“The years teach much which the days never know.”
Ralph Waldo Emerson
Ah, what a year it has been! From high highs to low lows, 2019 was an exciting roller-coaster ride for the start-up space. While several Indian start-ups paved their way towards a global footprint, some that built castles in the air came crashing down. To cap it all, India rose to prominence as the third largest start up ecosystem in the world, with the addition of over 1,300 new start-ups and the emergence of seven unicorns.
Looking ahead as we approach the end of 2019, I think 2020 will be a watershed moment in the entrepreneurial ecosystem. With India gearing up to become a USD 5 trillion economy by 2025, our start-ups are now perfectly primed to capitalize an incredible opportunity.
Today, as the Indian start-up ecosystem continues to evolve and build synergies in an orchestra of innovation, we have reached an inflection point. It’s time for us to reflect and reshape our future. Here are five trends that the Indian start-ups should watch out for, in 2020:
1. Profitability will be prioritized
So far, extensive advertising and deep discounting were considered the surest way to attract buyers. But this logic is flawed. Despite sky-high valuations and record sales, startups keep burning cash and struggle to break even or generate profits.
Drawing from my experience, although investor attention can keep you going for a while, it is the customer’s attention that you’d need to stay afloat and be profitable. A disruptive product or service with a great market fit is far more likely to generate profits than artificially acquiring customers through discounts. Building sustainable business models should, therefore, be our strategic priority for 2020.
2. Funding will be quality-centric
Money is the lifeblood of every business. As a startup founder, raising funds, networking with the right investors and gaining access to the right resources at the right time will be your crucial responsibilities. Until now, these activities were relatively easy, thanks to investors’ willingness to be a part of India’s growth story.
But times are changing now. Going forward, the spotlight will be on disruptive startups with scalable applications. Although fund inflow will increase in 2020, startups will be under the microscope for longer and have to transcend higher scrutiny, to gain access to funds.
3. Corporate governance will become the new yardstick of success
The massive meltdown of WeWork from one of the fastest-growing startups (valued at USD 47 billion) to a touch-me-not of investors (USD 10 billion) has smudged the founder-reverence culture in the startup world. As ventures stabilise and mature, they must adapt and refine corporate governance practices, within the ambit of regional laws.
To raise the benchmark, startups should adopt good corporate governance based on trust-led financial reporting and transparent policies. The goal, in my opinion, should be on demonstrating good corporate citizenship, through sound governance and ethical behaviour. Although the additional regulatory burdens increase the complexity of overseeing and managing businesses, founders can team up with industry veterans to steer through the process efficiently. Case in point – SoftBank in talks with T-Mobile CEP John Legere.
4. Large conglomerates will join forces with startups
2019 saw Bajaj Auto funding Yulu, a micro-mobility platform. The win-win collaboration helps Yulu increase its fleet size, leveraging Bajaj’s expertise in the automotive industry. So is the case with Mahindra Electric-Meru alliance, which synergises the duo’s ridesharing and electric mobility solutions.
Going forward, 2020 will forge more such mutually beneficial partnerships. And, as Henry Ford says, “If everyone is moving forward together, then success takes care of itself.”
5. Stability and maturity will lead to IPO-ready ventures
After WeWork’s failed stint at IPO and Uber’s weak stock market performance, newsrooms were quick to write obituaries of the startup ecosystem. But Alibaba’s IPO debut at Hong Kong Stock Exchange proved otherwise. This shows that the startup space is heading for a turning point.
In 2019, the BSE listing of Alphalogic Techsys, the first startup IPO, was successful. Further, with Ola eyeing an IPO over the next two years, other ventures like Oyo, Pepperfry and Freshworks will soon join the ranks.
In 2020, we will see start-ups showing the way for profitable, shareholder-backed value oriented business models.
What are your predictions for India’s startup story 2020? I’d love to hear from you!
