As 2018 draws to a close and 2019 stares us in the face, it is a good time to take stock of the achievements of the year gone by and look into the crystal ball to predict the startup trends for the new year.
What will 2019 bring?
The trends that will shake the startup world next years are important as more than 4,200 startups in India provide more than 80,000 jobs, according to Nasscom data. Trends that are likely to dominate are startups that solve industry-specific challenges and have voice-based solutions. These will attract investors.
In 2019, watch out for technologies like artificial intelligence and IoT, cloud-based innovations and blockchain in 2019.
Milestones of 2018
2018 will be known as the year when startups went global, eight startups became unicorns, Gujarat became the most startup friendly state and fintech emerged as the investors darling.
- Funding: During the year more than $11 billion was raised by startups in 712 deals. Of this fintech and financial services got $2 billion as of November 30, 2018, down by 13 percent over $2.4 billion in 2017.
- Deals: The number of deals increased to 132 versus 103 last year, reflecting increased interest and activity in the sector, according to Yourstory data.
- New Unicorns: The average time taken by a startup to attain a billion-dollar valuation in India has come down to between five and seven years, lower than the seven to eight years in the US. However, India still lags China’s four to five years, according to Nasscom.
Here’s a look at Indian startups that became unicorns in 2018.
Byju’s: Naspers led a $540 million investment in education startup BYJU’S with participation from Canadian Pension Plan Investment Board and private equity giant General Atlantic. The latest funding more than tripled the edtech startup to $3.6 billion
Zomato: In February this year, the 10-year-old food tech company became a unicorn when it raised $200 million at a valuation of $1.1 billion. The surge in Zomato’s valuation followed its diversification into the food-delivery space in 2015 after operating as a restaurant-search and discovery service for seven years since its inception in 2008.
Swiggy: In June, food-delivery startup Swiggy entered the unicorn club when it raised $210 million in a funding round led by Naspers and DST Global. The company was reportedly valued at $1.3 billion at the time. This made four-year-old Swiggy the fastest Indian startup to achieve the status at the time. In comparison, India’s most-valued unicorn, Flipkart, took six years.
Policy Bazaar: The online insurance aggregator turned unicorn in June after it raised $200 million from Softbank. The 10-year-old company plans to expand its health care offering further.
Paytm Mall: Online retailer Paytm Mall, which was spun out of India’s largest digital payments firm Paytm in 2016, has been a unicorn since March. In April, it raised $450 million in a deal that reportedly valued the company at over $1 billion.
Freshworks: After the pioneering software provider Zoho, Chennai-based Freshworks is the only other Indian software-as-a-service (SaaS) company to achieve unicorn status. In August, the company achieved the $1-billion valuation after it received $100 million in investment from Sequoia Capital, Accel Partners, and CapitalG.
OYO: The hotel aggregator became a unicorn in September when it said it was raising $1 billion from existing investors SoftBank Vision Fund, Sequoia Capital, and Lightspeed Venture Partners. The three have already pumped in $800 million with a promise to invest $200 million more.
Udaan: B2B online marketplace, Udaan, founded by three ex-Flipkartians – Sujeet Kumar, Vaibhav Gupta, and Amod Malviya – achieved the unicorn status within just two years of inception. The company raised $225 million in September from DST Global and Lightspeed Venture Partners. This was the second funding round for Udaan in a single year. It had raised $50 million in series B funding in February 2018.
- Policies: Government made policies to regulate and create a framework for emerging technologies some of which are still work in progress.
Angel tax: Angel tax remained an issue for startups and early-stage investors in 2018. In April, a notification said that companies which had raised less than Rs 10 crore and were incorporated before 2016 would not be liable to pay angel tax (startups incorporated after 2016 were already not under the taxman’s purview). This would be applicable to companies with revenues of less than Rs 25 crore.
But earlier this month, news reports said that around 25 startups and a handful of angel investors had received tax notices in connection with fundraising during the assessment year 2015-16.
E-pharmacies: In December, the Delhi High Court prohibited e-pharmacies across the country from selling medicines online without a valid licence.
The court directed the Centre and the Delhi government to implement the order immediately. Shortly after, the Madras high court enforced a blanket ban on the sale of medicines online pending clarity on regulations in the sector. An estimated $300 million of venture capital money is invested in this space.
Data protection and localisation: In April, the Reserve Bank of India mandated that all payment system operators will be required to store payments-related data only in India within a period of six months.
While most companies complied, payment verticals of multinational companies such as delayed their India launches. In July, a committee headed by retired Supreme Court judge BN Srikrishna came up with the draft of the Personal Data Protection Bill, which triggered concerns from global companies operating in the country as well as industry bodies like Data Security Council of India, which indicated that localisation for all personal data as mentioned in the draft would result in trade barriers.
Draft e-commerce policy: A framework which was formulated but was later dropped. The initial draft policy released in July aimed to address local storage of data, predatory pricing by global e-commerce companies, consumer protection and more.
Work is currently underway on a second draft of the policy, according to reports, with a group of secretaries from other departments taking part in the discussions.
Drone Regulations 1.0: In August, the new Drone Regulations 1.0 unveiled by civil aviation minister Suresh Prabhu stated that the machines can now be commercially and legally used across the country.
A task-force for Drone Regulations 2.0 has also been set up.
Consultation paper on regulating over-the-top (OTT) players: The Telecom Regulatory Authority of India (TRAI) brought out a consultation paper in November which seeks to regulate over-the-top players that have functions similar to those of telecom service providers such as text messaging, voice and video calls. This may directly impact players like WhatsApp, Skype and others.