30 December 2011

Startups To Become More Conservative In 2012

2011 is approaching an end and we had a rollercoaster ride. PE investments were at their low and despite of being the silver spoon for VCs, many ecommerce sites were shut down. Walking bare footed on the pebbles, we are bidding the year hopping to see a bright 2012. However,  bitter experiences due economic downturn and political uncertainity will make the startups more conservative in 2012. Even the VC perspective toward funding startups will observe certain chagnes in terms of expectations.

 So, what are the VCs expecting from the entrepreneurs the next year? Talking about this, Rahul Khanna, Managing Director, Canaan India, says, “2012 is going to witness an interesting time, lot of capital will be available for the entrepreneurs in the early stage. We saw a rise in the appetite of the startups in 2011, same will continue in 2012. But due to economic slowdown, entrepreneurs’ environment has become more conservative and we intent to see how conservative they will be in 2012.” The VCs will be more interested in funding those entrepreneurs who think big and are being mindful. Raising cash will be more difficult in 2012 and a good plan will be no guarantee to it. VCs will tend to fall for those enterprises that have a great team with lots of experience.


“2011 was not a bad year for startups. We saw many success stories. The year is ending with a happy note, with Mu Sigma raising $108 million in funding. Three or more such companies are going to emerge next year that are will make big in the market,” says Karthik Ananth, Director, Zinnov Management Consulting, a Management Consulting Firm.


The market aims to get good sentiments and foresees the ecosystem strengthening thus providing new arena to keep emerging. Digital commerce, B2C companies will be again racing at the top, as huge purchases are being made online. “Movie ticket, new year party tickets, books, baby care products, second hand products and what not can be purchased online now. Like this year, everyone will be bullish on investing in ecommerce sites but they will be more cautious on the terms of investment. Any complementing sites to ecommerce such as data analysis, and companies providing solutions in terms of metrics will also gain momentum in terms of raising fund,” says Abhijit Maheswari, Founder and CEO, Venturesutra, a direct funding platform to connect entrepreneurs with VCs, Angel Investors and Seed Investors.


Online advertising, mobile advertising and online media have not got enough attention and is expected to gain momentum in the next year. Education sector has seen a hype in the current year, but not significant investments. But 2012 tends to be more lucrative. Also, online education, health care education and financial sector is also going to boom in the coming year. The companies developing global apps for iPhone and other VAS providers, cloud-based and SaaS providers will also succeed to drive the attention of the VCs.


 “More people will be keen of starting their own business, but more of the existing startups will keep on entering diversified sectors to provide better services and products to their customers,” adds Ananth.