Investor’s top 5 favourite startup sectors
Recently in an interview (1), Sudhir Sethi and TC Meenakshisundaram (IDG Ventures India) hinted towards the startup bubble saying, “Me-too companies with weak teams and no differentiation will not get funded. The binary situation of will-not–get-funded is coming up very fast.” No doubt, it is a point of concern for the budding entrepreneurs and wannapreneurs. Investors have reached high figures of investment – Angel and seed funding $ 209 million, while late stage funding amounts to whooping $4 billion in the year 2014. And now investors have stooped down their further investment plans fearing the bubble thing, due to sky rocketing valuations of these companies. (2) Investors are now reshuffling their portfolios, analyzing each startup more closely and betting their money more consciously. Here in this article I am ranking startup sectors according to the funding amount received so far. So, lets explore Investor’s top 5 favourite startup sectors.
The point to remember here is that we are talking about ranking startup sectors according to the funding amount received, which is not synonymous to the performance or profit earning business. The amount of investment in one sector might me more because of the capital-intensive nature of business and high cost of operations. The ranking has been done on the volume of investment.
e-commerce shopping companies ($ 8-9 billion)
This has emerged to be the investor’s most favourite startup sector.
Total investment made so far in this sector is around $8-9 billion and the sector includes more than 50 companies. Companies like Flipkart ($ 3.15 billion), Snapdeal (1.9 billion), Paytm ($ 900 million) have bagged the most of it. These companies have reached the valuation of 15, 7-8 and 4 billion dollars respective and have attracted most of the PE and VC equity investment. They have emerged as the leaders and most looked up to brands in India. The irony is many of them are still not making profits. The primary reason why these companies are still not making the profit is the discount war amongst them to maintain their user base.
|Flipkart||Tiger Global, Accel Partners|
|Myntra||Tiger Global, Accel Partners, Kalaari Capital, IDG Ventures|
|Snapdeal||Kalaari Capital, Nexus|
|Shopclues||Helion, Nexus, Tiger Global|
|Zovi||SAIF, Tiger Global|
Investors have bet their money on multiple companies. With Tiger Global having investments in Shopclues, and Flipkart, Ratan Tata in Paytm and Snapdeal, Alibaba also in Paytm and Snapdeal. However investing in competitors and backing competitors is another point of interesting discussion, which could be taken up in another article.
Top seven investors of e-commerce hold more than 50% share.(4)
Rank 2 Buying Assets Property and Cars ($ 1.2-1.5 billion)
With total funding amount of $ 1.2-1.5 billion this sector stands at a distant second place to ecommerce shopping sector. Housing.com ($ 139.5 million), 99acres ($ 120 million), Indiahomes ( $ 76 million), MagicBricks ($ 100 million), CommonFloor ($ 63 million), Droom ($ 18 million), CarTrade ($ 30 million), CarDekho($ 65 million), Carwale ($ 7 million). The above nine companies only account for around $700 million alone. The rest of the investment being in 20 other such companies selling assets like house, property, car, mobiles etc online.
Rank 3 Riders Solution ($ 1.5 billion)
Taxi Aggregator-Ola ($ 902 million), Zoomcar ($32 million), Meru Cabs ($ 50 million), Uber has made an investment of $ 1 billion in India. These are the major players in taxi aggregation business.
Ride Sharing– Apart from above, this sector also includes companies offering self-drive services- Carzonrent which is one of the oldest cab provider in India, Bla-Bla car (Paris based) long distance sharing company, Zoomcar ($ 32 million).
Bus Aggregator-Another segment in the same sector is the bus aggregator companies- rBus, Trevo, and shuttle.
Rank 4 Wallet and Bill Payment ( $ 1 billion)
Paytm ($ 200 million), PayU , MobiKwik ($ 30 million), Freecharge (got acquired by Snapdeal for $400 million), Oxigen, Airtel Vodafone + Bank’s apps. Indian users are strongly biased towards Cash on delivery. 55-60% payments in online marketplaces are done via cash on delivery. Moreover, Indian e-commerce rarely uses international payment gateways like PayPal the major reason being the lack of support for rupee based online commercial transaction and support for only credit card transactions (As per Crisil Research Report). So, many Indian companies see scope in this area and are moving at a very fast pace specially after 11 companies got a license from RBI.
Rank 5 Connecting Dinning Places ($ 550-700 million)
Zomato ($ 223 million), Food Panda ($ 218 million), Tiny Owl ($ 20 million), Swiggy ($ 18.5 million). These food tech companies are still being one of the favorites of the investors, now seeing a downfall in investor’s interest as we can witness some of them shutting down (Dazo), some not able to make up to the next level of funding round (SpoonJoy, Etalo, Freshmenu), Many of them laying off their employees (Zomato and Tiny Owl). According to Tracxn (Startup Data Tracker Company), out of 31 food tech companies who raised money in 2015, only 5 were able to make it to the next level.
To get a free copy of “Five Startup Ideas, That can be done with a Job” Please subscribe.
- Krishnamurthy, K. (2015, Oct 9). Funds and Startups Coming Back to Reality. The Economic Times, p.18.
- Singh and Bora. (2015, Oct 8). How E-commerce Has Changed Your Life. The Economic Times, p.18
- Crisil Research Report