The one word that sums up India’s startup sector in 2016: unimpressive

Still a sapling.
Still a sapling.
Image: Reuters/Sivaram V
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First, the good news. In terms of the number of firms, India’s still the third-largest startup ecosystem in the world.

China and Israel are not far behind, though, and the US leads by a huge margin, according to IT body Nasscom’s annual startup report, released on Oct. 26.

However, what is more worrying is that the sector is stagnating in India.

Indian startups have hit a bump this year with e-commerce major Flipkart seeing devaluation by several investors, putting the valuations of other Indian firms under pressure.

The total funds raised by Indian startups are estimated to decline 20% year-on-year in 2016. Although, the number of firms getting funded may increase to 650, up by a marginal 8%.

“There were some mega funding rounds by some of the bigger startups in 2015, which has not happened this year,” said Ravi Gururaj, who heads Nasscom’s startup council. “Investors are now writing cheques in tranches and linking funding to the performance, which means big funding rounds are not happening easily anymore.”

Amid a tough funding environment, several companies have laid off employees while others have even gone out of business. This has hurt job creation as startups are no longer hiring as aggressively as they once were. The number of jobs in the space is estimated to grow only 17% annually in 2016, as against last year’s 31%.

The gender gap is an issue in technology businesses across the world, but in India the problem is appalling. The Indian entrepreneurial community is hopelessly skewed towards males, with just 10% of all startup founders being women, as compared to over 37% in the US.

Even as the number of startups in India has increased from 3,100 in 2014 to 4,750 now, not much has changed on the gender front.