Professional Documents
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Scenario
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2012
2013
2014
2015
2015 in review
2015 in review
Challenges to Funding
The investors are now more careful than
ever. Following are some major
challenges for the private equity
industry:
Mismatch in valuation expectations
Volatile macro-economic factors
Difficulty fund-raising
Inability to exit
VC Trends-Global
VC Trends-Global
VC Trends-Global
Internet and mobile once again took the majority of deals going to VCbacked companies. These two major sectors accounted for 67% of all
deals in Q116. All other sectors remained fairly range-bound, with
healthcare taking 13% and non-internet/mobile software hitting a 5quarter low at 4%.
VC Trends-Global
VC Trends-Global
VC Trends- India
The rise in total funding(Tech Sector)
VC Trends- India
Surge in series A and series B funding
VC Trends- India
Funding in different sectors($ mn)
E-Commerce
Big Players New
Flipkart
Players
Snapdeal
Amazon
Alibaba
Jabong
Infibeam
Lenskart
Tradus
FabFurnish
FirstCry
CaratLane
Market Size
Expected to reach
$38 billion by
2016
Current Scenario
Investment
Investing into developed areas is risky. The current players already have a huge customer
base.
Without a really strong business model, it will be hard to expand in these developed areas.
Some areas like online drugstores, hardware, still havent found traaction. These will be the
areas of rapid growth in the future.
Before entering this market, a good analysis of market is required. Last year saw the rise of
Lenskart and the fall of Jewelskart, Bagskart, Watchkart.
Almost all the big players have a similar model. They act as a platform to facilitate purchase
between retailers and customers.
Startups like Lenskart have a different business model where it itself acts as a retailer.
Most of the startups in this segment have focused on growth rather than profits. They have
been burning their fundings to increase market share. Unviable discounts to get customers
on board have resulted in huge losses.
New players are emerging with a focus on differentiation. And not surprisingly, they focus on
vertical or niche categories.
Startups to look at
Teesort- Teesort claims to have delivered more than 2 million orders so far. It
isgrowing at a rate of 300% YoY, expecting to achieve a revenue of Rs. 100 crores in
this fiscal year. It is profitable and claims to have a gross margin of 40%.
Flyrobe- Flyrobe is an online fashion rental marketplace. This startup has a strong
thinktank. Started by IITB alumni, this startup has experienced employs from firms
like Bain & Co., Inmobi, Cadbury and a HBS alumnus with experience in companies
like Amazon and Google. It has served over 4,500 customers till now.
Fintech
Players
Current Scenario
Market Size
Online Financial Services market is
expected to be a 17,800 Cr market
by 2020.
Investment
Fintech-Business Models
Lending services:These lending service startups are looking to disrupt the traditional
lending mechanisms and are using alternative methods to provide faster access to capital.
Eg. Faircent follows a P2P lending model and charges a percentage of the total transaction
amount.
Personal finance / retail investment services:These are the companies that help
individuals manage their own finances. E.g Policybazaar.com compares various financial
policies for the consumers.
Startups to look at
Hyperlocal
Big Players New Players Market Size
Grofers
UrbanClap
Delhivery
GoJavas
Zomato
Ola Cabs
Taskbob
Opinio
Big Basket
and many more.
Current Scenario
The Hyperlocal market in India has grown at a growth rate of 71% in number of
orders.
Over 22 per cent of the deals by the top 10 investors in 2015 were in the newly
emerged on-demand industry.
Busy lifestyles and relatively better incomes are driving the growth of on-demand
services.
Investment
Within a short span, the on-demand beauty service segment has had
significant adoption, and given their busy working schedules, more women
are opting for them. So this area should be on the lookout for investors.
Ecommerce has paved the way for high growth in Hyperlocal Logistics sector
with key players like Delhivery, GoJavas, Rivigo, Ecom Express etc. This
segment will soon start consolidating.
Even in this sector, areas like pharmaceutical, alcohol delivery havent grown.
So these might be good areas to look at.
These startups also have the same story. Burning fast through the
funding cash led to the shut down of startups like PepperTap. Tiny Owl
and Zomato had to cut jobs. Now Tiny Owl is now merging with another
hyperlocal logistics company.
They are facing increased costs and an inability to cut them because of
lack of scale companies typically operate on wafer thin margins in the
retail business.
There is still a question of what the correct business model is, should
you hold inventory, or just aggregate orders.
Startups to look at
TruckSumo- The startup is an aggregator of mini-trucks and connects businesses having local
logistics needs in real-time with service providers who can fulfill those needs. They are currently
doing 17,000 orders in a month and have onboarded 900 customers. The team is bootstrapped and
is looking for funding.
Quifers- Quifers is targeting both the logistics and the labour market. Quifersuses technology as an
enabler to aggregate LCVs in order to provide hassle-free and high speed goods transfer service to
people. It has raised Rs. 2 cr in funding from IAN.
AVN Business Solution- AVN Business Solution is growing on an average rate of 50 % (mom). Till
date, it has delivered products worth Rs350 million. They offer two products Shipyaari and eRunnerz.
Fixmasters- an on-demand repair and maintenance service that helps users get verified and
qualified service providers for repair tasks at home and office. Company passes on 80 per cent of
the revenue per fix to the service provider while retaining 20 per cent for itself.
Dhobhiwala- Dhobiwala offers plenty of options: steam ironing, washing and ironing, stain removal,
and starching.
Tooler- This one will not only do your laundry but also clean your shoes and sofa. It was doing 100
orders a day back in Nov 2015.
Healthcare
Key Players
Practo
Portea
Lybrate
New Players
Attune
WelcomeCure
Goqii
and many more.
Market Size
The market size of
healthcare sector of
India is projected to
reach $160 billion by
the year 2017.
Current Scenario
This segment is relatively young when compared to other segments with only a few successfully
growing startups.
These startups have been facing various challenges like
Slow Growth
Complex Industry
Doctors are tough
Monetization
Investment
Innovation is the key to this industry. Startups will have to tackle the inherent problems with
the healthcare system in India through innovative ideas to succeed.
This segment has a lot of potential. With a successful business plan and right amount of
patience, a startup has a very good opportunity to succeed.
Healthcare-Business Models
Startups to look at
CareOnGo- CareOnGo claims to be Indias first mobile chain of cobranded pharmacy stores. The company claims to have grown by 200
percent since its inception. CareOnGos customer app isadding 25,000
chronic patients every month onto the platform. It also provides an
analytics platform, Pharmalytics as a B2B offering.
Foodtech
Key Players
Zomato
Foodpanda
New
Players
Swiggy
Petoo
and many more
Market Size
The food services market
is touted to be a USD 50
billion market thats
growing at 16 to 20 per
cent YOY.
Current Scenario
Investment
The primary reasons are funds crunch and a flawed business model where start-ups offer
economically unviable discounts to get more customers on board.
Despite the setbacks, this segment remains an attractive choice for investors, given a viable
business plan.
Food Delivery- Startups like Zomato, Tiny Owl act as a search platform
between customers and restaurants. They charge around 10% of the
transaction value.
Online Kitchen- These startups have their own kitchen and provide ondemand food delivery. We havent seen a successful startup in this category
yet. SpoonJoy and Dazo were shut down last year.
Startups to look at
Yoga Bars- With a growing market for fitness, Yoga Bars falls bang on
the target market. They are selling over 30,000 units monthly in
Bengaluru Market.
Travel
Key
Players
MakeMyTrip
Yatra
RedBus
Ixigo
Cleartrip
Investment
Current Scenario
Travel-Business Models
Many out-of-the-box ideas like food tourism, fishing tourism etc. have
helped this segment evolve.
Content-HolidayIQ, AudioCompass
Community-Tripoto, 365Hops
Planning-TripHobo, Triptern
Startups to look at
Real Estate
Key Players
99Acres
Magicbricks
Investors Clinic
New Players
Housing
Commonfloor
Proptiger
Nestaway
Ghar360
Market Size
The estimated size
of Indian Online
Real Estate
Services is around
$5 billion.
Current Scenario
Investment
Listings and lead Sellingis the most overheated space at the moment. Startups
like Housing and Commonfloor have completely disrupted the segment. Even
general free classified sites like OLX and Quikr are entering the real estate game.
Primary Salesis the most lucrative market at this moment. Developers offer a
sales commission to the channel partner ranging from 2 to 5 per cent on primary
sales. Some of the key players in this sector are Investors Clinic, Square Yards, Prop
Tiger, and Indiahomes. In this space, aftermarket services like resale assistance and
portfolio management are yet to see some growth.
Resale and rentalsis the biggest market. It is still dominated by brokers and there
is no disruption in sight from any online player.
Startups to look at
Ed Tech
Key Players
Educomp
Meritnation
Toppr
New Players
Byju
UpGrad
EduKart
and many more
Market Size
India's online
education
market size is
expected to
touch US$ 40
billion by 2017
Current Scenario
New players have
continuously emerged but
not a lot of them have
been able to make a mark.
Investment
This sector has a high opportunity for growth. As the smartphone and
internet users grow in India, EdTech startups will play a key role in
delivering education in India
Byju has recently disrupted the test preparation area but other areas
still remain stagnant.
Classroom space- This area has been dominated by Educomp. Educomp is under
large dept which has stopped its growth. Differentiated startups might be able to
successfully tap this area.
Online Courses- SimpliLearn and Upgrad are recent startups in this area. They
both are focused on professional training with certifications focused on career
development.
Startups to look at
Digital Media
Key Players
Inmobi
Gamiana
Hashcube Tech.
Saavn.
Scoopwhoop
and many more.
Market Size
Current Scenario
There are more than 250 startups in gaming industry. With increase in
number of mobile users, this industry has a high opportunity of growth.
Startups like Octro and Moonfrog Labs received $15 million in funding.
Homegrown Indian digital startups like ScoopWhoop etc., have enjoyed
far more impressive growth than their foreign competitors
A lot of niche startups are growing in AdTech space like AdSparx,
Silverpush etc
Investments
As the smartphones and internet users grow, digital media has a huge opportunity.
Music industry has some big players like Saavn and Gaana in streaming services.
Niche startups still have a great chance in this industry.
AdTech space is highly competitive with players like Inmobi. There is still a possibility
for niche AdTech startups to emerge.
Lack of innovation and automation can create problems for AdTech startups. Vizury
laid off 80% of its employees whereas Admagnet shut down its operations.
Internet Industry- With the rise in number of internet users and social
networking, internet has become a major platform for content creation.
Startups like Scoopwhoop have successfully grasped this opportunity.
Advertising Industry- AdTech space has seen big growth in the past
few years. Innovation and Automation remain the key factors in success
of AdTech startup. Adtech is a game of niche or a game of scale.
Startups to look at
Lipikaar- In the first eight weeks, they crossed 1 lakh monthly active
users. They also have bulk licensing deals with companies like HCL and
ITC
Investing Framework
Products and ideas- Early-stage companies with just an idea carry the
biggest risk.But you can also find companies with an idea and a
prototype (or something else tangible), or even a clear path to revenue,
or a seasoned executive team with a history of finding ways to generate
business.
Investors should focus on the next big product or service coming down
the research and development pipeline.
You can lower the investment risk by betting on companies with a deep
inventory of fresh ideas.
Investing Framework
Investing Framework
Investing Framework
Investing Framework
Investing Framework
Investing Framework
Exit Strategy- The exit strategy is how the investors who had
previously put money in a startup get money back, usually years later,
for a lot more money than they initially spent. Having a minority share in
a healthy, growing company, without any prospect of an exit, is a
terrible scenario for investors.
Investor exits traditionally happen in two ways: Either the startup gets
acquired by a bigger company, for enough money to give the investors a
return or the startup grows and prospers enough to eventually make an
IPO.
There are other startegies also like the company buying back investors
shares, dividends etc.
Valuation
Asset approach
Valuation
All future cash flows are estimated and discounted to give them a present
value.
If the value arrived at through DCF analysis is higher than the current cost of
the investment, the opportunity may be a good one.
DCF models are powerful, but they do have shortcomings. Small changes in
inputs can result in large changes in the value of a company.
Valuation
A target multiple can be taken from industry average tables, or derived from
scoring key factors of the business, and averaging the results, with the final
average called the "multiple.
Valuation
Cost approach
It attempts to measure the net value of the business today by calculating how
much it could cost for a new effort to replace key assets.
The replacement value is used to estimate the current market value of the
enterprise.
Valuation
Market approach
Another popular method to establish valuation for any company is to search for similar
companies that have recently received funding and compare with their valuation.
Public Company Method- Companies within similar industries or similar positions within their
industries will have similar valuations or characteristics upon which a valuation can be based.
Transactions Method- detailed private company financial data is unlikely to be available but
transaction value does become available, and, on such occasion, that valuation can be used as
a tool to provide a valuation for other similar companies.
Heuristic pricing rules method- The best known professional group that does this is the
business intermediaries that broker business sale transactions in specific industries. Their
knowledge of the market place and direct exposure to transactions puts these experts in an
excellent position to estimate the likely business selling price.
VC approach
The value at the end of the forecast period is assessed by multiplying the
expected earnings in the future year by the multiple of earnings (PE ratio)
that publicly traded firms in the sector trade at
The estimated value at the end of the forecast period is discounted back at a
target rate of return
Your idea might be great but may not address a big pain point. One must
estimate if there are enough people to buy the product.
E.g. Lumos
E.g TinyOwl
People get into areas that are not their core expertise
A startup can fail if the team members are too alike. There needs to be
enough diversity for a variety of skills to come into play.
Instead the focus should be on creating value for their products which help in
customer retention.
Some will focus too much on marketing and some will pay no attention to
marketing.
A startup can get going and do well early but when time comes to scale up, it
might fail. Thats because its business model works only up to a certain size,
and is not so good when it comes to making money on a larger scale
Done right, this is a total winner of a strategy. But there is no guarantee that
the company will be able to flourish. The Unicorns like Flipkart, Snapdeal
havent been able to turn profitable yet. One of the best example to
demonstrate this is Pets.com. Within two years, US$300 million of investment
capital vanished with the company's failure.
Source of the problem is that startups are being evaluated on growth related
metrics only and not financial metrics.
One of the best example are the markdown in valuations of startups like
Zomato and Flipkart. We have also seen shutdowns in foodtech sector last
year which didnt have a viable business plan but investments were based on
growth metrics.
Though it is not the job of an investor to mentor a company but we can all
agree that an informed client is better than an uninformed one. At the end it
is your investment.
Etsy
Etsy, an online marketplace for arts and crafts, raised $267 million in its IPO in
April, pricing its shares at $16. The price of the stock soared to $30 on the
first day, but it has since declined because of poor earnings and the
announcement of Amazon that it will be launching a rival service named
Amazon Handmade.
Altassian
Atlassian launched its IPO in December with a bang. Atlassian priced its IPO at
$21 a share, raising $462 million. Atlassian soared 31% on its first day of
trading.
Infibeam
Infibeam Inc. Ltd. successfully raised Rs.450 crore through its initial public
offering (IPO), which made it the first Indian online retailer to go public.
Box
Square
Square, which developed and markets a mobile payment device that attaches
to a tablet computer or smartphone to receive credit card and debit
payments, took a hit for the team in launching its IPO at roughly half its
valuation. By pricing its IPO at $9 a share in mid-November, substantially
below its initial IPO pricing range of $11 to $13 a share, Square left some
room for investors to make a profit and was able to show a strong
performance on its first day of trading, with its stock closing at $13.07 a
share.
Match Group
The Match Group, which owns popular dating services Match.com, OkCupid
and Tinder, launched its IPO in November at $12 per share, which was at the
lower end of the expected $12 to $14 range. The company raised $400
million, with the price of its shares now up to about $14.
Go Daddy
Website hosting company GoDaddy was able to raise $460 million from its IPO
in April, pricing its shares at $20 each, above the expected range of $17 to
$19. Since then, the stock price of the company has grown by almost 25
percent.
Didi and Kuaidi Dache, the largest car-hailing players in Chinas market, have
merged together to form a $15B ride-hailing giant. This move is especially
significant as Uber raises $1B+ in capital to move into the country. Didi and
Kuaidi Dache have now formed a united front, when they were previously
involved in a costly pricing war with each other. China, one of Ubers most
important target markets, will now be one of the toughest battle grounds in
ride-hailing
LinkedIn-Lynda
LinkedIns acquisition of online learning platform Lynda for $1.5B in April 2015
was its largest disclosed acquisition of all time.
its the biggest VC-backed education technology exit of the last decade.
Finally, Lynda fills an important gap for LinkedIn, which links together jobs to
people with those relevant skills. Now with Lynda, users have a direct platform
to develop those skills and earn credentials, furthering LinkedIns reputation
as your online resume.
Twitter-Periscope
Periscope was acquired for approximately $100M in March 2015, and Twitter
officially released the app after mobile live video-streaming competitor
Meerkat unveiled theirs at SXSW a few weeks before. Periscope had 1 million
active accounts after its first 10 days, and now has 10 million as of August
2015. Periscope is a proving ground for whether or not a large audience exists
for live mobile video streaming.
Snapdeal-Freecharge
Ola-TaxiForSure
For a long time Ola and TaxiForSure vied to be Indias answer to Uber.
Suddenly times changed. A rape case was lodged against an Uber driver in
Delhi; many state governments rushed to ban on-demand taxi services; and
all taxi apps landed in one hot soup. Investors got jittery, funding dried up for
TaxiForSure, and it could not keep up with the discount war between Ola and
Uber. It is in these circumstances that its rival Ola, which had a bigger war
chest thanks to a timely funding round by SoftBank,bought out
TaxiForSurefor US$200 million.
PropTiger-Makaan
Twitter-ZipDial
Customers could send missed calls to brands which would respond and
engage with the callers. Twitter found the ZipDial platform a perfect fit for its
plans to grow its user base and engagement in emerging markets. ZipDial
thus becameTwitters first acquisitionin India last January, reinforcing the
attraction of India-specific innovations.
Genius micro schools- It is founded by Advitiya Sharma(co-founder, Housing).The product aims to optimise the
individual learning experience by continuously varying the content based on feedback. Genius will run micro schools with
about 5-8 students and the institutes will be hyper-local in nature. The company is mirroring the path of US-based
AltSchool. The start-up will hire 500-800 teachers in different cities and train them separately.
InPod- The Mumbai-based bootstrapped startup has patented its modular building system.
Pickyourtrail.com- It is an online platform for personalized vacation planning and posting quotes for personalised travel
itineraries. Post confirmation of the travel, the booking engine of the platform takes care of the bookings. The company
claims that its revenues have been growing every month and making 1 crore+ revenues in less than 6 months.
Mapmygenome- With the exponential growth in the field of genetic engineering, there is a tremendous future for this
sector in our country and Mapmygenome looks promising.
CareOnGo- CareOnGo claims to be Indias first mobile chain of co-branded pharmacy stores. The company claims to have
grown by 200 percent since its inception. CareOnGos customer app isadding 25,000 chronic patients every month onto
the platform. It also provides an analytics platform, Pharmalytics as a B2B offering.
Fixmasters- an on-demand repair and maintenance service that helps users get verified and qualified service providers
for repair tasks at home and office. Company passes on 80 per cent of the revenue per fix to the service provider while
retaining 20 per cent for itself.
Teesort- Teesort claims to have delivered more than 2 million orders so far. It isgrowing at a rate of 300% YoY, expecting
to achieve a revenue of Rs. 100 crores in this fiscal year. It is profitable and claims to have a gross margin of 40%.
Flyrobe- Flyrobe is an online fashion rental marketplace. This startup has a strong thinktank. Started by IITB alumni, this
startup has experienced employs from firms like Bain & Co., Inmobi, Cadbury and a HBS alumnus with experience in
companies like Amazon and Google. It has served over 4,500 customers till now.
AVN Business Solution- AVN Business Solution is growing on an average rate of 50 % (mom). Till date, it has delivered
products worth Rs350 million. They offer two products Shipyaari and eRunnerz.