Indian start-up landscape has been very vibrant in recent years with total venture investment in start-ups during 2005 to 2015 is estimated to be around ₹ 1,11,700 crore. The average annual growth rate in investment flow in that period is about 42 per cent and over 10,000 start-ups have received funding, according to 8th Annual Report on Indian Venture Capital and Private Equity on Start-ups, “Inspiration and Momentum for the Gladiators.”
Average annual growth in number of start-ups that have been funded in the last decade has been 16 per cent. The average age at which start-ups get angel funding has consistently decreased from 4.77 years in 2008 to 0.54 years in 2015, said Thillai Rajan, Professor, Department of Management Studies, IIT Madras, and co-author of the report, which focussed on theme of start-ups.
Presenting the report at TiECON 2016 organised by TiE Chennai in association with The Hindu Business Line, Rajan said a major concern was low proportion of start-ups that get funded in India. For example, the percentage of global start-ups that are able to successfully raise capital in the grocery technology, healthcare and consumer healthcare, and smart home and home improvement are 41 per cent, 52 per cent and 36 per cent respectively. The corresponding percentage for Indian start-ups are 5 per cent, 10 per cent, and 11 per cent.
A noteworthy development in last few years has been evolution of angel networks. While many of the angel networks are organised around cities (such as The Chennai Angels and Mumbai Angels), there are other forms of networks as well. The annual growth rate of the number of investments by angel networks made during the 2009-15 period has been about 75 percent. In a span of seven years, the number of networks have increased 20 times, he said.
Average investment received from an angel round by a start-up has increased from ₹10.63 million in 2009 to ₹46.76 million in 2015 indicating an annual growth rate of 27 percent. The average investment made by an individual angel investor has increased from ₹2.16 million in 2009 to ₹16.95 million in 2015, indicating an annual growth rate of 34 per cent. Individual investments made by angels in a networking platform are lower, he said.
On start up scenario in Tamil Nadu, Rajan said a decade back Chennai was on par with Bengaluru, Mumbai and Delhi but lost in the race. A fundamental change needs to be done to make “Tamil Nadu become First” and correct the contours and push the State to an upward trajectory, he said.
Ecosystem
Participating in a panel discussion on Start-ups - The Emerging Paradigm, Kris Gopalakrishnan, co-founder, Infosys Ltd, said in Bengaluru there is a mature start up ecosystem. However, ‘we need success stories’ and create world class companies out of India.
On aspirations of Tamil Nadu Chennai to create a vibrant start up ecosystem, “I am positive and optimistic that it can be done with ecosystems like the IIT Madras Research Park. There is a strong linkage is required between research institutions and start up ecosystem. IIT Madras is an example of that with over 100 start ups.
We need to replicate, grow and sustain this,” he said. On decision making by students whether to join a company or start a company, Ashok Jhunjhunwala, Professor in the Department of Electrical Engineering at IIT Madras, said when a student do not have an immediate financial obligation and if don’t have to support their parents, the best career option is start up for bright youngsters. This is something that is gradually insight the youngsters, he said.