{"id":192895,"date":"2022-06-28T20:38:09","date_gmt":"2022-06-28T15:08:09","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=192895"},"modified":"2022-06-28T20:38:09","modified_gmt":"2022-06-28T15:08:09","slug":"market-reality-is-catching-up-to-the-tech-startup-ecosystem","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/market-reality-is-catching-up-to-the-tech-startup-ecosystem\/","title":{"rendered":"Market reality is catching up to the tech startup ecosystem"},"content":{"rendered":"\n

News<\/strong>: In recent years, India has been witnessing the growth of the start-up ecosystem <\/strong>which has been in overdrive for the past few years.<\/p>\n

What are the factors that have led to growth in the start-ups in India?<\/strong><\/h5>\n

On the supply side<\/strong>, the start-ups were able to find cheap money<\/strong>, and they also benefitted from negative real interest rates<\/strong>.<\/p>\n

On the demand side<\/strong>, the start-ups were supported by the strength of the Indian consumer, and the economy. India has been witnessing an accelerated financial inclusion <\/strong>(bank accounts) and identification became easy in India through Aadhaar.<\/strong> Connectivity also increased through mobile phones<\/strong>.<\/p>\n

What are the challenges?<\/strong><\/h5>\n

In recent times, the start-ups that have gone public, are facing losses. For example, Paytm\u2019s<\/strong>, Zomato<\/strong> and PB Fintech (Policy Bazaar<\/strong>) have registered losses.<\/p>\n

The era of cheap money<\/strong> is now showing signs of weakness in India. The investors from early-stage venture capitalists<\/strong> to institutional <\/strong>and retail investors<\/strong>, are likely to be more cautious in their dealings. For example, Alibaba <\/strong>and Ant Financial <\/strong>exited their entire holdings in Paytm Mall. The start-ups ranging from Ola to OYO, are planning to raise funds at lower valuations.<\/p>\n

Due to high no. of the smartphone users in India, the transactions<\/strong> routed through the UPI platform<\/strong> was high, and there is near universality of bank accounts<\/strong>. But in reality, there are not many consumers with significant discretionary spending capacity<\/strong>, and those with the capacity aren\u2019t increasing their spending as these companies would hope. For example, in 2021-22, Zomato received around 11 orders per customer for the entire year or less than one order per customer per month.<\/p>\n

Another worrying factor is the complete absence <\/strong>of any increase in spending by the consumers who are already on these platforms. For example, Zomato, in 2020-21 registered an average order value of Rs 397 and in 2021-22 the average order value was Rs 398.<\/p>\n

What should be done?<\/strong><\/h5>\n

There is a need for tighter financial conditions<\/strong>, and a re-rating of the market,<\/strong> both of which will impact both fundraising efforts and valuations.<\/p>\n

There is a requirement to answer questio<\/strong>ns like to what extent will investors continue to subsidise consumers? Will startups still command the same valuations they have received in previous fundraising rounds? Or will we see down rounds?<\/p>\n

Source<\/strong>: The post is based on an article \u201cMarket reality is catching up to the tech startup ecosystem<\/strong>\u201d published in the Indian Express on 28th<\/sup> June 2022.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: In recent years, India has been witnessing the growth of the start-up ecosystem which has been in overdrive for the past few years. What are the factors that have led to growth in the start-ups in India? On the supply side, the start-ups were able to find cheap money, and they also benefitted from… Continue reading Market reality is catching up to the tech startup ecosystem<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10500],"class_list":["post-192895","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1703743526},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/192895","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=192895"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/192895\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=192895"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=192895"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=192895"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}