Given that, there has been significant Chinese investment in Indian startups, it should lead to having the confidence to enter the Chinese and Southeast Asian markets.
By Sashi Reddi and Shweta Singh
In 2018, India added eight unicorns and moved to third place after the US and China in terms of the number of unicorns in a country. The gap between India (18 unicorns) and UK (15 unicorns) will now continue to increase, clearly positioning India along with dominant countries the US and China as the trio that will dominate the startup ecosystem globally. Here are a few things to expect in 2019:
1. Slowdown in Chinese tech scene
Significant slowdown in China tech sector will continue for various reasons, the primary ones being an increased role of the Chinese government in curtailing the power of the top players, increased scrutiny of Huawei, ZTE, and others by Western nations, and a drying up of funding for unsustainable business models (like what is rumoured to be happening in the bike sharing space).
2. B2C startups move out
Oyo recently announced that it was setting aside $600 million for expanding into China. HealthifyMe sees Southeast Asia as its next target market. Given that, there has been significant Chinese investment in Indian startups, it should lead to having the confidence to enter the Chinese and Southeast Asian markets.
3. Higher FDI
2018 marked the first time in 20 years that India got more FDI than China. 2019 will strengthen this further, marking an important milestone in global capital flows. Non-US investors like Softbank, Naspers, DST, and others will continue to play a dominant role in Indian startup funding.
4. Rise of Protectionist India
Starting with the new e-commerce policy disallowing Amazon and Walmart from selling affiliated brands on their sites, there will be other similar regulations to strengthen Indian players compete with international players. These regulations will impact fintech, e-commerce, telecom, as well as potentially manufacturing and defense.
5. Data Protection Law
India will implement a data protection law on the lines of GDPR to strengthen data privacy and control. While this will initially hamper international players in India, it may also provide a path to again allowing third-party firms to leverage Aadhar data for various purposes and continue the digital revolution that India Stack was supposed to unleash.
6. Time for enterprise startups
While B2C will continue to dominate the Indian startup ecosystem, 2019 will mark the emergence of at least 20 enterprise B2B startups that are valued at over $100 million. The current list of Freshworks, Grey Orange, Capillary, etc., has been a great foundation on which the next wave of enterprise tech startups will emerge.
7. Intense vernacular battle
According to a KPMG report, the Indian language internet user base has surpassed the country’s English user base and is growing at 18% CAGR to get to 536 million by 2021 – 75% of India’s estimated internet user base by that time. The platform that can capture these users will reign superior in the race towards monetization. We will thus continue to see India’s dominant vernacular content platform, ShareChat, lock itself in an unexpected battle with new, yet vastly experienced, Chinese entrants such as Helo, Tik Tok.
8. Fintech retains spotlight
Payments/wallets, wealth management/robo advisory, insurance, instant lending will all remain top of mind in 2019. Some level of churn will continue in part due to the Indian NBFC liquidity crunch from 2018, with only those lending players that have demonstrated their
ability to not just distribute but also collect capital would survive.
9. Digital entertainment gains strength
On-demand streaming services such as Hotstar, Amazon Prime, Netflix will continue to boom on the back of cheaper and faster internet connections and Indian networks will have no choice but to go digital — a trend already underway with the launch of online streaming players such as Voot, AltBalaji, SonyLiv, Zee5. Due to the Telecom Regulatory Authority of India’s (TRAI) revised tariff order being implemented in 2019, viewers will be able to select and pay for only those channels they want to watch. This will create further pressure on weaker channels that benefited from bundled cable offerings.
(Sashi Reddi is the managing partner and Shweta Singh is the principal at SRI Capital. Views are the authors’ own).