The Indian startup ecosystem system saw a slowdown in funding this year as number of promising startups closed out. After a tough phase of sustainability, startups have taken a hard look at profitable solutions through long-term resilient business strategies. So, let’s check out how the startups have fared in 2016.

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India’s Startups through Thick
and Thin in 2016
The Indian startup ecosystem system saw a slowdown in funding this
year as number of promising startups closed out. After a tough phase of
sustainability, startups have taken a hard look at profitable solutions
through long-term resilient business strategies. So, let’s check out how
the startups have fared in 2016.
Fintech
While the fintech sector received only $485 million in funding this year,
compared to $1,175 million last year, it saw more activity compared to
other sectors. This April, the government launched unified payments
interface, which powers multiple bank accounts, banking features, and
merchant payments in a single mobile app. Termed as a game-changer

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for the fintech industry, the UPI platform was leveraged by startups like
Paynear and Freecharge, who tied up with banks to introduce their UPI
apps. The sector also saw its largest ever M&A this September, when
Naspers-backed PayU India acquired Citrus Pay for $130 million. But
the biggest push was after the demonetization move. The daily
transactions through e-wallet services shot up by 300% in just a month.
Enterprise Tech
Both Saas-based companies and product companies gained ground. The
sector received $517 million in funding this year. Enterprise software
maker Druva, for instance, raised $51 million in a funding round led by
Sequoia and EDBI in October. Also, Gurugram-based Knowlarity saw
fresh investor interest with Dubai-based private equity fund Delta
Partners Capital leading a $20 million in the cloud-based telephony
company.
Foodtech
The slowdown began last year, and the bleak funding scenario in 2016
saw many foodtech startups getting shutdown. On-demand food delivery
companies such as TinyOwl, iTiffin, Dazo, and SpoonJoy struggled for a
few months amidst layoffs and a cash crunch before finally shutting
shop this year. In December, Rocket Internet sold Foodpanda's India
operations to its rival Delivery Hero. Even startups with big wallets, like
Ola, which rolled out its food delivery service last year, shut that arm in
May.
Groceries

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The other big loss was to the on-demand grocery delivery sector.
PepperTap, which was competing with BigBasket and Grofers and
raised $40 million last year, announced its decision to turn to an e-
commerce logistics model. Ola joined the list when it shut down its Ola
Store a year after launch. Flipkart shut down its grocery delivery
division Nearbuy that was launched last October. Grofers laid off 10%
of its employees and shut operations in nine cities.
Funding Scenario
Funding for startups almost halved this year, down to $3.8 billion
compared to $7.6 billion after investors become market cautious and
relied more on multiple-stream revenue generation bets. The funding
crunch had a direct impact on the startup sphere as number of startups
coming up this year went down from 9462 in 2015 to 3029 this year
according to Tracxn data.
Flipkart, Snapdeal, and Ola, the poster children of the Indian startup
scene, watched their valuation dropping with Flipkart, most notably,
from over $15 billion to $5 billion. Some of the larger startups that
raised multiple rounds of funding last year like Flipkart, Quikr, and
Grofers did not raise fresh capital in 2016. Among the top ten
technology deals were the Ibibo Group and Makemytrip merger, Yatra
(acquired by Nasdaq-listed Terrapin for $218 million), and fund raised
by Bookmyshow and Hike.
Startup India initiative

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According to Ramesh Abhishek, Secretary, DIPP, the government is
implementing changes as and when required to boost startup ecosystem.
He said, “There have been tax benefits, and fund of funds have been
launched. We are making some tweaks so that it makes Startup India
easier. We have a long way to go. It has been a great learning experience
even for the government. We ourselves had to understand a lot of things
in regulations and law. Startups are the next big thing and we want to
engage with startups.”
We can notice that this year a major impetus is put on increased
digitization to push entrepreneurship and help startups.
Bringing in India funds
While, through Digital India, efforts have been made to transform the
lives of citizens through simplified steps for interaction with the
government, there are fragments of the society that needed to understand
the nuances of digitization.
When it comes to the fund of funds, the government has to make tweaks
and focus better. “There now is a need for funds that are India-specific,
and the government is looking at that,” said Aruna Sundararajan,
Secretary, MeiTy.
Conclusion
The year emphasised the fact that startups are more than just valuation.
Creating value and assets instead of hyper-growth could be considered
as a wise ploy for startups to flourish in India.

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