India Startup Report

A 15-min guide by World Startup Report

Updated: Mar 19, 2013

Authors
Bowei Gai Benjamin Joffe Aka. Mr.
• Silicon Valley serial entrepreneur Asia
• Founder, World Startup Report • Founder, Plus 8 Star
• Founder, CardMunch (acquired by • Angel investor (Cmune, Gengo, etc.)
LinkedIn) • Startup Mentor (500 Startups)
• Bowei@worldstartupreport.com • benjamin@plus8star.com
• @Bowei • @BenjaminJoffe

Contributors

Left to right: Giggleloop, 500Startups, Oodio, Yourstory, 91Springboard, India Internet Group, Startup Kindness

Join us: @WorldStartupRpt © 2013 All Rights Reserved

Our Mission

Document
Document our world‟s startup ecosystems through a series of
reports detailing the local culture, trends, key players and
challenges. Share these reports for free to benefit everyone
in the global startup community.

Connect
Identify and empower local startup activists to become the
ambassadors of each ecosystem. Leverage this network of
ambassadors to help connect people to each other and to the
global startup community.


Why India?

In a country that houses 1/6 of the world‟s population, what will be its
future?
“India is not simply emerging, it has emerged”
By year 2025, India will overtake China to be the most populous
@BarackObama
country in the world. Here are a few things you should know.


India at a Glance
INDIA CHINA US

Population 1.2B 1.3B 0.3B

GDP $1.8T $7.3T $15T

Growth since ‟85 x7.8 x31 x3.6

Millionaires in „10 190,000 1,110,000 5,220,200

Billionaires 52 66 422

Population < $2/day 68.7% („10) 29.8% („08) ---

Population < 30 years old 63% 38% ~42%

All $ amounts in USD


Web & Mobile Markets
INDIA CHINA US

Population 1.2B 1.3B 0.3B

Internet Users 125m 516m 243m

Internet Penetration 10% 38% 78%

Online ad market ~ $0.52B ~ $12B ~ $37B

Mobile Subscriptions 893m 986m 332m

Mobile Penetration 72% 73% 106%
(mostly prepaid) (mostly prepaid) (mostly subscription)
Smartphone Users 35m 246m 230m

Smartphone penetration 3% 19% 76%

Mobile Operator ARPU $2.5 $10.7 $46.5

ARPU x Mobile Users $2.2B $9B $15.5B

E-commerce Market Size $1.6B $170B $215B

All $ amounts in USD


India vs China
India today is like China in…

1990 2000 2006 2005 - 2013
Infrastructure IPO exits Internet Mobile
India‟s roads, electricity India has one tech India has roughly India has roughly equal % of
& water leaves much to IPO to date and a 10% internet mobile subscriber as present
be desired. It lags couple more IPOs on penetration, mainly day China. However India has
behind China‟s the horizon. (not focused in big cities. much less smartphone users
infrastructure by counting the Like 2006 China. than in China.
multiple decades. outsourcing firms).

*Important Note: India will follow a very different growth path from China. In some
areas, India may never catch up. In others, it could leapfrog China‟s growth (e.g. in
smartphone & tablet usage).


Names to know
“India might leapfrog the offline phase of retail
and give birth online to many new product brands”

@BenjaminJoffe


Key Players
Recent Rising Stars
Successes

E-commerce megastore (2007) Mobile Ads (2007) E-commerce (2010) E-Commerce/fashion (2007)
$800M valuation $1B valuation $200M valuation $100M valuation

Past Successes

Search engine (1996) Matrimony (1997) Travel (2000)
$720M valuation $250M valuation $688M valuation

The full list of top
Indian startups and
contacts is available
on: India Startup Wiki


Angels, Incubators, VCs
Popular Angels Incubators/Accelerators Angel groups / VCs

Rajan Anandan AngelPrime 500 Startups

Praveen Chakravarty GSF Accelerator Blume Ventures

Vishal Gondal iAccelerator India Quotient

Sunil Kalra Microsoft Accelerator IAN

Ranjan Kapur The Hatch Kae Capital

Rehan Yar Khan Startup Village Mumbai Angels

Anand Ladsariya The Morpheus One97 Mobility Fund

The Mirchandanis The Startup Centre SeedFund

Mukund Mohan Tlabs Sequoia Capital

Rajesh Sawhney Venture Nursery Nexus
The full list of top
angels/incubators/V
Cs is available at:
India Startup Wiki

Media, Conf, Events
Tech Media Conferences Meetups Events

YourStory.in TechSparks Open Coffee Club StartupWeekend

VCCircle Nasscom Product Conclave TiE In50hours

NextBigWhat Nasscom EmergeOut NEN iWeekend

StartupDigest Microsoft/Morpheus/ Tlabs community Startup Leadership
GSF Demos Days events Program

TiECon Nurture Talent Startup Saturday

Unpluggd VC/Angel group meet Microsoft Accelerator
& greet Events

The list of events
and conferences
will be on: India
Startup Wiki

Culture
“When you face India’s traffic, you understand
why India developed meditation”

@BenjaminJoffe


Internet Culture
• India missed the PC Revolution
- Personal computer was and still is too expensive for the general population. For many,
their first exposure to internet is through mobile phones and tablets in the future.

• Indians are using the internet without realizing it
- Here are examples of some Indian startup that provides human interfaces to the
internet:
- People can search the web via a phone call (JustDial, $720M valuation),
- Travel agent who is simply typing customer queries into websites to facilitate ticket
purchasing (Makemytrip, $688M valuation, Redbus, $200M valuation)

• The missing internet cafes & gaming culture
- One would expect India to be filled with internet cafes like other developing countries, but
you rarely see them in the big cities due to regulations.
- Perhaps due to the lack of consistent internet connections, there isn‟t a strong gaming
culture in India either. That should change as India‟s internet connectivity improves.

“I believe there is room for one or two billion dollar online gaming companies in India ”
@benjaminjoffe


Competition
• Fast-growing market with limited competition
- India is a young ecosystem with a relatively small number startup companies at the
moment.
- The risk-averse culture leads to less competition than in the US and China.
- Currently, the only real competition is in the e-commerce sector, many other fields are
wide open.
- Angels/VCs rarely compete for deals, which leads to lower valuations among Indian
startups than what is seen in the Valley.

Important note: The lack of overall competition is hurting India‟s startups as it leads
to poorer quality, lower valuations and slower market-building.


Startup Surprises
“If you want to get married, don’t do a startup.” – Delhi startup event audience

• Many Internet companies are solving big infrastructure problems
- Flipkart is building their own shipment and cash-on-delivery workforce to solve India‟s poor
logistics and payment infrastructures.
- Companies like Redbus provide software/devices to bus companies, to build India‟s missing
ticketing infrastructure.
- Quick Note: Trust in online stores is still an issue, so all e-commerce companies are
effectively participating in market-building.

• Startups have high social risk for founders
- Startup founders might have trouble getting married! It‟s a bad point on the matchmaking check-
list, like being a struggling artist (without the glamour).
- Thus, to convince someone to join your startup, you‟ll likely end up needing to convince their
entire family!
• Lots of traditional entrepreneurs
- India has millions of entrepreneurs. They are mostly small business owners and fairly risk-averse
so they stick to traditional cash-flow businesses and family run businesses.
- Due to people‟s traditional cash-flow mindset, in the tech space, startups that can monetize
quickly are favored by both entrepreneurs and investors (e.g. E-commerce).


India Surprises
• India is “Made in China”
- India import an incredible amount of good from China, despite its ultra-low wage. Nearly all
products sold are manufactured in China and later shipped to India. Why? Efficiency,
infrastructure and short term vision by the manufacturers. Indians in general prefer to be
“traders” than to be “makers”.

• Unusually high interest rate
- India‟s nominal interest rate is ~10%. Why risk it at a startup?
- Real-estate, gold investments and traditional cash-flow businesses are much more appealing to
most investors.

• Few returnees
- India has a lower returnee rate in comparison to China. This could be because the living
condition is not yet good enough to attract the top talents back to India. 1.65M out


India Surprises cont.
• India time
- Due to culture & poor traffic, it‟s expected that people
will be late to meetings/events. 15min-1hr delay is common,
but sometimes it can be as long as 2 hrs.

• Decision by committee
- India is also slow because of the decision by committee mentality.
Everything is slower in India by a factor of 2-10x in comparison to Silicon Valley.

• Despite difficult conditions, people seem content
- People‟s expectations are focused on lower tiers of Maslow‟s hierarchy of needs (feeding their
family). Among the general population, there‟s little drive to change things for the better.
- People are accustomed to living under difficult conditions. They seem happy with the country‟s
recent progress and are optimistic for the future.


In depth look
“In China, things happen because of the government.
In India, things happen in spite of it.”

@Mukund


Indian Startup Trends

41% reside in Bangalore

33% are E-Commerce

Data from of Microsoft India Accelerator Program Applicants, Bangalore


India Infrastructure

Everything is possible, nothing is easy. Lots of “friction”.

Roads – Poorly planned
Logistics – Inefficient
Internet – Slow & unreliable
Water– Numerous Outages
Electricity – Frequent power cuts

Important note: According to many, infrastructures are much better from where
they were just a few years ago.


Talents
“Too many Indians, not enough chiefs” - @benjaminjoffe

Talent Costs Entry level Good experienced hire
Industry salary (yearly) $10k $20k - $30k
Startups salary (yearly) $6k-$8k $18k-$24k + equity

• Plenty of engineers, few specialized experts
- India graduates over 1M engineers every year, many of which join big IT firms.
- Good engineers do not stay in engineering, they seek management for a better paycheck.
- As a result, senior developers, designers, marketers, product managers are hard to find. Experts in
specific technologies (e.g. Node.js, Hadoop) are virtually nonexistent.
• IIT rules India. But you can hire from other schools
- Indian Institute of Technology is the MIT of India, but their engineers are easily the best but are the
most expensive. For startups, look beyond IIT for schools with good internship programs like like
Birla Institute of Technology & Science.
• Avoid job sites
- You‟ll be bombarded with tons of doctored resumes. Stick with recruiters and your network.


Policies
• Strict rules against foreign multi-brand retailers
- India is extremely protective of its retail sector and forbids major foreign investments in multi-
brand retailers (Walmart/Bestbuy). These laws are evolving and startups have found ways to
get around this rule, so expect to see major changes in India‟s retail sector soon.

• Incorporate base on potential capital source
- Startups seeking only Indian capital tend to incorporate in India.
- Startups seeking foreign capital tend to incorporate in Delaware or Singapore.

• The new startup tax is more annoyance than
deterrence
- India proposed a new startup tax to battle money laundering schemes. India angel
investments are now taxed at 30%, for any amounts that exceeds accounting laws of a fair
market valuation.
- This law will not be stop the angel investments in India, but it will generate unnecessary
costs and annoyances to the startups.


Community Outlook

** Startup Pillars Rating Notes

Good to see some early success like
Entrepreneur-led Good
Munkund Mohan starting to take charge.

Long term vision Indian startup community leaders have a
Great
(20+ years) long term vision, even beyond 20 years.

Many entry-level ones, fewer events for
Events for all skill levels Could be better
semi-experienced entrepreneurs
Incredibly warm community, but
Inclusive of others Great entrepreneurs could use more peer
support when startups fail.

** Based off of Brad Feld‟s Boulder Thesis on startup communities


Unique Local Innovations

Find anything and everything with a phone call. Like
Google w/a giant call center for people without access to
internet.

Offline marketing, community building & analytics using
free miscalls as call to action

Cash-on-delivery. Created a national-wide team to solve
India‟s payments and logistics challenges.

Other interesting models: Olacab, Redbus, Zivame.
These models are likely to work other emerging markets


India Opportunities
• India missed the PC revolution, but will it catch up in the phone and tablet
revolution?

• Organized retail is responsible for only 7-8% of the total retail market. The
question is not “if”, but rather “how and when” the retail market will change
and who will change it.

• The country‟s infrastructure needs a lot of help. Fortunately, India is open
to privatizing some of these infrastructures. Can startup leverage
technology take a piece of this big pie?

• 70% of the country lives under $2 a day and is neglected by the first world.
Can innovations touch these 840M people?


India Commodity Innovation Map Saturated
Mature
Semi-mature
A map of India’s current market leaders in 25 commodity internet business models Infancy
Non-Existent

Dating Search Travel Blogging Communication
OKCupid Google Kayak Tumblr Whatsapp
Shaadi/Stepout Google/JustDial Makemytrip Tumblr Whatsapp

Ticketing Events Transportation Social discovery Listing
Stubhub Eventbrite UBER Pinterest Craigslist
BookMyShow MeraEvents Olacab Pinterest Quikr/OLX

Payment Online retail Deals Gaming Music
Paypal Amazon Groupon Zynga Pandora
CCAvenue/EBS Flipkart Snapdeal Sourcebits Saavn/Gaana

Dining Auto Subscription Rtl Finance Local Discovery
OpenTable Carmax Birchbox Mint Yelp
PoshVine CarWale FashionandYou FutureWise Zomato

Social news Real estate Rental Education Microwork
Reddit Trulia Airbnb Coursera Taskrabbit
Reddit CommonFloor Airbnb ??? ???

Ecosystem Ratings
India
MARKET China
4 US

3

REGULATIONS 2 CAPITAL

1

0

INFRA PEOPLE

CULTURE

Ratings
* Criteria based on Benjamin‟s Joffe‟s Ecosystem 101 explanation: India
Startup Wiki

Culture Ratings
India
MONEY China
3
US

2

APPEARANCE FAMLY
1

0

SPIRITUALITY SOCIAL LINK

CULTURE
Ratings
* Criteria based on Benjamin‟s Joffe‟s Ecosystem 101 explanation: India
Startup Wiki

“In India, you skate to where the puck is right now”
@Bowei


Advice for Local Entrepreneurs
• Stay in India, there are lots of unfilled opportunities waiting to be
tackled, you don‟t need to reinvent the wheel. Just “skate to where the puck
is right now” and focus on execution.

• Try to get into an incubator/accelerator to avoid a lot of the early mistakes
that people make. You‟ll also have an easier time finding mentors and
funding in the future.

• If you must come to the US, remember many US startups have Indian co-
founders (rumored to be up to 62%). Reach out to them for help and they‟ll
likely give you a hand.


Advice for Foreign Entrepreneurs
• In correlation to China‟s internet history, many Indian startup wins will come
in the next few years from returnees/foreigners. Unfortunately, that
opportunity won‟t last, so if you want to come then come soon.

• You will be highly regarded, so use it to your advantage. Be bold, tackle the
big opportunities that scare away most of the local entrepreneurs. But also
be humble, go find yourself an Indian co-founder who can navigate the
complicated and often convoluted social & business pathways.


Advice for Foreign Angels
• Yes, it is safe to invest for exploratory purposes.

• Have realistic expectation for your investment. IPOs are virtually non-
existent in India. Most local angels aim for series B exits or small
acquisitions.

• Definitely co-invest with reputable organizations. Let the local investment
groups complete your due diligence (e.g.Mumbai
angels, GSF, Seedfund, 500Startups, IAN, Blume, Kae Capital, etc.).


Advice for Foreign Companies
• India is an easier market to break into than China. Talent is cheap and
regulations are good. Online companies can easily win in
India, Google, Facebook, Twitter and LinkedIn are doing amazingly well. On
the other hand, companies relying on offline infrastructures like Ebay and
Amazon are getting killed by the local competitors. Know thyself and you
can win in India.

• Be PATIENT! Business progresses slower than usual in India because of
the poor infrastructures, slower pace of life and people‟s general lack of
motivation. This is unavoidable. India has a ton of potential, but it is a LONG
market. You will win eventually, but don‟t be discouraged by the initial
results.


Conclusion
There‟s no doubt India will grow, the only question is how fast?

India is a place that can be whatever you want it to be. It can be
ideal for a small cash flow business or a billion dollar empire. It‟s
true, building a company in India is full of friction, but less friction
usually means 10x the competition.

Pick your battles.


India Startup Wiki

For the latest updates on the Indian Startup Ecosystem and our full India
Startup Report, please visit:

http://wiki.worldstartupreport.com

Want to help write
YOUR country‟s
startup report?

Let us know!


India Ambassadors
Want to learn more or visit in person? These Ambassadors have graciously
volunteered to educate and welcome our readers to the Indian startup
ecosystem. Feel free to reach out.

Lead Ambassador
Mohit Bijlani Aditya Rao Parul Raj Lodha
Founder, GiggleLoop Founder, Oodio Curator, StartupDige
Mumbai Studio st
Bangalore Bangalore

Anirudh Suri Varsha Adusumilli Yatin Thakur
Partner, India AVP, YourStory.in Founder, Moonlightin
Internet Bangalore g
Group, Mumbai New Delhi

Deven Shah Chandan Raj Varun Chawla
Founder, StartupKindnes VP, YourStory.in Partner, 91springboard
s Bangalore New Delhi
Mumbai
Want to be an
ambassador for
your country?
Let us know!

Need More Help?
Get expert advice from our team of industry thought leaders.

We offer:

• Global research and connections
• International best practices
• Worldwide go-to-market strategies

Email us at: consulting@worldstartupreport.com


Acknowledgements


Special thanks to:
Dave McClure Brad Feld

Want to be a World Startup Report sponsor? Email us: hello@worldstartupreport.com


Resources
• https://www.cia.gov/library/publications/the-world-factbook/
• http://www.slideshare.net/QuantMarkets/online-market-in-india
• http://www.gapminder.org
• http://www.rediff.com/business/slide-show/slide-show-1-countries-with-the-most-
millionaires/20110603.htm?print=true
• http://statspotting.com/2011/03/india-mobile-statistics-monthly-average-revenue-per-user-2-46-usd/
• http://www.totaltele.com/view.aspx?ID=472089
• http://www.convergedigest.com/2012/10/china-mobile-nears-700-million-users.html
• http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market-
consolidates
• http://www.iamwire.com/2012/04/india-to-be-the-fastest-growing-e-commerce-market-in-asia-pacific-
market-set-to-grow-to-8-8-billion-by-2016/
• http://www.factbrowser.com/facts/5037/
• http://nationalatlas.gov/articles/people/a_age2000.html
• http://www.vijayanand.name/2012/10/comparing-accelerators-in-india-side-by-side-part-1/
• http://techcircle.vccircle.com/2011/12/01/meet-india%E2%80%99s-hottest-angel-investors/
• http://techcurry.co/some-bizarre-numbers-on-smartphones-in-india/
• http://blog.flurry.com/bid/94352/China-Knocks-Off-U-S-to-Become-Top-Smartphone-Tablet-Market
• http://www.slideshare.net/mukundmohan/startup-application-trends-spring-2013
• http://www.firstpost.com/economy/budget-2012-threat-to-enterprise-mentoring-angel-investors-worried-
248363.html
• http://www.globaljurix.com/fdi-in-multi-brand-retail-sector-india.php
• http://www.pwc.com/gx/en/technology/moneytree/private-equity-vc-investing-in-india.jhtml


Thanks for reading!

WorldStartupReport

@WorldStartupRpt

Hello@WorldStartupReport.com


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