Failure is a key element in the startup world

Written by Anand J | Updated: Sep 16 2013, 07:41am hrs
I started investing in Indian technology startups in 2006 when I moved to India after spending 20 years in the US. I made my first investment in an Indian startup in a company called Wiziq.com. If you go back to 2006, the activity levels were very low. In the entire year (2006) I saw a few dozen business plans and made one investment.

Now let us fast forward to 2013. Many things that have changed significantly. First and most important is that we have a much larger addressable market in India. There were 40 million internet users in India in 2006. At the beginning of 2013, India had 150 million internet users and the country is adding 4-5 million internet users a month. There were no smartphones in 2006, there was very little activity on social and online video, and e-commerce was virtually non-existent in India. Today all of that has changed. India is now the third largest internet market in the world and we are seeing explosive growth in mobile, social, video and e-commerce.

Second, we have a much larger number of entrepreneurs. For instance, the Nasscom 10,000 startups programme had over 4,000 applicants over a period of two months. In addition to the significant increase in numbers, we have seen a steep change in the quality of the entrepreneurs. We are now seeing a large number of highly driven, young engineers trying to build tech companies.

Finally, the Angel ecosystem has grown significantly. When I joined the Indian Angel Network (IAN) in 2006, there were only a few members but today IAN has more than 200 members apart from several other angel networks. From 20-30 active angel investors in 2006, today India has at least 400-500 angel investors. Today with the advent of cloud services, two engineers with a great idea can build a product and get it launched with a few lakh rupees.

In the startup world, mistakes are going to be bountiful. Failure is a key element in the startup ecosystem. I would like all of us to make many more mistakes as that is the nature of the game. If you see the entrepreneurs from Bangalore, Mumbai, NCR, Pune and Chennai the appetite among young people to take risks is very exciting.

We now have many examples of successful technology startups that have been built in India. This is very important as these companies and their founders are role models to thousands of young entrepreneurs. Companies like Makemytrip, Infoedge, Justdial, Inmobi, Flipkart, Myntra, Snapdeal, Homeshop18, Quikr, Shaadi and many others are truly world class companies built by Indian founders. Three of these companies are publicmost recent being Justdial. Many more will go public over the coming years.

Today we are seeing hundreds of young Indians taking the risk of starting up. Success breeds success and it has led to developing local ecosystems. For instance, Zoho which is one of the most successful SaaS companies in the world, has enabled building a startup ecosystem in Chennai. Zoho team members who leave the company startup their own ventures.

Despite all this progress, we are still in the first day of the test match. We just need to look at Israel. Israel has four million people; India has three million software engineers. Last year Israel had over 800 new funded technology startups. India had less than 200 new funded tech startups a year. We have the opportunity to at least 10x the number of companies that are starting up and getting funded every year.

By 2020, India will have over 600 million internet users and most of them will be on smartphones and access the internet on broadband networks. At that point we should have tens of thousands of tech startups. Our aspiration should be to be the most vibrant country for tech startups in the world. Last year the US had 15,000 new funded technology startupswe had less than 200. This aspiration was the genesis behind the Nasscom 10,000 Startups initiative that was launched in March 2013.

We have massive opportunities in both the domestic market as well as the international markets. When it comes to tech startups, most of the media attention is on domestic internet companies. But there is an equally exciting story in software product startups.

We already have many examples of startups that are building global software businesses from India: Fushioncharts, Freshdesk, Druva, Capillary, Webengage and Interviewstreet are few of the dozens of startups that are growing very rapidly.

The domestic market has many sub-segments. E-commerce in India will be a $50 billion industry by 2020. Only 25 million of the 150 million Indians transact online and if you take out travel, only about 12 million Indians transact online. This number will easily increase to 100 million transacting users by 2020. China already has 200 million internet users who buy products online. At a minimum we will get to half that number by 2020. Although there has been about $2 billion that has been invested in e-commerce and the industry is currently going through the first phase of consolidation, my view is that the game is still very early.

The non-travel commerce segment will grow from $2 billion in 2012 to over $30 billion in 7 years. That is massive growth. All we have to do is look at e-commerce markets like US, UK and China to understand what might happen in India over the next decade.

The other large opportunity is local. We are all aware of Justdials success. Justdial is synonymous with local search in India. Another very interesting player in local is Zomato, the restaurant listings site. I am confident we will see many companies that will focus on specific verticals and build deep content and transaction based businesses. Docsuggest the leader in the find a doctor and make an appointment space is one such example.

India will have 70 million smartphone users by the end of 2013. India will be the first large internet market that will be truly mobile first. Every one of the new users who will come online in the next five years will be mobile first and mobile only.

Online video is exploding in India. I have been very surprised to see the explosive growth in online video consumption. We already have a few hundred entrepreneurs who are building interesting content businesses that leverage the online video platform.

We all know the success of social platforms in India. Facebook, Twitter, Linkedin and Google Plus are growing very rapidly. These platforms provide a unique opportunity to build use cases that can disrupt existing business models. Socialblood is trying to address the problem of blood donations in India by leveraging existing social networks. Giftery is making gifting super simple by leveraging the social graph. My view is that there are hundreds of niche businesses that can be built quickly by leveraging the massive social networks we already have.

The largest set of unmet opportunities in India are centered around local languages. Only 150 million Indians can read and write English. The next 300 million Indians cannot speak, read or write English. Outside of news and online video content, there is very little local language content on the Indian internet. How will the next 300 million connect What will they do

Finally SMB is a huge white space in India. There are 47 million SMEs in India. 12 million have more than 5 employees. Less than 400,000 of these small businesses even have a website. Over the next decade at least 10 million Indian SMEs will come online. Who will bring them online Who will provide the tools that they need How can you reach them and sell to them Each of these is a billion dollar question. There are many large startups that will get built around addressing the unique needs of SMBs.

We have a 150 million Indians on the internet in India. Now let us imagine a India with a billion connected Indians. This is the time to Start-Up.

(The views expressed here are personal. Some of the startups mentioned are companies in which Rajan Anandan has invested.)