Indian Startup Industry Battles Problem Of Plenty

Year 2015 will clearly go down as a watershed for the startup ecosystem in the country which not only saw hordes of innovative business models mushrooming and evincing investor interest but also saw the rise of startup acquisitions, signalling growing consolidation in the sector.

As per data available with research firm Venture Intelligence, as many as 139 acquisitions took place in the startup space in 2015, more than double the number of startup acquisitions that were sealed in 2014. In 2013, as many as 42 startups were acquired by the biggies in the sector.

Here are some of the big deals that happened last year that changed the contours of the startup landscape. Snapdeal acquired online mobile recharge platform FreeCharge for $400 million, while smaller taxi aggregator TaxiForSure was grabbed up by bigger competition Ola for 200 million. Zomato, Flipkart and Practo, too, are some of the other businesses that made it to news for acquisitions of smaller startups.

A lot of innovative ideas came up in the last two years. Not all of them have the bandwidth to expand and go to the next level even if availability of capital is there. That perfectly describes why the smaller firms are up for grabs.

As far as the bigger startups are concerned, acquisitions of smaller targets help them expand their operations instantly and strengthen their presence while foraying into different sectors apart from the one they are present in. Besides, since there is extreme completion in the market right all, most of the established startups are jostling with each other to capture a bigger marketshare and acquisitions give them an easy way to do that.

Experts say going forward India's startup industry is likely to witness a spate of shakeout or consolidation as currently there are too many emerging businesses operating and riding on the domestic consumption story.

“It is obvious that not all of them will survive. The nature of the startup business is such that even if one of ten becomes a blockbuster, the purpose is served,” said Arvind Mathur, President at Private Equity and Venture Capital Association.

Most of the startups today are gripped with similar problems: how to get enough margins, how to be price competitive and how to keep customer acquisition costs low. Currently, there is a problem of plenty. Going forward the ones that stay ahead of competition will be the ones to succeed.