From the startup world – June 28

 

A compilation of important news from the startup world:

Droom, a lesson in efficiency for startups
This comes at a time when well-funded hyper-local startups like PepperTap have shut down and larger ones like Grofers and Zomato have been forced to scale down operations. The so called ‘unicorns’ are struggling to raise funds, and recklessness with investors’ money is punished with tighter purse-strings. Meet Sandeep Aggarwal , co-founder of ShopClues and Droom . He was a wall-street analyst who bootstrapped his venture with his own funds and angel money that he raised from his friends and family till he first received institutional funding to the tune of $4 million in January 2012. Interestingly, Aggarwal’s latest startup Droom has a mere three employees in customer support. The company’s GMV to human resource ratio stands at $1 million annualized GMV per person.  Aggarwal claims it’s the highest amongst startups in the country. His company is currently doing close to $170 million in annualized GMV. Business Insider sat down with Aggarwal to understand where machines can replace man, and where they can’t. Technology may deem some redundant. It’s their job to adapt and re-train themselves. That’s called survival for the fittest. That way people would actually end up earning more than they are currently.

Indian startups will go through a grind, but it won’t be a winner-takes-all market: Nikesh Arora
In his first interview to Indian media after quitting SoftBank, Nikesh Arora, till recently the successor-in-waiting to founder Masayoshi Son, says it was not a fallout of an ego clash. Founders have strong personalities and it’s very hard for them to give up their ways, he says, adding that Masa wants to be CEO for another 5-10 years and “I could not wait that long”. Son is committed to supporting SoftBank’s all investments, the ex-Googler says. Like water, valuations of Indian startups will also find their level as they enter a phase of readjustment, Arora tells TOI’s Samidha Sharma. Nikesh Arora’s much-publicised stint at SoftBank as its president & COO, and more importantly, as successor-in-waiting to founder Masayoshi Son, came to an abrupt end last week. Many questions have since been asked about the timing of the announcement which came post Arora’s exoneration by a committee investigating him on charges of conflict of interest and poor investment decisions. Having emerged as one of the most sought-after tech investors globally, the ex-Googler steered the Japanese internet and telecom giant’s global ambitions dubbed SoftBank 2.0. During his two-year tenure, Arora, an inveterate networker and salesman, was continually scrutinised and questioned by many in the industry as he took bold and often expensive bets on consumer internet startups. In his first interview to Indian media since the news of him moving on from SoftBank made headlines, the 48-year-old sat down with TOI for more than an hour at the company’s Bay Area office in San Carlos.

Why current mobile networks do not benefit startups and consumers
There are several Over-The-Top (OTT) companies emerging in India; the strange thing is they are building their apps to support 2G speeds for video downloads. Data provided by IAMAI suggests that 70 percent of India is still running on 2G networks. One would ask if Indians love 2G plans because they have not yet been exposed to the benefits of 4G. Truth be told, there are not many services built for a 4G experience because the network itself is slow. A startup called FastFilmz offers HD-quality unlimited video download for Rs 30 in 4G speeds. But with low-speed 2G networks, their customer must enjoy low-quality video, which can dramatically reduce the experience, because the consumer will have to spend more on data for bad-quality video.Today, 95 percent of Indians are on prepaid services and only 150 million are using 3G in some form, mostly to transfer downloaded images, music, and video. “Most consumers in the country prefer a 2G data plan because they can continue to message on WhatsApp, or they can download a few songs if they subscribe to a data plan worth Rs 100 that lasts seven days,” says Karam Malhotra, Co-founder of FastFilmz. What consumers do not understand is that 2G networks are slower and expensive to maintain because the technology requires a lot of servers and switches to be added to manage the traffic. The question is why have 4G networks been launched to such low adoption. From this, we can deduce why B2C businesses are not getting funded because the market adoption for data consumption is very low in this country. This lack of adoption exists because of two problems. The first one is clearly because 3G networks too have not been installed to full capacity in small cities. These towers are set up to handle a limited volume of data consumption. This leads directly to the next problem. The majority of Indians cannot loosen their purse strings to spend that Rs 20 extra for a 3G or 4G service.

How telecom groups are helping startups
Every startup entrepreneur’s big wish is to be in Silicon Valley or at least have access to the kind of `ecosystem’ that exists in the Valley. Abundance of risk capital, lot of people willing to back ideas, big companies helping small ones, easy availability of talent, plentiful labs to test out products and services and a big market. Despite lack of all the ingredients everywhere, startup culture has spread much beyond the Valley to places including Bangalore, Gurgaon, Hyderabad to name a few. The ecosystems exist — not quite like the Valley but it has its own strengths and opportunities that attract startup entrepreneurs.But for today’s telecom and technology driven startups, the scale of ambition is often to be the next Uber, which is in about 300 plus cities globally or an Airbnb which offers services in 191 countries! If ideas appeal to a global audience, like cab hailing or renting out accommodation getting the right mix of technology, marketing, sales and local cultures can help build scale. But very often entrepreneurs with great ideas lack the ability to scale, beyond home markets.That’s why last year’s effort by four telecom operators is worth examining in regard to building startups beyond home markets. Four of the world’s top telecom operators teamed up to invest in technology start-ups with the view to launching them beyond their home markets.

Startup ecosystem in Kerala loses sheen, but hope floats; here’s why
Kerala was the first off the starting block in India to start an IT park in Thiruvananthapuram way back in 1990. But, the state failed to capitalise on the early start as cities like Bengaluru and Hyderabad soon overtook it in terms of IT exports and employment. Four years after Kerala started its incubator Startup Village (SV) in 2012 to promote IT startups, things have definitely taken a positive spin. While the state’s proactive role in promoting startups with innovative ideas like Student. Entrepreneurship Policy (SEP) has managed to build a momentum for an entrepreneurial culture in the state, the real challenge is to sustain this momentum, scale-up and become financially self-sustaining.An investment outlook by the NewsCorp Circle, India’s leading publisher of startup and private equity news,reports that majority of the startups in Kerala still continue being at the seed or pre-seed funding stage. “Their ability to secure investments to scale up is limited by the selective understanding of valuations, pitching methods and investment trends from the perspective of venture capitalists,” it said. The report adds that startups in Kerala have garnered 28 early stage funding deals amounting to $18.5 million since 2011. Historically 2013 was the best year from a funding perspective, after which the two years that followed have been muted.

Angel investors hail Indian government’s decision to abolish angel tax
Six months after promising more for the startup ecosystem, the Indian government has decided to do away with the “Angel Investment Tax” on investors funding money for startups. In its notification, the Central Board of Direct Taxes (CBDT) in the Indian finance ministry said that Section 56(2) of the Income Tax (IT) Act has been amended, which has been one of the long-pending demands from the investors’ community.Unil now, all unlisted companies which raised funds in the form of equity were taxed as “income from other sources” under Section 56(2) of the IT Act. As such, these companies were paying more than 30 percent as corporate tax. However, many startups may not be able to avail the concessions due to strict norms laid down by the government.What has disappointed the startups was the terms and conditions prescribed by the Department of Industrial Policy and Promotion (DIPP) to avail such benefits. The eligibility criteria said that the companies should not be more than five years old and the annual turnover of each of them should not be more than 25 crore rupees. Most importantly, these firms should work towards innovation, development, deployment or commercialisation of new products, processes, or services driven by technology or intellectual property.

Delhi-NCR tops list of India’s most funded startup cities
According to a Tracxn report, in the first six months of 2016, Indian startups have received up to Rs 12,000 crore, of which more than half was raked in through 155 deals in Delhi-NCR. Occupying the second spot in the list was Bengaluru.Surprisingly, Mumbai has been placed at the third position in the list.Following Mumbai, it was Pune at number four while Hyderabad was the fifth most funded started cities in India.This survey has come days after the capital’s Connaught Place was announced as the seventh most expensive prime office market in the world with an annual occupancy cost of $149.71 (Rs 10,000 approx) per sq ft.Bandra Kurla Complex (BKC), Mumbai’s Alternative Business District, stood at 19th position while Mumbai’s Central Business District of Nariman Point is at 34th position, according to a survey conducted by property consultancy CBRE Research’s Global Prime Office Occupancy Costs.

Paytm and Alibaba to help sellers from India to procure 5-million products from China at cheaper prices
Alibaba Group Holding Limited a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals which also provides electronic payment services, a shopping search engine and data-centric cloud computing services and Paytm  an Indian e-commerce website headquartered in Noida, India which was launched in 2010 and is owned by One97 Communications are working towards enabling Indian sellers to source products from China at cheaper rates as well as help them with logistics and paymentsAs per the company statement, it has identified about 25-30 Indian merchants with a credible track record to incubate under categories including home and kitchen, micro innovation including USB cookers, etc, fashion and mobile accessories and western fashion to begin the pilot. There are plans to get on board at least 10,000 merchants by the end of this year, giving them access to more than 5-million products from China.

Networking infrastructure for startups to pay as they grow
UrbanClap, a rapidly growing services marketplace in India, is implementing a Virtual Chassis technology solution using California-based technology provider Juniper Network’s services.With an existing customer base of over one million and an average of 150,000 requests monthly, UrbanClap required a high performance network infrastructure that could support future scalability in accordance with the pace of business growth. The company needed a network that would be rich in user experience yet cost effective, easily manageable, reliable and highly secure. Juniper’s switching, security and routing solutions were selected as the solution of choice to build a state-of-the-art, pay-as-you-grow networking infrastructure.Implemented at UrbanClap’s new Gurgaon headquarters, the new network infrastructure is based on Juniper’s EX4300 Ethernet Switches serving as a gigabit core layer and access layer solutions comprising EX3300 Ethernet Switches. Virtual Chassis technology allows up to 10 switches to be managed as a single logical device, and provides a cost-effective way to scale the network using a pay-as-you-grow approach. Performance needs are met with a 40 Gigabit Ethernet (GbE) backbone at the core and 10 GbE at the access level delivering 100 Megabits per second (Mbps) connectivity to each user. With this technology, UrbanClap will gain the flexibility of a stackable switch with the performance and reliability of a modular system.

1001 Startup Ideas – Provding Storage Facilities To Households
The startup idea is to provide the storage facilities to customers at their doorstep in India. The idea is to establish a company, which will provide the services of collecting goods from customers’ home, and store it at its facilities for a fee. The customers can also get the goods delivered back to them by paying a small fees. Self-storage or physical storage facility has been colossal in the USA and other parts of the world. According to an estimate, of the 58000 self-storage facilities in the world, about 46000 are situated in the USA. There was about 2.63 billion square feet self-storage space in the USA in 2014. It is further estimated that self-storage spaces in the USA will make about USD 32.7 billion in revenues in 2016. According to a report by FEDESSA, the Federation of European Self Storage Associations, in 2014, it was estimated that 975 facilities exist in the United Kingdom, 430 in France, 264 in The Netherlands, 210 in Spain, 131 in Germany, and 112 in Sweden. Self-storage or physical storage facility has been colossal in the USA and other parts of the world. According to an estimate, of the 58000 self-storage facilities in the world, about 46000 are situated in the USA. There was about 2.63 billion square feet self-storage space in the USA in 2014. It is further estimated that self-storage spaces in the USA will make about USD 32.7 billion in revenues in 2016.

Snapdeal’s ex-CPO Anand Chandrasekaran sees a good deal in these 6 startups
Anand Chandrasekaran, who quit as the chief product officer at Snapdeal a month ago, has announced investments in six startups — Truce, MagicX, Lucideus, LoanCircle, Lernr andRupeek — and plans to invest in three to five more companies this year. Chandrasekaran has become an active angel investor in Indian startups over the past 12 to 15 months and typically invests about $25,000 (Rs 17 lakh) in each entity. He declined to say how much he invested in these six startups. The investor, who has met about 200 companies since leaving Snapdeal, has built a portfolio of over 15 startups, including gaming network Gamezop and online marketplace RentOnGo. Chandrasekaran, a cofounder of mobile applications software company Aeroprise (acquired by BMC Software), moved to India in 2014 and played a key role at Airtel, building products such as My Airtel, Airtel Money and Wynk Music.

Waterbridge Ventures Launches $15Mn Fund For Early Stage Tech Startups
Manish Kheterpal,  the Angel investor and private equity veteran has launched WaterBridge ventures with a fund corpus of $15 Mn  which is  SEBI registered, early stage startups fund with initial focus on Seed and Series A funding in the technology startups.It is looking to bet on startups utilizing technology at their core that are spread across sectors, including consumer-focused mobile apps in media and telecom, ed-tech, health-tech and fin-tech, among others.According to Kheterpal, WaterBridge Ventures will primarily look to invest between Rs 75 lakh and Rs 3.5 crore in 12-15 ventures, and has a fund life cycle of 5-7 years.“It helps that VCs have tightened the tap for later stages of funding, as those help with entrepreneurs driving sharper business plans in earlier stages, valuations are more realistic and conversations are more sensible,” said Kheterpal.

Deal activity in Indian e-commerce sector grows amidst decline in US, China
Indian e-commerce startups such as Flipkart and Snapdeal have become increasingly important contributors to e-commerce deal activity, along with their early-stage counterparts. Such companies currently account for one-fifth of e-commerce deals globally, and that level might rise to a new record this year going by the current run-rate data from CB Insights. That makes India a bright spot in contrast with the Chinese and US markets, where the pace for deals has declined this year, both in respect to number of deals and dollar funding. In fact, global e-commerce deal activity is headed for a decline in 2016, and dollar funding is on pace for its worst year since 2012. As the chart below illustrates, in 2015 both China and India saw increased deal counts and narrowed the gap with the US, which dropped from peak levels seen in 2014.Indian deals soared 124 per cent, to a new high of 148. This year, India’s e-ecommerce firms are on track to surpass that figure while e-commerce deal activity in the US has continued to be weak. The share of US companies in global e-commerce deals has infact been on the decline since 2012, when they attracted more than half of worldwide deals. But that share dropped to 41 per cent in 2015, and is at 39 per cent this year.

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