm and energy and
are also surrounded with experienced insiders and senior advisers are more
likely to be successful.
Investing Framework

 Sociopolitical risks - Socio-political risk is difficult to avoid since most events

happen without warning. Eg. The Haiti conflict and terrorist attacks on oil
pipelines had caused artificial volatility to enter oil and other commodity
markets.
 Regulatory risks - Regulation rarely affects the fate of startups. But it has the
power to stop companies in their tracks. Emerging markets that lack the
regulations have a greater risk. They can result in larger and faster returns
but the potential for loss is equally high.
 You need to analyze the potential risks associated with increased or
decreased regulation to the profitability of your target company and make
the smartest bet possible.
Investing Framework

 Exit Strategy- The exit strategy is how the investors who had previously put
money in a startup get money back, usually years later, for a lot more
money than they initially spent. Having a minority share in a healthy,
growing company, without any prospect of an exit, is a terrible scenario for
investors.
 Investor exits traditionally happen in two ways: Either the startup gets
acquired by a bigger company, for enough money to give the investors a
return or the startup grows and prospers enough to eventually make an
IPO.
 There are other startegies also like the company buying back investor’s
shares, dividends etc.
Valuation

 Asset approach
 Place a fair market value on all physical assets
 Assign real value to intellectual property
 All principals and employees add value
 Early customers and contracts in progress add value
Valuation

 Discounted Cash Flow(DCF) approach

 This approach describes a method of valuing a company using the concepts of
the time value of money.
 All future cash flows are estimated and discounted to give them a present value.
 The discount rate can be calculated through rigorous financial analysis or an
average discount rate for the industry can be used
 If the value arrived at through DCF analysis is higher than the current cost of the
investment, the opportunity may be a good one.
 DCF models are powerful, but they do have shortcomings. Small changes in
inputs can result in large changes in the value of a company.
Valuation

 Earnings multiple approach

 Usually applied to a more mature startup
 Company’s valuation is estimated by multiplying EBITDA by some multiple.
 A target multiple can be taken from industry average tables, or derived from
scoring key factors of the business, and averaging the results, with the final
average called the "multiple“.
Valuation

 Cost approach
 It attempts to measure the net value of the business today by calculating how
much it could cost for a new effort to replace key assets.
 The replacement value is used to estimate the current market value of the
enterprise.
 The cost approach is employed to great effect on difficult or unprofitable
businesses.
Valuation

 Market approach
 Another popular method to establish valuation for any company is to search for similar
companies that have recently received funding and compare with their valuation.
 Public Company Method- Companies within similar industries or similar positions within
their industries will have similar valuations or characteristics upon which a valuation
can be based.
 Transactions Method- detailed private company financial data is unlikely to be
available but transaction value does become available, and, on such occasion, that
valuation can be used as a tool to provide a valuation for other similar companies.
 Heuristic pricing rules method- The best known professional group that does this is the
business intermediaries that broker business sale transactions in specific industries. Their
knowledge of the market place and direct exposure to transactions puts these experts
in an excellent position to estimate the likely business selling price.

Revenue:valuation ~ your revenue:x

 VC approach
 estimating the expected earnings or revenues in a future year
 The value at the end of the forecast period is assessed by multiplying the
expected earnings in the future year by the multiple of earnings (PE ratio) that
publicly traded firms in the sector trade at
 The estimated value at the end of the forecast period is discounted back at a
target rate of return
 Venture capitalists receive a proportion of the business in return for the capital
they bring to the firm
5 most common mistakes by startups

 Lack of market need for their product

 Your idea might be great but may not address a big pain point. One must
estimate if there are enough people to buy the product.
 42 percent of the failed startups quizzed by CB Insights gave this as a reason for
failing.
 Customer feedback plays an important role in understanding the market.
 E.g. Lumos
5 most common mistakes by startups

 Ignoring important metrics

 Startups are being evaluated on growth related metrics(number of transactions,
vendors, customers) only and not financial metrics(profits). This clearly is not
sustainable.
 E.g TinyOwl
5 most common mistakes by startups

 Not the right team

 People get into areas that are not their core expertise
 A startup can fail if the team members are too alike. There needs to be enough
diversity for a variety of skills to come into play.
 E.g Lumos, Pirate’s Kitchen
5 most common mistakes by startups

 Lack of Cash Flow Management

 Most startups focus on quick customer acquisition by burning their funds in
discounts. The more you acquire customers by giving away discounts, the
customers will go away the day you stop those discounts and that is a dangerous
situation.
 Instead the focus should be on creating value for their products which help in
customer retention.
 Some will focus too much on marketing and some will pay no attention to
marketing.
 E.g Spoonjoy, Langhar, OrderSnack
5 most common mistakes by startups

 No scalable business plan for a big enough market

 A startup can get going and do well early but when time comes to scale up, it
might fail. That’s because its business model works only up to a certain size, and is
not so good when it comes to making money on a larger scale
 E.g Dazo, Talentpad
5 most common mistakes by VCs

 Giving in to ‘Fear of Missing Out’

 On the lines of e-commerce and hyperlocal sectors, foodtech witnessed several
prominent angels and VCs funding various me-too startups. These startups also
prioritised scale and growth over basic business fundamentals.
 These investments from investors were largely driven by FOMO (fear of missing
out). Dazo, SpoonJoy are some examples of recently failed foodtech startups
that didn’t have a viable scalable business plan.
5 most common mistakes by VCs

 Valuing team or product or market so much that the weaknesses of a

company are overlooked
 It's easy to become blinded by a founder's qualifications/charisma, or by a
market in a state of hypergrowth or a product you personally find revolutionary
and to let that blindness cloud your judgment. Even if one aspect of a company
is amazing, you still have to be disciplined and make sure the other aspects
aren't terrible.
 Take the example of Dazo; It had a plethora of investors. Its founder, Shashank
Kumar Singhal(ISB alumnus), was the mobile product head for RedBus. And yet, it
had to shut down in October within a year of launching.
5 most common mistakes by VCs

 Investing early at very high prices

 Done right, this is a total winner of a strategy. But there is no guarantee that the
company will be able to flourish. The ‘Unicorns’ like Flipkart, Snapdeal haven’t
been able to turn profitable yet. One of the best example to demonstrate this is
Pets.com. Within two years, US$300 million of investment capital vanished with
the company's failure.
5 most common mistakes by VCs

 Choosing the wrong metrics

 Source of the problem is that startups are being evaluated on growth related
metrics only and not financial metrics.
 One of the best example are the markdown in valuations of startups like Zomato
and Flipkart. We have also seen shutdowns in foodtech sector last year which
didn’t have a viable business plan but investments were based on growth
metrics.
5 most common mistakes by VCs

 No Advisory- One of the biggest reason of failure of startups and hence the
investments, has been assigned to the lack of mentorship.
 Though it is not the job of an investor to mentor a company but we can all agree
that an informed client is better than an uninformed one. At the end it is your
investment.
 It is a good practice to keep up with the developments in the company.
Most interesting IPOs in 2015

 Etsy
 Etsy, an online marketplace for arts and crafts, raised $267 million in its IPO in
April, pricing its shares at $16. The price of the stock soared to $30 on the first day,
but it has since declined because of poor earnings and the announcement of
Amazon that it will be launching a rival service named Amazon Handmade.
Most interesting IPOs in 2015

 Altassian
 Atlassian launched its IPO in December with a bang. Atlassian priced its IPO at
$21 a share, raising $462 million. Atlassian soared 31% on its first day of trading.
Most interesting IPOs in 2015

 Infibeam
 Infibeam Inc. Ltd. successfully raised Rs.450 crore through it’s initial public
offering (IPO), which made it the first Indian online retailer to go public.
Most interesting IPOs in 2015

 Box
 Cloud storage company Box managed to garner enough investor support to
price its IPO at $14 a share in January.
Most interesting IPOs in 2015

 Square
 Square, which developed and markets a mobile payment device that attaches
to a tablet computer or smartphone to receive credit card and debit payments,
took a hit for the team in launching its IPO at roughly half its valuation. By pricing
its IPO at $9 a share in mid-November, substantially below its initial IPO pricing
range of $11 to $13 a share, Square left some room for investors to make a profit
and was able to show a strong performance on its first day of trading, with its
stock closing at $13.07 a share.
Most interesting IPOs in 2015

 Match Group
 The Match Group, which owns popular dating services Match.com, OkCupid
and Tinder, launched its IPO in November at $12 per share, which was at the
lower end of the expected $12 to $14 range. The company raised $400 million,
with the price of its shares now up to about $14.
Most interesting IPOs in 2015

 Go Daddy
 Website hosting company GoDaddy was able to raise $460 million from its IPO in
April, pricing its shares at $20 each, above the expected range of $17 to $19.
Since then, the stock price of the company has grown by almost 25 percent.
Most interesting M&A in 2015

 Didi and Kuaidi Dache

 Didi and Kuaidi Dache, the largest car-hailing players in China’s market, have
merged together to form a $15B ride-hailing giant. This move is especially
significant as Uber raises $1B+ in capital to move into the country. Didi and Kuaidi
Dache have now formed a united front, when they were previously involved in a
costly pricing war with each other. China, one of Uber’s most important target
markets, will now be one of the toughest battle grounds in ride-hailing
Most interesting M&A in 2015

 LinkedIn-Lynda
 LinkedIn’s acquisition of online learning platform Lynda for $1.5B in April 2015 was
its largest disclosed acquisition of all time.
 it’s the biggest VC-backed education technology exit of the last decade.
 Finally, Lynda fills an important gap for LinkedIn, which links together jobs to
people with those relevant skills. Now with Lynda, users have a direct platform to
develop those skills and earn credentials, furthering LinkedIn’s reputation as “your
online resume”.
Most interesting M&A in 2015

 Twitter-Periscope
 Periscope was acquired for approximately $100M in March 2015, and Twitter
officially released the app after mobile live video-streaming competitor Meerkat
unveiled theirs at SXSW a few weeks before. Periscope had 1 million active
accounts after its first 10 days, and now has 10 million as of August 2015.
Periscope is a proving ground for whether or not a large audience exists for live
mobile video streaming.
Most interesting M&A in 2015

 Snapdeal-Freecharge
 Ecommerce firm Snapdeal’s buyout of mobile top-up site FreeCharge for an
estimated US$400 million in April is the biggest acquisition in India to date.
Most interesting M&A in 2015

 Ola-TaxiForSure
 For a long time Ola and TaxiForSure vied to be India’s answer to Uber. Suddenly
times changed. A rape case was lodged against an Uber driver in Delhi; many
state governments rushed to ban on-demand taxi services; and all taxi apps
landed in one hot soup. Investors got jittery, funding dried up for TaxiForSure, and
it could not keep up with the discount war between Ola and Uber. It is in these
circumstances that its rival Ola, which had a bigger war chest thanks to a timely
funding round by SoftBank, bought out TaxiForSure for US$200 million.
Most interesting M&A in 2015

 PropTiger-Makaan
 Real estate is another space where consolidation is under way. Just as CarWale
got acquired by its younger rival CarTrade, property classifieds site Makaan,
founded in 2007, gotswallowed up by Newscorp-backed PropTiger which is four
years younger
Most interesting M&A in 2015

 Twitter-ZipDial
 Customers could send “missed calls” to brands which would respond and
engage with the callers. Twitter found the ZipDial platform a perfect fit for its
plans to grow its user base and engagement in emerging markets. ZipDial thus
became Twitter’s first acquisition in India last January, reinforcing the attraction
of India-specific innovations.
 Genius micro schools- It is founded by Advitiya Sharma(co-founder, Housing). The product aims to optimise the individual
learning experience by continuously varying the content based on feedback. Genius will run micro schools with about 5-8
students and the institutes will be hyper-local in nature. The company is mirroring the path of US-based AltSchool. The start-
up will hire 500-800 teachers in different cities and train them separately.
 InPod- The Mumbai-based bootstrapped startup has patented its modular building system.
 Pickyourtrail.com- It is an online platform for personalized vacation planning and posting quotes for personalised travel
itineraries. Post confirmation of the travel, the booking engine of the platform takes care of the bookings. The company
claims that its revenues have been growing every month and making 1 crore+ revenues in less than 6 months.
 Mapmygenome- With the exponential growth in the field of genetic engineering, there is a tremendous future for this sector
in our country and Mapmygenome looks promising.
 CareOnGo- CareOnGo claims to be India’s first mobile chain of co-branded pharmacy stores. The company claims to have
grown by 200 percent since it’s inception. CareOnGo’s customer app is adding 25,000 chronic patients every month onto
the platform. It also provides an analytics platform, ‘Pharmalytics’ as a B2B offering.
 Fixmasters- an on-demand repair and maintenance service that helps users get verified and qualified service providers for
repair tasks at home and office. Company passes on 80 per cent of the revenue per fix to the service provider while
retaining 20 per cent for itself.
 Teesort- Teesort claims to have delivered more than 2 million orders so far. It is growing at a rate of 300% YoY, expecting to
achieve a revenue of Rs. 100 crores in this fiscal year. It is profitable and claims to have a gross margin of 40%.
 Flyrobe- Flyrobe is an online fashion rental marketplace. This startup has a strong thinktank. Started by IITB alumni, this startup
has experienced employs from firms like Bain & Co., Inmobi, Cadbury and a HBS alumnus with experience in companies like
Amazon and Google. It has served over 4,500 customers till now.
 AVN Business Solution- AVN Business Solution is growing on an average rate of 50 % (mom). Till date, it has delivered
products worth Rs 350 million. They offer two products Shipyaari and eRunnerz.