Nextworm

Meltdown in India’s startup sector shows that quality trumps quantity

India’s once booming technology start-up sector is now experiencing a declining trend as venture capital firms become more cautious in sealing investment deals. According to QZ, in the words of the President of Chennai chapter of the Indus Entrepreneurs, Naru Narayanan, it is only logical that investors take precautionary measures before injecting funds into startups.

This is because some of the previous investments have failed to deliver profitable yield. Additionally, he pointed out that the vibrancy with which prospective startups emerged back in 2015 has not been matched with a viable and/or immeasurable level of activity over the years. Hence, it could be deduced that the laxity exhibited by these start-ups have profoundly influenced the investment decisions of capital firms.

As a matter of fact and based on the result of the research conducted by Tracxn, it could be observed that the sector has indeed been laid back. The result available on Quartz shows that only about half of the technology startups incorporated in 2015 remained active by the end of 2016. Coupled with this, it was shown that investors were only able to infuse funds totaling to $1.5 billion into startups in 2015- this amount translates to a stark reduction [of about 27%] on the previous year’s investment.

This downward spiral does not look to take a turn for the better any time soon even as just about only $700 million has so far been released to 294 startups in 2017- this does not appear to be an encouraging result considering India’s position on the world’s startups ladder.

Notwithstanding, the current trend could be one that would help restructure the start-up sector as start-up companies attempt to fashion out innovations that will stand the test of time. As Narayanan sums it up, this act [of investors placing prospective entrepreneurs under close scrutiny] is definitely a way of communicating the fact that quality should always trump quantity- and the earlier startups begin to horn out quality- and sustainable- innovations, the quicker India’s startup sector starts to thrive again.

Peter Mukaka