The second day of the Goafest saw some stimulating panel discussions. One such involved a well-known veteran of the startup ecosystem, Rajan Anandan, managing director at Sequoia Capital, alongside journalist Anuradha SenGupta. Anandan spoke about how the funding and startup culture has evolved in India over the last few years and what we should expect.
Startups in India have become part of everyday conversations, given the surge in this cohort and the impressive number of them that achieved unicorn status, or a valuation of $1 billion. With innovations and introductions of new technology, data and insight-driven products and services, the market in India has drastically expanded, to become the third largest in the world.
Back in 2010, there were less than $1 billion in Indian startups. In 2021, the number had gone up to $45 billion. This year, 2023, the number is estimated to settle anywhere between $10 billion and $15 billion. That is not a number to sneeze at, even if it pales before the $45 billion seen a few years earlier. Anandan said, “2021 is not the norm. 2021 will never come again. If anything, the startup ecosystem in India is going back to normal.”
“We’re back to sort of a trend line that we’re seeing. This is the best time in India to invest and it is the best time to build a company,” Anandan added.
Now you may be thinking that there has been a significant drop in funding since 2021. However, according to Anandan, it is late-stage funding that has actually slowed. This is because the best companies raised most of their funds in 2021 and the first half of 2022 and don’t need to raise capital anymore. Hence, in his view, the sector is moving down the right path and at the right pace.
Anandan spoke about the changing mindsets at startups. A company like Hindustan Unilever Ltd (HUL), unlike a startup, has had one goal from the start, which is to be profitable. But now, Indian founders, be they young, early-stage founders or legacy and growth-stage founders, all talk about making their company profitable, he said.
There is a lot of dry powder in venture capital terms in the Indian market today. For a startup to attract some of that money, the quality of the founder is a big factor, according to Anandan, as is the growth of a business. “The startup ecosystem in India will in the next decade deliver dozens of HULs. Fundamentally strong companies generating big revenue will play a big role,” the Sequoia Capital MD said.
The growing startup sector will have a very positive rub-off effect on digital advertising. Anandan predicted that by 2030, the digital advertising sector will be worth $25 billion. What is interesting is that a lot of this growth won’t come from consumers but from small businesses. The future is bright, in Anandan’s opinion.