Investment boom for Start-ups

Investment boom

There is an ongoing investment boom in start-ups on a global scale. The trend has caught up in India as well, and Indians are taking advantage of the same by launching multiple entrepreneurial ventures. The government has realized the importance of this seemingly infectious entrepreneurial spirit and has been working actively to encourage it through various policies.

The most recent of these policies was unveiled on 1st February 2016 by the Reserve Bank of India in its 6th bi-monthly monetary policy statement. RBI Governor Raghuram Rajan has proposed steps to introduce a sense of relative simplicity in doing business for start-ups through easier access to foreign capital and by enabling smoother transfer of ownership. The central bank wants to simplify the investment process and will create an enabling framework for attracting foreign venture capital (VC). These steps have come in the wake of Pune-based Altizon Systems, an Internet of Things (IoT) platform, securing a $4 million Series A funding round led by Wipro Ventures.

Clearly, investors are not hesitating in investing in start-ups, and this lack of hesitancy has been brought about by a favorable investment climate. India is a country of a billion plus people and hence carries huge potential in terms of the consumer base. At over 350 million, India has the 3rd most Internet users in the world, after USA and China. Most of them are accessing the internet on mobile devices. This number is expected to grow even higher in the coming years as connectivity is spread by telecom operators. Numerous start-ups are being launched by Indians, who are aware of ground level situations and necessities and are therefore in a position to bridge the gap between missing markets and existing consumer demand. In this manner, start-ups present a wonderful opportunity for investors to fund, with hopes of reaping substantial returns as the ventures take off.

Investors and entrepreneurs alike are being encouraged by the government through the myriad policies that have been introduced for the same. The amendment of the Companies Act 2013 brought about a series of measures that hope to achieve an easing of the compliances and red tape associated with starting a business. The recent measures by the RBI yet again focus on easing the path of entrepreneurs seeking funds for their start-ups.

Start-ups that have seen early success and have valuations of $1 billion have been termed unicorns. Among the popular companies that qualify as unicorns are Uber, Flipkart, Snapchat, Xiaomi, Airbnb, Pinterest, Snapdeal, Zomato, Olacabs, Quikr and a list of several more. Investors often behave like a flock of sheep, where one goes, the rest follow. Given the unbelievable success of these start-ups, investors are now flocking to invest substantial sums in start-ups with potential that promises rewards later.  It may be seen that this behavior is clearly prevalent in India – Wipro’s recent investment in the aforementioned Altizon Systems is proof of such a trend. We are currently witnessing a strong surge of VC investments in India. In 2015 alone, Indian start-ups have secured over $5 billion in investment from close to 500 investors. It has never been as easy for an Indian start-up to raise capital as it is now.

The investment boom is surely underway, but it will not remain so forever. There is already talk of this being a start-up bubble, that is very real, and may perhaps burst if enough number of start-ups go south. Time is of the essence, as any current analyst will tell you. In this sort of an investment climate, if you have an idea then do not sit back, and act on it as soon as you can.