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Five Hottest Sectors for Startups
With technology finding new ways to sneak into our
lives every single day, it is little wonder that the sector has thrived and
has been dishing out healthy returns for investors. This, in turn, has
created a robust network of mentors, who are supporting more technology
companies, creating a virtuous cycle. Zinnov, a management consultancy that
closely tracks the sector, estimates that between now and 2015, up to 600
new technology ventures will be created every year in India. The gold rush
is clearly on. “Across internet services, ecommerce and travel portals at
least two to three companies will be billion-dollar bets for certain,” says
Vani Kola, co-founder of Kalaari Capital, an early stage investment firm.
However, picking the right bet from an overflowing technology basket is key
for a new venture. Despite the advantages of money and a growing market,
barely a fifth of the technology ventures set up in the last seven years
have raised a second round of funding. Industry experts reckon picking the
wrong business idea can drive the failure rate even higher. “You cannot
manufacture cars when there are no roads,” says Kola. ET spoke to a cross
section of investors and industry experts to pick the Top Five Sectors to
launch a technology venture today.
Single-Brand Ecommerce
Ecommerce in India, especially in the multi-brand
category, has gone from being the new kid on the block to a crowded
industry. However, web-only brands, where a business can create its own
brand of products in any category like apparel or jewellery and retail it
online, is emerging as the new growth opportunity. BlueStone launched in
August 2011 as a manufacturer and retailer of light precious jewellery like
earrings, pendants and rings has raised $5 million (about Rs 27 crore) in funding
from Accel Partners, Silicon Valley Bank and serial entrepreneurs Meena and
Krishnan Ganesh. CaratLane, Zovi and Freecultur are some of the other
internet-only brands. With 38 million Indians expected to transact online
by 2015, according to data from Avendus Capital, the promise of ecommerce
will lure many aspiring entrepreneurs. But this is a business best run with
a clear goal to build a brand in the long run. “The online part is
incidental, internet is just the channel used for sales,” says Gaurav Singh
Kushwaha, cofounder and CEO of Bluestone which is targeting sales of 80
crore in fiscal year 2014. “Low-hanging fruit might bring in money but
might dilute your brand and confuse customers in the long run.” While
BlueStone mainly manufactures its own jewellery, others like fashion brand
Zovi outsource their manufacturing. In both models, it is the lower costs
associated with building a pure online brand and the quick growth that is
attracting entrepreneurs and investors.
Creating your own brand of products in one category like jewellery or
fashion and using the online channel to retail the products
Seed investment: Up to 10 crore
Market size
ecommerce market size to reach $200 billion by 2020
•TECHNOPAK
•
Target customers
Online users; Total number of users transacting online in India to
reach 38 million by 2015
•AVENDUS CAPITAL
•
How long to earn fi rst reveneus
Product development and pre-launch process: around six months; Revenues
from as soon as transactions start. This could be from day of launch of
site
Top ventures
Bluestone, CaratLane, Zovi, Freecultr
Cloud Computing
The attractiveness of cloud-based applications
across sectors, from hospitality to healthcare, is driven by ease of use
and lower cost. Thi has led to India becoming a hub for young cloud
computing companies.Chennai’s OrangeScape provides cloud solutions to firms
like drugmaker Astra-Zeneca, consumer-goods company Unilever and automaker
Ford. In Bangalore, storage company Datagres, which sells data management products
to large enterprises, was founded in 2010 by Srinivasan Viswanathan, an
alumnus of Indian Institute of Science. He put in 60 lakh as the initial
capital to start the firm. Last Sept-ember, the company recieved first
round funding of over 10 crore from Nexus Venture Partners. These young
companies, which need less capital, are growing faster and are more
profitable compared to traditional enterprise technology ventures. The high
rating for the sector also comes from some of the biggest exits for investors
in this segment. In the past 18 months, Mumbai-based Netmagic sold a
majority stake to Japan’s NTT Communications for 900 crore while Citrix
Systems paid over 1,000 crore to acquire Cloud. com. Gluster, a cloud
computing startup, was bought by Red Hat for about 667 crore.
The information is stored and processed on computers ‘in the cloud’ or
the web instead of local servers. This data can then be remotely accessed
through a personal computer, cellphone or any other device Seed investment:
50 lakh
Market Size
10-fold growth to $4.5 billion
by 2015, from $400 million now
(EMC and Zinnov)
Target customers
Enterprises in healthcare, education, hospitality and financial
services and government
How long to earn fi rst reveneus
1.5-2 years for product companies
Top ventures
OrangeScape, Datagres, CloudByte, Knowlarity, Aryaka, Hotelogix
Mobile Payment
With an estimated 900 million mobile users, India
is the second biggest mobile market in the world after China. And as with
ecommerce that is witnessing a second coming, mobilebased payments that
failed to take off nearly five years ago are now being launched in newer
and improved versions. Ezetap Mobile Solutions, a company that processes
card payments on mobile phones, has built technology that allows anyone to
accept cards—from merchants to cabdrivers, grocers and pizza delivery boys.
It allows feature phones, smartphones and tablets to be converted into
full-fledged point of sale terminals. Backed by AngelPrime, an incubator
started by serial entrepreneurs, Bala Parthasarathy, Shripati Acharya and
Sanjay Swamy, the venture is drawing from the failures of ventures such as
mChek in the past. Ezetap received its first round funding of 19 crore from
a group of influential Silicon Valley investors, including Yammer founder
David Sacks and Paypal Inc co-founder Peter Thiel, last November.
The technology allows mobile devices to become full-fledged point of
sale terminals. It allows anyone to accept cards Top ventures Ezetap,
Gharpay, Mswipe
Seed investment: 20-30 lakh
Market size $10 billion market globally
Target customers
Ecommerce customers, retail, pharmacies, cabdrivers, grocers, pizza
delivery boys, and even hairdressers
How long to earn fi rst reveneus
It can take from six months to a year
Ecommerce Logistics
It was a road trip across the hills and along
backwaters of Kerala in 2009 that changed the career of Afsal Salu, 31, and
two of his IIM batchmates. Quitting a coveted job at Unilever, Salu and his
friends launched a logistics business built on a technology backbone,an
idea they had presented in their MBA classroom way back in 2003. They
formed Delyver Retail Network, which would deliver food and groceries to
homes in Bangalore. A logistics startup needs to build an IT platform, which
typically takes four to six months, besides arranging vehicles for
delivery. “Costs for a city based logistics venture can be controlled by
hiring mini vans, which would drop goods in a neighbourhood that can be
picked up by delivery boys,” says TA Krishnan, founder CEO of E-Com
Express, which launched operations in 36 cities in North India this
January. The young venture has now set up large warehouses due to
increasing demand. Others like Chottu and Delhivery also provide logistics
support to ecommerce firms. Delyver’s Salu fulfilled his first order while
on a lunch break from Unilever. “It’s a capital intensive business. We
started with a seed capital of 3 lakh,” he says. His parents, both doctors
in Kerala, were alarmed to hear that their son, an IIM graduate, was
delivering cakes and food to people’s homes. But the sector is a hot area
for new startups as India’s overall logistics market is estimated at over
$100 billion, growing at a rate of about 20%. The sector employs about 45
million people in the country, according to consulting firm Deloitte.
Companies provide lastmile delivery support to online ventures. Some
portals take orders for offline retailers and handle deliveries as well
Seed investment 3-15 lakh
(For single city setup)
Market size
Logistics market size in India $ 100 billion
•DELOITTE
Target customers
Online and offline retailers
How long to earn fi rst reveneus
From the very first day
Top ventures
Delyver Retail Network, Chottu.in, Delhivery, E-Com Express
Big Data Analytics
From crafting strategies for cricket teams to
helping scientists develop new drugs, Indian entrepreneurs are building
specialised companies. These firms can chew through billions of bits of
data, analyse them via self-learning algorithms and package the insights
for immediate use. “Big data is becoming hot, because people are using it
to predict the future,” says Ravi Gururaj, vice-president for cloud
platforms group at Citrix Systems. He said earlier it took at least 5 crore
to start a data analytics firm. Now, with so many open source platforms
available, an entrepreneur can launch a new venture with just 50 lakh. One
such example is Gramener, which converts insights drawn through data
analysis into visual graphics. It was a reunion in Bangalore for six
friends that led them to quit their jobs and start Gramener in 2010. “We
decided to do something on our own and have fun,” says Naveen Gattu, 38,
cofounder. In an innovative example of how such technology can be used,
Gramener helps poultry company Suguna Foods enhance the longevity for
chickens. The firm finds disease patterns, suggests precautions and even
makes recommendations about how much sunlight the birds must be exposed to
the type of feed. Gramener, which counts telecom firms, car-parts maker
Bosch and many IT and engineering companies as its clients, now earns
around 1-2 crore per annum.
The process of examining large amounts of data to uncover hidden
patterns and unknown correlations. This can provide competitive advantages
over rival organisations
Seed investment: 50 lakh
Market Size $48.3 billion by 2018
(Transparency Market Research)
Target customers
Enterprises in Energy, Pharma, Retail, Telecom and government
How long to earn fi rst reveneus
1-2 years for product companies
Top ventures
Bizosys, Gramener, Qubole, Abiba Systems,
Salorix, AbsolutData
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