2016 has been an eventful year for the economy, technology and business by any standard. India continued to be the third largest startup economy in the world, according to IT body Nasscom’s annual startup report, behind the US and UK. A year of hits and misses – Paytm’s rise via demonetisation, Flipkart’s devaluation and startup exits – included numerous noteworthy events and trends. So as the year draws to a close we look at some of the highlights of the year for Indian startups.
Startup India Standup India
As PM Modi delivered on his promise to provide a fresh impetus to India’s startup ecosystem, the Startup India event set the tone for the year. It was attended by the biggest names in the space, not just from India but also globally. Beyond the panel discussions, presentations and shop talk, the PM took centrestage and announced numerous initiatives. These included the creation of an innovation hub that draws on IIT Madras’ successful template. Tax benefits, a startup corpus of Rs. 10,000 crores, legal facilitation of patents and IPR and an app for tracking startup applications rounded out the sops and benefits.
It stirred up quite a controversy and everyone who was anyone had an opinion on the subject. While Wired defended Mark Zuckerberg‘s Free Basics, Indians were up in arms about net neutrality with Osama Manzar leading the chorus and questioning why any Indian would agree to restricting their internet access. A number of startup founders like Deepinder Goyal of Zomato and Vishal Shekhar Sharma of Paytm joined the chorus and supported Trai’s net neutrality.
It’s been a year of fulfilling potential and adopting recommendations as the RBI issued licenses to 11 chosen applicants to start Payments Banks. Paytm is the notable startup in this list of initial licensees. Aimed at promoting financial inclusion across the length and breadth of the country, Payments Banks’ main brief is to provide basic banking facilities to migrant labourers, small businesses and low income households who invariably get left out of the traditional banking system. The Payments Banks model, already template-ised across vast swathes of Africa through mobile banking like Vodafone’s M-Pesa, has the potential to dramatically change banking in India.
Make in India Week
Following up on the hugely successful Startup India, PM Modi flagged off Make in India Week at the MMRDA Grounds in Mumbai’s Bandra-Kurla Complex. Organised on a breathtaking scale, and aimed at boosting the flagging manufacturing sector, the event promoted design innovation and sustainability. It covered various sectors like Defence, Aerospace, SMEs, IT, Construction, Pharma and more. Attended by as many as 70 countries, thousands of Indian and international companies, the event saw numerous big ticket deals and MoUs signed for setting up of manufacturing facilities in India.
It has been the trend of the year. More and more startups are eschewing spending on their own space and the resulting overheads. Instead, most are preferring to operate out of collaborative workspaces more popularly known as coworking spaces. While the trend was big in the West in 2015, it gained momentum in India this year. BHIVE, CoWrks, Ministry of New, Innov8, Investopad and many more have sprouted across the country in all the major startup hubs like Mumbai, Hyderabad, Bengaluru, Gurugram, Chennai and Delhi. Coworking spaces are easily accessible and have a pleasant ambience with all amenities of a world class office. The main draw however, is the opportunity to network, collaborate and share ideas at these hubs of activities, freelancers, entrepreneurs and others.
2016 saw a number of big startups’ valuations marked down reinforcing the view that Indian startups were in a valuation bubble. Flipkart’s valuation was marked down twice, setting a somber mood over the startup ecosystem. Zomato’s valuation was next to be marked down, leading many to wonder if the valuations of these startups were based on solid fundamentals or just plain speculation. However, the situation was seen by most leading entrepreneurs and investors as a silver lining, forcing many startups to focus on the basics and build strong businesses.
Another big highlight of 2016 were the pseudo wars – Uber v. Ola and Amazon v. Flipkart. The cash rich international startups continually challenged their big Indian rivals through regular as well as festival discounts and sales in an effort to grab a large market share. This has led to both the Indian startups burning through loads of cash similar to their international rivals. However, this is unsustainable and has resulted in calls for ‘protectionism’ from Sachin Bansal of Flipkart and Bhavish Aggarwal of Ola. According to The Economic Times, the duo has claimed that dominance by the American companies could impact the creation of high-value jobs in India. Even though the debate found resonance among others in the industry, there was a general feeling of leveling the playing field for all players.
The most surgical of all strikes of the year, demonetisation stole upon us all. It had the brute force to push most Indians to embrace a cashless economy; even vegetable sellers and tea vendors began accepting digital payments via Paytm. And Paytm was the biggest gainer from the demonetisation drive! The company which was otherwise chugging along nicely was suddenly adding millions of customers a day. Other mobile wallets too gained momentum as digital was the only avenue in the endless scramble and queues to withdraw cash. Other startups too like Novopay and Netree which provide digital devices and services for merchants and traders like PoS, have seen their sales burgeon. Thus, demonetisation became an unlikely advertising poster for a number of startups in the fintech space.