65% startup leaders believe the sector is in a tech bubble


Founder of startup company Vikram Rastogi works in his office in Bangalore. In the basement of a Bangalore building, hundreds of young Indians sit in neat rows of desks typing furiously, all dreaming of becoming the new Steve Jobs or Mark Zuckerberg.(AFP)

Nearly 65% of startup executives and founders believe that the Indian startups are in a technology bubble, while 18 per cent feel that the bubble was close to bursting soon, a study by venture debt and specialty lending business, InnoVen Capital, said.

The India Startup Outlook Report 2017 highlights the perspective with responses from over 170 startup leaders across bootstrapped as well as funded ventures.

The study said that 63 per cent of the respondents, who attempted to raise funds in 2016, confirmed that they had an unfavourable funding experience with almost half of these not being able to raise any funding and the rest raised either a sub-optimal external round or a bridge round.

The respondents believe that in 2017, more companies with robust business models followed by more exits is most likely to improve investor sentiment.

The least likely factor to better the funding environment is Indian unicorns raising more money at a higher valuation, the report added.

“The startup outlook report is part of our continued effort to understand and communicate the nature of the Indian entrepreneurship ecosystem. In this report, we explore the mood and outlook of Indian startups given the recent budget, cautious investor climate and an uncertain global economy…” Ajay Hattangdi, Group COO and CEO India, said.

Ninety four per cent startups are looking to raise funding in 2017, with VC-backed companies aiming to raise a median of $2.5 million, the report pointed out. The average expectation on how long it could take to close the round is 4-5 months.

Difficulty in raising equity funding was voted as the top business challenge, followed by difficulty in managing talent and market creation. However, the respondents were uncertain whether fund-raising will be more challenging in 2017 or less.

Overall, almost 75 per cent of the set supposed that the startup ecosystem in 2017 will be driven by entrepreneurs, whilst 26 per cent voted that investors will play the pivotal role.


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