India has acquired some impressive rankings across numerous lists in recent past. Third largest startup community, most attractive destination for FDI and improving rank on the list of ease of doing business are some of the most talked about positive points. While everyone is talking about the positives there are few who are actually experiencing the negative side effects.
Will Spirit of Entrepreneurship suffer if the Startup Bubble Bursts? If various serial entrepreneurs and VCs with impressive portfolios are to be believed October month was a real low. Only a handful of startups were able to acquire funding. The overall funds allocated through various funding mechanisms were around $120 Million, which is really low when compared to $830 Million in September.
India is the third largest startup community in the world; it acquires a foreign funding of $100 M every week but the indigenous funding has decreased drastically. Experts are comparing the current scenario with the recession of 2008 but then there are VCs and entrepreneurs who have referred to 2008 as systematical flaw while the contemporary problem is related to valuation.
A lot of Indian Startups have followed old paradigms of value calculation and have valued themselves around $50 Millions while their actual calculation comes around $20 Millions. The contemporary situation is seriously different from what it was in 2008.
In 2008 government had to change the system and also provide enterprises with requisite fund in order to cope with the pressure. In the contemporary world the recession of funding can be handled by replacing few things from the startup community.
Some of the common factors why funding has witnessed a new low in the month of October:
- No new ideas only replication: Yes, it is true. A lot of Indian entrepreneurs are looking forward to replicate ideas from West. Earlier it had worked but now a lot of them are failing which is forcing VCs to slow down a bit and save their money. The entrepreneurs need to verify their ideas. They need to put it on various tests before reaching out to the VCs for funding.
- Particular interests of VCs: in a recent survey conducted by various online agencies, it has come to light that VCs are favoring entrepreneurs from particular community. VCs are known to prefer IIT Entrepreneurs to entrepreneurs with common background. This is one of the major flaws in the system. It is true that one should value the team but not funding a company just because their entrepreneurs are not from IITs will take our country nowhere.
- Needs Trigger: When referring to Trigger, we are not talking about a special package from the Central Government. No, there is a need of change in the mindset. We have created India’s Uber in form of Ola, we also have created India’s Amazon and Alibaba in forms of Flipkart and Snap Deal respectively, now it is time to stop creating something that is already out there in the world. India needs original ideas and the day our entrepreneurs start working on these ideas, we will witness a new height of success and funding.