Indian Startup Ecosystem

1. ACCELERATING INNOVATION IN THE
DEVELOPMENT
A BIRDSEYE VIEW OF THE INDIAN START-UP ECOSYSTEM
Aera Consultancy and Services
Nov 2014

2. CONFIDENTIALITY STATEMENT
ABOUT US
PURPOSE &
INTENDED AUDIENCE

3. 2
About us
Profession organization equipped with Group teams consists of Chartered Ac-
countants / Company Secretary / IT Experts/Legal having deep knowledge of Ac-
counting,Finance, Corporate Finance, Legal, Compliance, Consulting,Restructur-
ing, start-up Mentor and Information Technology. The Company represents a combi-
nation of specialized skills, which thrive by helping you to be successful.
Develop Customized services which are unique and practical to cater the current
market trends
Aera combines extensive experience with high-touch , individual service. We suc-
cessfully bring together the interests of our client in a way that builds visibility and
achieves our clients’ goals.
Confidential Statement
The information presented in this document shall not be binding and in no way repre-
sents a contractual commitment by Aera Consultancy and Service. All communica-
tion received in this document will be treated and regards as confidential.
Each recipient of this document agrees to treat it in strictly confidential manner. The
recipient may not to disclose, directly or indirectly, or permit affiliate to disclose any
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ments to Aera upon request.
Purpose of this document
The purpose of this document is to attempt to construct a perspective of Start-up eco-
system in India as it stands today.
Intended Audience
Aera Consultancy intends it for use as to understand the current start eco-system in
India. We need to study the requirement for each client on case-to-case basis.
Disclaimer
This document has been prepared for informational purpose only. Aera has prepared
this document for the sole purpose of providing information relating to Eco system for
start-up in India. The contents of this document are based on public information own
research and on third party research provided to Aera. No reliance may be placed for
any purposes whatsoever on the Information contained in this document or on its
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All statements other than statements of historical facts included in this document, in-
cluding, without limitation, those regarding eco-system of Start-up in India, business
strategy, plans and objectives of this system for future operations (including develop-
ment plans and objectives relating to this system), are forward looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements ex-
pressed or implied by such forward-looking statements.

4. The Indian ecosystem is still taking early steps along
the arc of building unique homegrown Startup
ecosystem with world best practice embedded in it.
Startup success ratio is still low in India. A lot of this
has to do with the fact that the Indian ecosystem is still
learning. Still a nascent ecosystem where exit patterns
are not defined.
EXECUTIVE
SUMMARY
2

5. 4
Executive Summary
The
Indian
ecosystem
is
s0ll
taking
early
steps
along
the
arc
of
building
unique
homegrown
Startup
ecosystem
with
world
best
prac0ce
embedded
in
it.
Startup
success
ra0o
is
s0ll
low
in
India.
A
lot
of
this
has
to
do
with
the
fact
that
the
Indian
ecosystem
is
s0ll
learning.
S0ll
a
nascent
ecosystem
where
exit
pa?erns
are
not
defined.
There
are
growing
numbers
of
accelerator
networks,
funding
for
interes0ng
projects
and
teams,
availability
of
a
world-­‐class
talent
pool
and
a
strong
ambi0on
to
rub
shoulders
with
the
best
of
the
world.
There
are
youngsters
out
of
college
hungry
for
success
star0ng
companies
with
tons
of
enthusiasm.
On
the
other
side,
there
are
companies
with
professionals
seasoned
at
global
firms
who
have
quit
well-­‐paying
jobs
to
start
entrepreneurial
ventures
based
on
the
skills
they
have
built
along
the
years.
Despite
the
complexi0es
of
star0ng
business
in
India,
aspira0ons
run
extremely
high.
Over
the
past
few
years,
there
have
been
close
to
30k
startups
in
India,
with
over
8k
new
en00es
expected
to
startup
every
year.
NASSCOM
(Na0onal
Associa0on
of
SoNware
and
Services
Companies
is
a
trade
associa0on
of
Indian
Informa0on
Technology
and
Business
Process
Outsourcing
industry)
recently
launched
a
high
profile
ini0a0ve
called
‘10000
startups’
aimed
at
providing
support
for
the
nascent
startup
ecosystem.
There
are
various
Angel
and
Ven-­‐
ture
fund
having
offices
in
various
ci0es
of
India
and
now
expanding
into
Tier
2
-­‐3
ci0es
of
India.
The
comprehensive
focus
on
the
entrepreneurial
ecosystem
shows
that
the
government
now
realizes
the
benefits
of
a
thriving
entrepre-­‐
neurial
community,
as
witnessed
in
countries
like
the
USA,
UK,
China,
Canada
and
Israel.
Govt
of
India
are
geng
aggressive
for
the
development
and
promote
entrepreneurship
in
mul0ple
ways:
Entrepreneurial ecosystem
•
Facilitate
collabora0on
with
overall
ecosystem
•
Par0cipa0on
in
dialogue
with
all
stakeholders
to
ensure
consulta0ve
policy
forma0on
•
Facilitate
effec0ve
provision
of
services
by
incubators
•
Crea0on
of
accredita0on
frameworks
for
cer0fying
quality
of
start-­‐ups
Entrepreneur
•
Procedural
and
regulatory
reform
for
all
stages
of
business
•
Entry
-­‐
single
window
clearance,
informa0on
availability,
industrial
clusters
etc.
•
Opera0ons-­‐
labour
laws,
IP
laws
etc.
•
Exit
mechanisms
and
modali0es
including
paperwork
and
restric0ons
Capital
•
Enabling
venture
capital
funds,
angel
investors
and
businesses
to
provide
equity
to
entrepreneurs
• Fiscal
policy
ini0a0ves
• Regulatory
reform
affec0ng
fund
raising,
opera0ons
&
exit,
especially
domes0c
capital
raising
• Enabling
banks
and
FIs
to
provide
debt
to
entrepreneurs
•
Regulatory
reform
for
promo0ng
credit
to
start-­‐ups
•
Crea0on
of
innova0ve
products
for
providing
non-­‐collateralized
debt
India’s
large
and
diverse
popula0on
offers
a
unique
customer
base
for
businesses.
It
is
cri0cal
for
nascent
businesses
to
design
business
models
aligned
to
the
market.
“Me-­‐too”
ideas
that
are
copied
from
interna0onal
successes
oNen
fail.
Online
retailing
businesses
in
India,
for
example,
have
used
cash-­‐on-­‐
delivery
innova0on
to
successfully
target
an
Indian
popula0on
that
has
low
possession
and
usage
of
credit
cards.
This
approach,
however,
is
not
used
by
many
upcoming
entrepreneurs
leading
to
early
failures
in
business
models.
Entrepreneurs
must
also
consider
the
large
base-­‐of-­‐pyramid
market
to
build
financially
viable
and
scalable
businesses.

6. Science, Technology and Innovation (STI) have emerged as the major drivers of
National Development globally. India has declared 2010-20 as the “Decade of In-
novation”. The Govt of India has stressed the need to enunciate a policy to syner-
gize science, technology and innovation. In 2013, Govt of India came up with Sci-
ence, Technology & Innovation Policy, in order to create robust innovation culture
and ecosystem. The Government of India proposes to increase the expenditure in
Innovation R&D to 2% of the GDP. For the development of the Innovation culture in
the country, the policy envisages creation of Conducive eco-system for the ven-
ture capital in the MSME sector with the initial corpus of Rs. 10,000 cr (around
$1.8 billions).
There are various Govt support at State and central level. Few of the successful
scheme are:
3.1 TDB Scheme for Seed Support to Technology Business
Incubators/ Science and Technology Parks
Technology Development Board (TDB), Ministry of Science and Technology,
Government of India is enacted to provide soft financing to Indian companies ena-
bling commercialization of their innovations.
1. As a proactive step, TDB has started Seed Support Scheme for technology
start-ups in Technology Business Incubators (TBIs)/ Science and Technology
Parks (STEPs) by providing grant upto Rs. 1 crore each over a period of upto
three years. TDB hereby invites proposals from STEPs/ TBIs/ Institutions having
similar infrastructure and capabilities for grant support for Technology Start ups.
2. STEPs / TBIs may use TDB grants to provide loan and / or equity support to
their in-house incubatees based on transparent policies & procedures. The total
upper ceiling of financial assistance to be disbursed to an incubatee is limited to
Rs. 25 lakhs per incubatee.
3. The financial assistance to technology startups is basically to cater to early
stage support requiring up- scaling of innovations and related work.
OUR UNDERSTANDING OF GOVT
SUPPORT
3
5

7. 4. The financial assistance is for incubated entrepreneur only and not for administra-
tive /expenses / facilities creation of /by STEP/TBI. As per the provisions of TDB Act, it
must be used for commercializing innovations involving major / substantial /
reasonable technology development. Mere applications development / product and /
or services creation using existing technology platforms do not qualify.
3.2 “Re-Imagining Andhra Pradesh – role of e-Governance,
Electronics and IT”
The State of Andhra Pradesh shares a collective dream of a new India where new
generation software products would be manufactured creating multiplier effects in
growth of the state and nation, employment creation, and social transformation.
Through the Innovation and Start-up Policy, the government intends to create an
ecosystem that produces an entrepreneur in every family. The targets laid out for the
Andhra Pradesh through this Policy by June 30 2019 are:
1.100 Incubators / Accelerators to be established
2. 5,000 Companies & Start Ups to be incubated
3. 1 million sq ft of Incubation Space to be developed
4. Venture Capital of Rs 1000 Cr to be mobilized for Innovation
5. Foster Innovation Culture
The Policy would have following Niche Themes as focus in the initial period:
1.‘IT for X’ in the areas of Pharma, oil & gas, urban management.
2. Social Media, Mobility, Analytics and Cloud Computing (SMAC)
3. Fables Semiconductors
4. Animation & Gaming
5. Entertainment
6. Visual Effects
7.Health and Fitness
8. Automotive
9. Internet of Things (IoT)
Under this policy
1. The Government will act as market maker for giving a massive fillip to Software
Product Industry. In line with the State IT Policy, an Innovative Start-up-Boot
up-Scale-up Model would be followed for attracting cutting edge Software Product
Start-ups to Andhra Pradesh by leveraging the points of IT projects up to 50 Lacs for
Rural Companies, up to 5Cr for MSME’s registered in Andhra Pradesh and up to 50Cr
per annum proposals to be taken up Suomoto using Swiss Challenge
2. Time bound approval of Proposals in 4 weeks would be given to Innovative Product
Companies to demonstrate their product(s) as Pilot project i.e., Start-up Phase. Once
the pilot is successful, the Government would encourage companies to do local prod-
uct development for software companies and manufacturing (for hardware compa-
nies) i.e.-Boot up Phase. The companies, which have deployed their products in
Andhra Pradesh, would then be given incentives as decided by the State Innovation
Council to go National and International i.e.- Scale up Phase.
There are various other attractive startup eco system is getting in shape. Towards this
objective, the Central Government set up a National Entrepreneurship Mission (the
“Mission”), whose sole focus is to establish a vibrant entrepreneurial eco system in
India. The Mission’s mandate, as one single entity within the Governments both at
the National and State levels, is require it to pursue exclusively, the task of facilitating
entrepreneurs and entrepreneurship.
6

8. The Support structures have also been improving with the presence of associations
like ‘The Indus Entrepreneurs’, (TiE) across multiple cities in India. Initiatives like the
National Entrepreneurship Network (NEN) are doing high quality work in channeling
entrepreneurial energies of students at the university level towards new venture
creation. Incubation centers at various prestigious educational institutes5 in the
country have also played their part in encouraging the top talent of India to venture
on their own.
Critically, the angel and seed funding ecosystem has improved significantly in recent
years, making much needed risk capital and mentoring more accessible to
entrepreneurs. Some of the leading organizations providing angel/seed stage
financing include Mumbai Angels Network, Indian Angels Network, Seedfund, Blume
Ventures, etc.
Several VC firms have also started providing seed stage financing to try and “catch
them early”. Furthermore, successful business houses and high net-worth individuals
(HNIs) are also carving out a portion of their capital to invest in early stage opportuni-
ties.
Top Seed Fund in India
1. Blume Venture
2. India Quotient
3. Kae Capital
4. Indian Angel Network
5. 500startup
India has over 25+ active seeds funds that are known to invest from $100k to
$1 million.
Top Incubators for Indian startup
1. Y combinator
2. 500 startup
3. Microsoft ventures
4 OUR UNDERSTANDING OF PRIVATE
INVESTOR SUPPORT
vii

9. Top Venture Fund in India
1. Nexus Venture Partner
2. Sequoia Capital
3. Accel Partner
4. IDG Ventures
5. SAIF Partner
They provide Series A and Series B stage investment from more than $ 2 millions upwards.
Statistics in India:
1. In 2013, Indian Angels invested about $60 millions (300 crores) in around 125 deals
2. As a proportion of Early stage investing, angel investments in India comprise around 7%, as against around 75% in US
3. Huge investment by Venture fund around $ 4 billions
Start-up Hubs of India
Innovation in India remains strong and growing in the country, but the challenge of raising capital remains. The question is whether the start-up sector could be that much
stronger in India. Help appears to be on the way in the form of Central Govt reforms announced, which will see the development of friendly start-up eco system.
India is poised for its next big Investment avenue to compete and shine on the global scene – Flipkart, Snapdeal and others were a proxy for technology in recent times.
Meaningful and consistent capital flows, attracting and retaining the right talent, offering relevant educational and training programs and access to a growing technology infra-
structure are the top priorities by Govt to ensure the sector remains productive and robust.“India’s start-up sector is transitioning back to a level of prominence. Investors and
venture capitalists/angel investors are reassessing their resource sector holdings and examining the high growth potential of the industry.
Bangalore and Delhi are hot cities for start-up in India while Mumbai is emerging as the fastest startup hub of India.
If work carefully, India can be a rewarding experience:
• Most maturing destination and wide spectrum of service and capabilities
• Cost benefits
• Scaling up is easy
• People are willing to learn and innovative
viii

10. AERA – START-UP SUPPORT
4

11. 10
Aera
–
Start-­‐up
support
At
Aera,
we
understand
the
importance
of
turning
idea
into
reality.
Founders
face
considerable
challenges
as
they
work
to
bring
new
ideas
while
taking
leadership
responsibili0es,
Raising
capital,
finding
talent,
establishing
a
corporate
framework,
and
other
management
ini0a0ves
take
0me
and
are
important
to
maximize
business
success.
We
are
delighted
to
share
highlights
from
our
experience
in
this
guide
including
opera0onal,
financial,
tax
and
accoun0ng
ma?ers,
and
other
business
considera0ons.
Ma7ers
to
be
considered
include
(not
exhaus=ve
list):
1.
Developing
your
pitch
2.
Choosing
a
legal
structure
3.
Tax
ma?ers
4.
Regula0on
5.
Human
Resource
6.
System
Design
and
Development
7.
Service
Partner
8.
Account
and
Finance
9.
Legal
Contact Person for Aera
Vikash
Parakh
M/s
Aera
Consultancy
and
Services
Private
Limited
Cell:
+91
9769150250
Mail
to:
vikash.parakh@gmail.com