I have this nasty feeling that 2012 is going to be bad for startups, specially in India. Here are my reasons:

  1. Most of the low hanging fruit is gone: We are at the end of phase I of Internet revolution and industries that were ripe for innovation like media, travel, classifieds (and to an extent retail, specially books) have been the focus of startup attention for too long now.
  2. No innovation: True innovation (of the scale of Google) will happen in places like Silicon Valley and Boston due to high the quality of mentorship and early adopters. It is extremely unlikely that a startup in India will do very innovative work.
  3. Recruitment: It will be even harder to recruit, because e-commerce players will be consolidating and will compete for talent. Just read an article that venture investments in India have hit a record in 2011. A lot of money has already been poured into these companies and they have no option but to fight for talent. Those large companies (esp in retail) left behind, will also start investing in web platforms. Moreover, the listed IT companies are still flush with funds.
  4. Startup Backlash: There has been a glut of startups in the last 2/3 years and very few seem to be succeeding. Of those still in business, I am not sure how many would survive without venture / angel / parent company funds. Most of the risk takers have already taken on too much risk.
  5. Early adopter fatigue: Even the die-hard early adopter will be battling fatigue at the moment. There are just too many tools and too many new things to consider. Doing a startup at this time would mean, battling for the little attention and energy that remains.
  6. The Empire Strikes Back: Corporates are now fully awake to the social media wave, startups will have to compete for space to get heard and noticed. For example, in the ERP space that I follow, SAP has been investing heavily in social media and gets a lion’s share of coverage on forums and news sharing sites because of their muscle.

I think 2013 may be a better year, because a lot of the wreckage will have been cleared in 2012 and there may be new opportunities showing up.

What’s your take?

[Editorial Notes: We do agree that low hanging fruits are taken (?) and even funded, but the good news is that real businesses aren’t about low-hanging fruits. They solve a much serious pain and we look forward to startups launching in 2012. If you are one, submit your details here].

[About the author: Rushabh Mehta is founder of ERPNext. Article has been reproduced from his blog]

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