The year ends tomorrow and it is a great time to recap 2018 to better understand what 2019 has in store for the Indian startup ecosystem.
Walmart’s acquisition of Flipkart was the most important and influential event for the Indian startup ecosystem this year. While I believe it is turning out to be a bad deal, it is a sign of the growing confidence in the Indian ecosystem. Investors, early employees and founders have been rewarded due to the exit.
Investor returns imply it is likely that we are going to see increased late-stage activity in 2019, while rewarded employees/founders are likely to start new companies (like Udaan) or startup investors (like xto10x). There are likely to be higher quality startups in India to invest, with ex-Flipkart employees. Large startups are going to become larger.
One of the large startups to watch out for is Swiggy.
Swiggy raised a $1Bn round to bolster its position as a leading food delivery startup. While Swiggy’s business model seems almost orthogonal to the e-commerce giants, I believe 2019 is the year the battle for the doorstep heats up.
Swiggy will likely take the battle for the customer wallet by expanding into groceries, pharmacy and other localized services which are not strengths of Amazon/Flipkart. One should expect consolidation in the hyperlocal groceries ecosystem, with numerous acquisitions of small players.
Consolidation of larger players, though, is likely to happen in the budget hospitality sector.
I had looked at how OYO is coming around to maturity, although its key metric of success will be determined by China. A $1Bn war-chest will be used for both organic and inorganic expansion. The budget hospitality sector benefits from scale, and OYO is already looking at large “smaller” players like Treebo. As I had elucidated, a larger network will push up lifetime values from customers.
Having large lifetime values will also become increasingly important in Ed-Tech.
I talked about how BYJU’s has scaled as a fantastic business, with my concern being around whether it will be able to drive user engagement/repeat rate. With a raise of $540MM, immense capital exists for the company to truly empower teachers and improve the performance of students.
Products that tangibly improve and measure performance will have high engagement (and high lifetime values). It is a whitespace in education and I believe multiple companies will emerge in 2019 to fill this gap.
One must be careful, though, of trying to fill non-existent gaps as 2018 demonstrated for the cryptocurrency ecosystem.
A year ago, I had elucidated how Bitcoin was likely going to collapse, and it fell more than I had thought. I was similarly concerned about how the Indian government was crippling innovation by freezing Indian cryptocurrency exchanges out of the financial system. While the exchanges were trying to fill a gap that no longer exists, they were creating financial technology products that could be game-changers.
Many of these talented engineers will be building fin-tech products in 2019.
2018 was a great year for Indian fintech startups. 140+companiess raised capital, growing over 2017. Fintech was the number one sector for investing, and that is reflected in my analyses through Capital Float, PayTm, Zerodha and ClearTax.
India has done very well in utilizing mobile to digitize financial transactions. UPI and Aadhar are the core of the buzz-wordy “India stack“, but it really is a harbinger for fin-tech. I expect 2019 to be even bigger for fintech, with a large focus on solving consumer lending as a pain point.
Another big pain point that is yet to be solved is content for India’s non-English speaking population.
Cambridge Analytica exposed Facebook’s weaknesses. A large portion of India’s non-English speaking population still relies on a clearly distracted Facebook. I believe vernacular content companies should step in to fill the gap, by building India specific and suited products. 2019 will definitely be a year for vernacular focused companies, that will understand how to best monetize this largely untapped audience.
As a member of this ecosystem, I am largely optimistic about the future. Indian entrepreneurs have always proved that they can innovate at an individual level, due to lack of resources per capita.
Recent years have shown that Indian entrepreneurs can build companies for scale. I believe truly global players will arise out of India, and sooner than we think.
I wish everybody a great new year ahead, and here is a small note on New Year Resolutions.