Transcript of "Zinnov product startup landscape in India 2012"
Product Startup Landscape in India -2012This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted,or reproduced for distribution outside the client organization without prior written approval from Zinnov
Zinnov has broadly classified Indian Product Companies into 6 categories with relevant examplesin each category Segment Definition Sample Companies Companies in core infrastructure, Server/Infrastructure S7 Solutions, Sanat Technologies, i- security, business management, storage software and Storage Explore, Array Networks verticals Companies that are into business Business and management, business solutions, Idea device, LeadForce1, 3i InfoTech, Productivity Software enterprise resource management, Abacus Software, Accord Software, account & analytical solutions, cloud Agile Financial Technologies, Busi etc. Companies that are into Search engines, Snapdeal,Redbus, Mginger, Shaadii.com, Digital cloud, e-commerce, travel, portals, Flipkart, Myntra, Playing11,Fropper social networking, etc. Client / Desktop, Companies that are into system System CK Technologies, Enzigma Software, platforms, desktop application, Software and Tools Atlantis Computing, Organyze Systems software products, etc. Companies that are into Avantel, Tejas networks, Rebaca Semiconductors semiconductors (Chip design, ASIC Technologies design) and power semiconductor Multiple industry solutions, networking, Amagi Technologies, Snap Networks, Others energy, entertainment, open source, Vihaan Networks, Medsphere etc. Technologies 2
One of the key categories identified is the ‘Digital domain’ which has been further classified into 8 sub categories Server/Infrastruct ure software and Storage Deal websites Business and Games Productivity Software Mobiles Digital Social Networking Client / Desktop, Shopping System Software and Tools Travel and Leisure Semiconductor E- Commerce Others Media and Entertainment MarketplacesSource: Zinnov Analysis 3
Agenda 1 Detailed Trends and Analysis 2 Digital Domain - Details 4
Since 1990, more than 3402 product companies have started in India; however, the YoY numbers vary dramatically due to various other economic variables Evolution of the Indian Product Business Landscape from the year 1990 to 2012 Due the economic downturn, the number of new product startups reduced in 2009. 458 425 E 395 400 E 377 357 335 280 171 162 145 123 132 86 101 83 78 34 49 38 Till 19951996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Q2 2012 Total= 3402Note: Only companies with visibility/beta product , live in the market have been considered in the database.; E - EstimatedSource: Zinnov Analysis 5
Of the total 3,402 product companies, approximately 51 percent are based in Bangalore and NCR region Product companies split across regions Region Cities Bangalore Bangalore, Mysore, Belgaum, Gulbarga, Hubli Kolkata Hyderabad Hyderabad, Secundrabad,Vishakhapatnu 121 m,Vijayawada 810 Pune Pune NCR NCR Chennai Chennai, Calicut, Trivandrum, Madurai, Coimbatore, Cochin, Vellore Mumbai Mumbai, Goa, Ahmedabad, Vadodara, etc. 498 NCR Delhi, Gurgaon, Noida, Chandigarh, Mohali Mumbai Kolkata Mumbai Pune Kolkata Kolkata, Patna, Hyderabad Bhubaneswar 227 435 Bangalore Hyderabad Pune 929 Total= 3402 382 Bangalore ChennaiNote: The cities marked in bold are emerging Tier-II cities for product startups 6
Overall 45 Currently, overall 45 percent of the companies are working on Web; however, the trend is undergoing a change as startups are shifting to Cloud Startup Companies and platform classification Cloud Computing and its impact on Startups Without the need of implementation of hardware and various other components which can take several Ease of hours. Startup setup can be done 33% Implementation within no time. This allows small companies to compete more 13% effectively with some of the larger businesses 3% Cloud computing has been a key enabling factor in the latest generation 4% Cash Needs of of web startups, allowing them start 47% Startups with small amounts of capital and scale quickly in response to demand. Cloud computing involves the shift Web PC Mobile Cloud Others from IT-based products to business- Products to oriented services. Although this trend Services has been present for some time, cloud computing is dramatically accelerating Overall startup companies = 3402 the shift.Source: Company Website, Zinnov Database and Secondary research. 7
In addition, obtaining funding has also proved to be a challenge; however, this is changing as VC investments in this space are rising VC Investments in India (2005 – 2011) VC Investments by Industry Value – 2012 1200 240 210 16% 900 1110 180 170 3% 34% 150 6% 140 7% USD million 600 110 120 7% 950 9% 94 8% 876 3% 7% 700 300 44 60 508 475 268 Online Services Enterprise Software and Products 0 0 Mobile VAS IT Services and Others 2005 2006 2007 2008 2009 2010 2011 Healthcare & Lifescience Energy BFSI Education Deal Value Number of Deals Food and Beverages OthersSource: Venture Intelligence; Zinnov Analysis 8
Overall 58 % of the funded companies from 2005 till today are from Bangalore and NCR VC Investments by companies Location (2005-2012) Funding timeframe for 2005-2012 companies 3/4th of total 2/3rd of total Interestingly, 1/6th of startups 92 were funded in the year of inception No of Companies No of Companies 69 69 74 149 117 46 87 37 37 37 46 34 21 6 0 1 2 3 4 5 6 7 Location No of Years for funding • Overall funded companies from (2005-2012) are around 446 (i.e. 19 % of 2407 startups) • Around 66% of the companies obtained funding within 3 years of inception • 69% of the companies which obtained funding during (2005-2012) are from Digital and Software domainSource of Funding: VCCircle, Crunchbase, Company Website, Zinnov Database and Secondary research. 9
From 2005 to 2012, VCs have invested about 58% of the overall funding, followed by Angels with 23% - together contributing up to 80%! Funding Scenario in Indian Startup eco-system Top Investors from 2005 till time Accel Partners, Sequoia, Nexus VC Funding Venture Tiger Global, Helion, IDG Venture, InodUS etc.. 8% Angel Rajan Anandan, Srini Koppolu, J A 23% 6% 5% Investors Chowdary, Christian Wedell Illustrative list of startups mGlitz, N-Axis Bootstrapped 58% Software, MBAskool. Family & Dealite.in, Fachak, NextLeap, Gam Friends es2win, Attribo. VC Funding Angel Funding Seed Funding Friends & Family Bootstrapped Capillary, Vdopia, Mymo Seed Funding Wireless, Picsquare, Einfinitus Overall Funded companies from (2005-2012) = 446 Innovize Angel Funding Technologies, Rupeetalk, Voicetap , ItsmymealSource of Funding: VCCircle, Crunchbase, Company Website, Zinnov Database and Secondary research. 10
It is noticed that between 2009-12 more than 55% of the startup founders have less than 10 years of experience Startup Founder’s by Domain – (2009-2012) Founders 119 Tier 1 40 Overseas 44 Enterprise Software 196 Telecom 9% 7% 72 BFSI 25 33% Electrical & Electronics 51% 26 Product 178 Semiconductors 30 Engineering Others 76 Pure Services 243 ITES 118 Total = 1282 Freshers Service Provider MNC R&D Serial Entrepreneurs Other 114 Startup Founder’s by Experience – (2009-2012) Total = 1282 4/5th of total Affinity to Startup is very high among people with <15 393 345 years of experience! 304 145 42 33 20 0-5 6-10 11-15 16-20 21-25 26-30 31+ Years of ExperienceSource of Founder profiles: Linkedin, Company Website, Zinnov Database and Secondary research. 11
About 6% of the startups established in the last three years are having women Co-Founders Gender Diversity amongst Startups established by year (2009-12) and startups founder (2009-12) geo split under women entrepreneurship 32 23 20 5 2009 2010 2011 2012 (2nd Qtr) Number of Co-Founders 80 1202 23 20 17 12 3 3 2 Number of Co-Founders Male Female Total Tech startups (2009-12) is 1282 About 45% of the women Co-Founders are based in Bangalore and Hyderabad.Source of Founder profiles: Linkedin, Company Website, Zinnov Database and Secondary research. 12
Key challenges faced by Digital companies in the startup ecosystem • Everybody is in a cut-throat price war. They want to play the last man standing game.Online Price • E-commerce ventures are being very aggressive when it comes to price in order to consolidate their War customer base. • Businesses cannot survive without margins for too long Low Profit • Different reasons like Payment Gateway Cost, Packaging Cost, Cash on Delivery, Lost/Damaged Articles Margins and Competition have adverse effect on margins. Service and • Poor Service and Quality of Delivery results in losing customer base. Quality • Lack of feedback mechanism in place to obtain feedback from consumers, which is essential for growth of startups. • Unavailability of right kind of investors Funding • Poor timing of capital deployment as a result of poor planning • Failure to understand working capital requirements/capital prioritization of a growing businessExample of Digital company shutdown are Taggle and Exclusively.in.•The main reasons behind the shutdown of Taggle were Online Price War, Less profit margin, and Improper usage of funds.•Flush with venture capital and private equity money, online retailers have been pursuing a single-minded strategy of acquiring as manycustomers as soon as they can. However, this has come at the expense of running a sustainable business as in many cases revenue fails tocover even the cost of operations.
Key challenges faced by Software product companies in the startup ecosystem Lack of • Proper resource for the development of product.technology • Lack of technology expertise in management and inability to visualize the big picture expertise Time to • If there is a delay in go to market timing then it may erode the first mover advantage. Market • Product owner must have proper idea about the timing of the launch of product in the market.Availability of • Acquiring sufficient funding is a challenge for any startup. Funding • Lack of vision of product owner in channelizing the funding taking into consideration the greater strategic plan • Too much time to build a product will make lose the market.Development • Resources are unavailable to develop the product on time. time • Improper planning of product development cycle. • Unreliable product because of inexperienced developers or early release of the product ( without Unreliable being tested). Product • Unreliability of the product grows manifolds if unresolved issues/defects are detected. This causes fatal damage to product reputation.
Agenda 1 Detailed Trends and Analysis 2 Digital Domain - Details 15
In the last few years, Digital Domain has witnessed a rapid growth. Currently ~ 65% of the product companies in this space are focused on marketplace and mobile domains Digital product companies split across various domains Total= ~1538 2% 1% Deal websites 5% Games 22% Mobile 43% Social Networking 4% Shopping 6% Media and Entertainment 2% 15% Other E-Commerce Sites Marketplaces Travel and LeisureSource: Zinnov Analysis 16
Of 1,278 product companies in the digital domain, approx. 56% are based in Bangalore and NCRregions Digital Product companies 18 6 4 split across regions150 103 Total= ~1538 34 Kolkata 31 Deal websites 437 Games NCR Mobile NCR Social Networking123 52 25 Shopping Media and Entertainment Marketplaces 313 Travel and Leisure Mumbai Kolkata Mumbai Pune 65 31 Hyderabad 4 72 140 Bangalore Hyderabad Pune 32 Bangalore 170 42 28 15 80 14 4 24 132 413 Chennai 17
Success stories of companies in the digital domain Employee Company Company Description Product portfolio Funding details HQ Location Awards headcount Independent IP-based • Online real games 2010 International Stevie7Seas Technologies games development • Mobizill Self funding Hyderabad 100 Business Award in the Best company • Neodelight Website category ACL Wireless Limited is a "The Red Herring 100 Asia" Mobile Value Added • SMS Chat Inter Asia Venture award in 2006 and "DeloitteACL Wireless Limited Noida 300 Services (VAS) provider • Frenzo Management Technology Fast 50 India" for telecom operators consecutively for 3 years. The company creates internet based products Deloitte Technologys fast 500 Billdesk is a mobile National venture Billdesk targeted at banks and NCR 800 Asia Pacific 2006 payment gateway Fund other financial product providers. • Tata NEN hottest startups • Drona VCast: 2008 Deltecs offers end-to- mLearning product for • Asia Moot Corp 2009 Deltecs Infotech end mobile learning Smartphones. Qualcomm ventures Mumbai 50 • South Asia mBillionth Award solution. • Drona: Learning 2010 Management Suite. • Microsoft Canaan TechSparks 2010 Flipkart is an online shopping portal where Flipkart is an e- Flipkart you can buy various Tiger Global Bangalore 2500 India Digital Awards 2012 commerce website. products. Snapdeal allows multi- Snapdeal is a Deal Bessemer Venture channel direct website which provides Partners, Nexus Indian Digital Media Awards Snapdeal marketing solutions New Delhi 1000 discounts on products Venture and IndoUS IDMA 2011 for the clients. and services. Venture Partners 18
Some of the key challenges that product companies face iincludes finding & retaining the appropriatetalent and implementing a robust marketing strategy ProductMarketing and • Inability to market product or services effectively revenue • Lack of awareness about time to market the product generation • Limited or no knowledge of competition Managerial • Poor talent management and hiring • Difficulty in hiring and retaining top talent due to absence of a brandIncompetence • Identifying the right strategy roadmap is essential Finding the • Gathering comprehensive market insights right idea • Raising the initial capital amount ( bootstrapping , external funding etc.) for Startup period and development stage Staying • Inability to set realistic and incremental business goals focused • Creating and adhering to deadlines • Unavailability of right kind of investors • Poor timing of capital deployment as a result of poor planning Funding • Failure to understand working capital requirements/capital prioritization of a growing business
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