Lower capital spend, more investments bode well for technology start-ups

There may be good times ahead for technology start-ups. Better talent availability, lower capex, improving ecosystem and more funding options are what they can look forward to, say Shailesh Ghorpade and Chinnu Senthikumar of Exfinity Technology Fund.

The first series of the fund was launched in March 2014 and the first closing of ₹100 crore (its targeted corpus) was in June 2014. The partners shared their thoughts, based on their experience of evaluating over 100 deals in the last 5-6 months.

“Without a doubt, the start-up ecosystem has come a long way,” says Shailesh Ghorpade, Managing Partner and CIO of Exfinity fund. “For one, you will find that there are a lot more Angel funding options available. A number of accelerators are being launched, to help incubate ideas. And thanks to cloud-based services, the capital expense for setting up IT infrastructure has come down. Many founders are finding that it is possible to get started with a small seed fund.” Unlike in the past, the social acceptance of a start-up as a career option is improving perceptibly, helping the availability of high quality talent. In the last few years, many foreign educated graduates are returning to India, says Chinnu Senthilkumar, Partner and CTO. This trend is adding to the talent pool.

They say that growth in the tech start-up space will be driven by a few key segments. “Cloud will be a main driver,” says Senthilkumar. He expects big-data, Internet of things and mobile to be other concepts that will witness a lot of action. Location-wise, you will find that the start-up universe is concentrating on a few ‘preferred locations’. Bangalore is certainly emerging as the winner, with over 70 per cent of the start-ups located in the city. Chennai, Pune and Delhi are the other hot spots.

While the broad picture may be looking up, a start-up’s journey is not a cake walk. “We find that there are at least three key problems that start-ups face,” says Ghorpade. The primary inhibitor is the lack of mentoring support. Founders may be too focussed on their ideas and products but do not pay attention to their go-to market and pricing strategy.

Tapping customers

Nor is it easy to find customers who are willing to ‘pay’ for a new idea. So it is imperative to focus on features that customers are interested in. There is also a lack of avenues for exit. Senthilkumar notes that it takes 5-6 years on average for a company to reach sufficient size to go public.