Notwithstanding global recessionary trends, 2011 witnessed a resurgence of India’s new economy sectors, led by the e-commerce space. IT products, venture capital as well as gaming and animation contributed immensely to the buzz as well. This coincides with FE’s New Economy initiative ? a series that completed a year’s run in February.

While makemytrip’s public listing was a highlight in the space in the previous year, 2011 marked a clear departure from the focus on online travel, with retailers such as Flipkart and Snapdeal becoming household names. The most recent of the big-bang events took place just a month back when Bangalore based e-retailer Flipkart acquired Letsbuy.com for $20-25 million. The four-year-old firm had created a stir in the market with a speculated evaluation of close to a billion dollars last year, triggering debates about a possible revisit of the dotcom crash in the Indian internet space. Flipkart had managed to secure funds close to $20 million through the year.

The largest investments in the space till date also came last year when Delhi-based portal Snapdeal.com raised $40 million from Bessemer Venture Partners and Fashionandyou.com raised $40 million from a group of investors led by Norwest Venture Partners and Intel Capital. In all, in 2011, the e-commerce space saw 32 investments.

Says Sandeep Komaravelly, head of marketing and alliances, Snapdeal.com, ?Last year was a milestone year, both for the sector and for Snapdeal. In Feb 2010, we had a million subscribers and now we are at 13 million. Our employee base has grown from 10 to 900 people,? adding that ?the growth has not been coincidental with huge investments made by most major players in marketing and creating awareness. As a result, public acceptance of online purchases has grown tremendously. There has also been a lot of diversification and branching out in terms of products available online.?

The challenge at hand now is to be able to satiate customers and match supplies to the huge demand that has been created. According to experts, a lot of weeding out is expected to happen in 2012, when firms shift focus from marketing and focus on investing.

?Volumes in overall e-retailing have gone up fivefold. That there is a demand has been established. However, till now, the big focus has been marketing. But now firms have to get down to the execution part and tackle the challenges of managing distribution networks, warehousing, etc, and show actual ROIs. It is quite possible that this year, and going forward, eight of 10 players could go away. Funding has already started drying up as investors have become more cautious,? says Manu Agarwal, founder and CEO, Naaptol.com. Last year, Agarwal’s shopping site raised $25 million from investors including New Enterprise Associates (NEA),Canaan Partners and Silicon Valley Bank.

For international internet firms, 2011 has seen quite a few highs and lows here. On the bright side, or perhaps not, depending on the viewpoint, online retailing giant Amazon.com launched a local website Junglee.com a

month ago, with over 10 million products and 14,000 brands to choose from. For social networking site Facebook.com, India became the second-largest user base as of February. This mirrors trends with other networking platforms such as LinkedIn.com, which last year said its highest base outside the US is in India. The firm’s only R&D centre outside of the US, incidentally, was also set up in Bangalore in November.

Groupon.com, the Chicago-based e-retail firm, however, saw itself going down a bumpy road after it entered the Indian market through the acquisition of Kolkata-headquartered deals portal SoSasta.com. By August, Groupon had lost its top management and some mid-level employees. By October, the Groupon tag was replaced with Crazeal.com. Bigger boys like Google and Facebook too ran into some trouble with the law, with courts as well as some well meaning citizens demanding content screening and removal of ?objectionable? material of ?sensitive? nature hosted on these platforms.

The year also saw the IT products space picking up compared to previous years. In FY10, the IT products category was said to have been a no-go area with Browne & Mohan reporting the closure of over 121 product companies. However, in late FY11, and onwards, there seemed to have been a resurgence in investor interest in the $2-billion space, driven primarily by the booming mobile internet market. In September last year, Bangalore-based InMobi attracted $200 million from Japanese internet company Softbank, in the largest deal in the mobile internet space. CustomerXPS, a technology start-up, raised $4 million in its first round of funding from JAFCO Investment in June. Agile Financial Technologies, a BFSI product firm, raised $5.7 million in May via a Series A round.

Technology start-ups also caught the eye of investors. Among major deals in the space, former MindTree chairman Ashok Soota’s new venture Happiest Minds Technologies raised $45 million in its first round of funding led by private equity major Canaan Partners, Intel Capital and promoters. Lok Capital, a venture capital firm focused on the bottom-of-the-pyramid market, invested $3 million in Karnataka-based rural BPO firm RuralShores.

An interesting development in the animation, visual effects, gaming and comics (AVGC) industry happened recently from an unexpected corner, when the Karnataka government,

setting a precedent in the country, unveiled

a special policy to promote investment and employment generation in the state’s AVGC industry. It announced that it was planning to set up a venture capital fund of R50 crore, and a Center for Excellence to provide common resources for IP creation in Bangalore at an estimated cost of R80 crore through a public-private-partnership model.

However, all these sectors, which have shown great resilience so far are likely to face testing times going forward, though investors remain adamantly bullish. Says Kanwaljit Singh, co-founder and MD, Helion Advisors, ?Technology or technology-enabled businesses will continue to be the major focus for the VC community. Consumers are really driving e-commerce. The IT product space also holds great promise with the emergence of a number of home-grown companies addressing markets such as healthcare, analytics, content/media, education and financial services.?

Expertspeak

Kanwaljit Singh,

Co-founder and senior MD, Helion Advisors

New Economy deserves credit for turning the spotlight on businesses and trends that have pretty much defined entrepreneurial activity in India during the last few years. An eclectic selection of themes ranging across e-commerce, digital, education, microbreweries, fashion, F&B, mobile apps and so on, made it a interesting read for anyone trying to make sense of the immense opportunities presented by the new India.

I look forward to more this year.

Dhiraj Mathur,

Executive Director & Leader – Aerospace & Defence, PwC India

FE?s New Economy column is an interesting and insightful section which apprises the readers of the latest developments impacting the economy. It keeps the readers abreast with trends in emerging sectors such as IT, biotechnology, internet and digital.

Sandeep Komaravelly,

Head of marketing and alliances, Snapdeal.com

FE has always been the leading newspaper to cover new trends and analyse various aspects not only in technology domain but other sunrise industries as well. I am sure they will continue to deliver such insightful columns in the future too, and New Economy section is certainly a testimony of the same.