InnoVen Capital India: Startup Outlook Report - 2020
InnoVen Capital India:Startup Outlook Report - 2020March 2020
t expectations5.Talent and hiring6.Priorities and Challenges7.Government policy8.Over and under-hyped sectors9.Need of a professional CEO10. Favourite start-up and founderInnoVen Capital India: Startup Outlook Report 20202
Survey Highlights Founders expecting a weaker venture funding environment this year. While 75% of founders had a favorablefunding experience in 2019 , almost 58% of founders expect fund-raising to be more challenging in 2020 Continued bias on growth v/s profitability. 79% of founders ranked growth higher than profitability as a focus areafor 2020, slight decrease compared to 2019 (85%) 57% of founders believe that the most likely exit scenario will be through M&A/Secondary Sale. However morefounders are now starting to look at IPO’s as a viable exit option (42% in 2020 v/s 38% in 2019) Private Equity & Hedge Fund gain more importance for growth/late stage funding rounds; 59% of startups arelooking to engage with PE/Hedge funds as part of their next fund raise (v/s 45% in 2019) Hiring good talent & managing growth expectations were identified as top two challenges for start-ups 75% of startups expect a higher pace of hiring in 2020 v/s 2019. Enterprise Tech, Fintech, Ecommerce andMedia/Content are the most bullish on hiring in 2020 74% of start-ups had 20% of women in leadership roles, which is lower than 69% in 2019 47% of founders open to possibility of a professional CEO running their business at the right stage of maturity Only 35% of founders rated government efforts to improve the start-up ecosystem as Good or Excellent. Founderswant a stable regulatory environment & better incentives for domestic players to compete against global giants Fintech & AI highlighted as the most over hyped sectors, while Consumer brands was voted as most under-hypedsector in 2019. Founders expect Fintech (largely Neo Banks) & Enterprise Tech to be hot in 2020. Respondents chose Swiggy as their most favourite Indian start-up, Bhavish Aggarwal as their most admired Indianfounder. Elon Musk was chosen again as the most favourite global founder (4th year in a row)InnoVen Capital India: Startup Outlook Report 20203
Fundraising (1/2)How was your funding experience in the last12 months?Will fund-raising be more challenging in 2020?20%5%42%75%58%FavourableYesUnfavourable, attempted to raise but could notUnfavourable, raised a sub-optimal round from external or internal investor(s)Funding experience over time (% favourable)74%NoThe Valuation offered in the last round was?Met expectation66%75%54%Below expectation201720182019Above expectation29%6%Favourable Back to Back years of strong funding environment;75% had a favourable experience in fund raisingInnoVen Capital India: Startup Outlook Report 2020 58% of founders believe that fund raising willbe more challenging in 20204
Fundraising (2/2)What is the most important factor in choosinga lead investor?Strength of institution brandIn addition to local VCs, which other investors areyou targeting for next round of funding?22%Private EquityStrategic fitPersonal relationshipNetwork44%23%8%Chinese29%7%Individual partner sectorexpertiseCommercial terms of the dealJapanese12%13%Hedge fundsAbility to do follow-on funding15%15% Strategic fit & strength of institution brand aretwo most important factors For growth/ late start-ups, strength of institutionalbrand is the single most important factorInnoVen Capital India: Startup Outlook Report 202013% More founders looking at Private Equity asopposed to Chinese & Japanese funds 42% of respondents targeting Chinese/ Japanesefunds (compared to 55% in 2019)5
Growth / ProfitabilityWhile both growth & profitability are important,what is the bigger focus for you in 2020?When do you expect to become net wth27%Profitability23%Late83%17%Respondents by funding stage85%79%Alreadyprofitable56%1-2 years2-4 years4 yearsTime to ity 79% of start-ups have bias for Growth overprofitability. All late stage start-ups & 91% growth stage startups aiming to become profitable in the next 4 years 82% of Consumer brands & 53% of Fintech claim tobe profitable/expect profitability in 1-2 ready profitable1-2 yearsLate2-4 years4 yearsRespondents by funding stageInnoVen Capital India: Startup Outlook Report 20206
Exit expectationsMost likely path of exitExpected timeline of exit1%14%26%27%20%65%16%30%IPO (India)IPO (Off-Shore)M&ASecondary SaleCan't sayNext two years 54% of growth /late stage start-ups expect an exitwithin 5 years, with 62% choosing IPO as a likely exit.42%38%39%30%IPO2018Between 3-5 years 42% of founders believe that IPO is the most likelypath to provide exit to investors46%40%20202019InnoVen Capital India: Startup Outlook Report 2020M&A2020 60% of Ecommerce start-ups believe secondary as themost likely exit path (most chose IPO last year) 64% of the Consumer Brand start-ups feel M&A is themost likely mode of exit. 53% of Fintech start-ups feel IPO is the most likelymode of exit.7
Talent and hiringWhat percentage of your topleadership are women?Hiring in 2020 compared to ionEnterprise oadly at same level20-50%41%20%HealthcareRetail consumer brand10-20%88%6%Media/Content 50%67%13%Logistics 10%60%42%17%33%25%17%22%Lower56%45%31% Enterprise tech & Fintech startups are themost bullish on hiring in 202050%22%36%17%18%62%Slightly higherInnoVen Capital India: Startup Outlook Report 2020 75% of start-ups expect to hire more in2020 v/s 2019 Media/Content & Ecommerce close 2nd 50% start-ups had less than 10% women inleadership positionsSignificantly higher8
Business Priorities and ChallengesWhat are the top business priorities in the next 12months? Respondents answered this question with multiple choiceRespondents answered this question with multiple adership/management talent21%Better Product-Market fitFocus on profitabilityWhat are the top business challenges right now?16%14%Improve tech capabilities11%Improve unit economics11%Hiring good talentGrowth Focus on profitability top priority for Logistics &Consumer brands Early stage start-ups, chose achieving a better productmarket-fit as a key priorityInnoVen Capital India: Startup Outlook Report 202017%Profitability and unit economics13%Regulatory EnvironmentCustomer Retention Better product market fit #1 priority - Enterprise Tech22%Fund RaisingCompetition Fund raising & Leadership/talent are top 2 priorities25%11%7%6% Top 2 challenges for start-ups were hiring goodtalent & meeting high growth aspirations 37% of Enterprise Tech start-ups rated customerretention as key business challenge 60% of Ecommerce & 50% of Healthcare start-upsidentified Fund Raising as a Key challenge9
Government policyWhat should the government do to make India more appealing for startups?Respondents answered this question with multiple choice40%26%24%10%Stable & predictable regulatoryenvironmentBetter incentives to domesticplayers to compete againstglobal giantsInvest in digital infrastructureStronger IP protection lawsHow will you rate government efforts toimprove the start-up ecosystem? Only 35% of the respondents rated government efforts toimprove the start-up ecosystem as Excellent or Good3%ExcellentGood effort, but cando more22%32%Average, needs todo morePoor, not helpful43%InnoVen Capital India: Startup Outlook Report 2020 Stable & Predictable regulatory environment is perceivedas a key concern by start-ups 82% of Fintech start-ups & 66% of Media/Content startups identified need for a Stable & predictable regulatoryenvironment as most important10
Over and under hyped sectorsUnder HypedOver HypedConsumer mer hLogistics7%NeoBanking6%5%Health tech6%B2C Consumer4%B2B6%Ecommerce4%AR/VR6%Ed kchain3% Consumer Brands rated as most under hypedsector. AgriTech was rated the most UnderHyped sector in 2019 and 2018InnoVen Capital India: Startup Outlook Report 2019Agri-Tech3%IOT3%SaaS3%Book Keeping3% Fintech, AI rated as most over hyped sector.Blockchain and AR.VR was rated the mostover-Hyped sector in 201911
Professional CEO running business in the futureYes, possible in next 2-3 years34%Yes, but only at the right stage of businessmaturityNo, founders should remain in charge47%19% 81% of the founders open to a professional CEO running their business, while 19% believe that thefounder should always remain in charge 36% of growth/ late stage start-ups open to a professional CEO running business in next 2-3 years.InnoVen Capital India: Startup Outlook Report 202012
Favourite start-ups and founders#2Favourite Indian Start-up#1#2#2#1#1#2Favourite Indian Founder#2Favourite international founder#1#1#2InnoVen Capital India: Startup Outlook Report 2020#213
About InnoVen CapitalInnoVen Capital is Asia’s leading venture lending platform with offices in India, China and Singapore. It provides structured debt capitalto high growth ventures. Started in 2008 as the first dedicated venture debt provider in India, the platform offers multiple debt capitalsolutions, including venture debt, acquisition finance, growth loans, and working capital support. Some of the prominent current &past investments include Swiggy, Byju’s, Oyo Rooms, CureFit, Snapdeal, FirstCry, Blackbuck, Rivigo, Myntra, Quikr, Dailyhunt, Pepperfry,Eruditus, PharmEasy, GreyOrange, Ather & Bounce. For more information, please visit www.innovencapital.com and follow us at@InnoVenCap IN.About the reportThe Start-up Outlook report is an annual report published by InnoVen Capital India & provides an outlook on the sentiment prevailingin the start-up eco-system through the eyes of founders. The survey is administered to founders (& few senior leaders) from a broadcross-section of companies (Early-stage, growth stage and late stage). It covers wide ranging topics around funding environment, exits,focus areas, challenges and other aspects that are on the mind of founders. This is the 5th Start-up outlook report and was based on asurvey conducted with 100 start-up leaders.Data and figures herein may represent the whole or part of a set of responses to a given question to account for data completionmatters.For more information on the report, please contact:contact@innovencapital.comThe 2019 edition of the report can be read here: Startup Outlook Report 2019This presentation material is the property of InnoVen Capital India Private Limited. The material herein is provided for informational purposes only. Theinformation should not be viewed as investment, legal or other advice nor is it to be relied on in making an investment or other decision.
54% of growth /late stage start-ups expect an exit within 5 years, with 62% choosing IPO as a likely exit. 60% of Ecommerce start-ups believe secondary as the most likely exit path (most chose IPO last year) 64% of the Consumer Brand start-ups feel M&A is the most likely mode of exit. 53% of Fintech start-ups feel IPO is the most likely
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For the 10th year, Silicon Valley Bank is proud to present our Startup Outlook Report. The innovation economy has expanded greatly in the US and abroad in the past decade, and so has Startup Outlook. In our first report, we surveyed 300 people, most of them in California. The 2019 report includes the perspectives of nearly 1,400 technology and
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