2016 is a time where large businesses with proven model will continue to become bigger. While 2015 was a year of startups, it was also a year where both investors and entrepreneurs realised that it is important to pivot their businesses to on the ground consumer problem solving than just looking at sheer market opportunity. An intelligent mix of both of these will help evolve the ecosystem in innovating path breaking, disruptive companies which will blend in financially sound revenue model as well. A lot of startups will use legendary data of startup failures and successes and use that knowledge to build sustenance and qualified consumer needs in their business. Operationally breaking even will also be a strong focus for a lot of startups because they’ve now moved beyond using customer adoptions techniques like discounting and offers to creating customer value and loyalty.
The large investments will continue to come in. However, because of the intelligent data that investors now have based on how investments have performed in the last few years, the valuations will become more scientific. Smaller investments will lead the pack in 2016, again because investors now have a proven sense of what the consumers in India will latch on to. Consolidation will see a surge, a lot of companies were built around large businesses(unicorns) to help them focus on their core, these non core yet critical to business companies will get consolidated but are likely to run independently e.g. logistics, couponing, ad networks, IoT, Analytics will generate a lot of interest for larger players.
Investors want to invest in businesses which will drive the next level of innovation in consumer life behaviour. The expectation remains unchanged. There is a clear need of getting exits and we have seen some exits of VC investments already happening to larger strategic investors like Tiger, SoftBank, Alibaba. This will continue to happen as business become large in size and look towards much larger funds who come in at late stages of evolution. Some of the existing business are also focusing on reworking their growth model to make themselves operations level breakeven. Monetization will also undergo innovation as companies using discounting and offers (while burning cash) were able to bring consumers to adopt to the product, the products which have been able to drive change for a consumer will get monetised and will help them grow towards an evolved financial independence. 2016 should see a better calibration in valuations because of the learning and intelligence that has come from the investments in 2015 and a few before that. With more verified data, the funding will come to companies who have more informed answers. The sentiment of funding drying up for 2016 is not true.
2016 will be the year for IOT (Internet of Things). Worldwide spending on the Internet of Things (IoT) will grow at a 17.0% compound annual growth rate (CAGR) from $698.6 billion in 2015 to nearly $1.3 trillion in 2019. Over the next five years, the industries in India to have the fastest IoT spending growth will be Insurance, Transportation, Healthcare, and Consumer. A lot of startups will surface with great industry offerings using IoT, clearly making it a leader in innovation for 2016.
While we see India moving up to rank 130 in ease of doing business, what needs to be looked at is our rank in starting a business, we currently rank 155 and this has to change substantially. While we have a separate ministry of entrepreneurship, what we need is industry representation, where startups can come together and educate the government on all the on the ground challenges that one faces when starting up in India. From offering tax sops to enabling one window approach, using technology to get started faster to giving financial assistance, there is a lot of expectation that the businesses have.
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