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2010–The ‘Dabangg’ Year for Indian Internet Startups

Internet is not happening in India. eCommerce isn’t able to grow beyond certain categories.

Well..there are naysayers, but the fact of the matter is that those who have to build a business will build one. A lot has happened in 2010 and while the funding space hasn’t been super active (in Internet space dabang_movieespecially), I’d call 2010 as the Dabangg (means fearless* ) year for Indian Internet startups.

2010 is the year when we witnessed more monetizable trends (a benefit post the 2009 economic slump), i.e. lesser number of web2.0 ideas; and most importantly, MMT IPO which has given the much needed boost to (Internet) startups (and Investors).

The Trend

2010 was a year of eCommerce startups, and we did observe the sudden rise of Group buying sites in India. As the year approached its end, the hype died and post consolidation, we expect 3-4 national players in this industry (Groupon Hunting Deal(s) in India)].

Another significant trend we noticed was the rise of personal finance startup (validated by Intuit’s foray in this space). While few startups managed to raise funds, some of them have folded or merged with other players.

2010 : Exits

The startup ecosystem needs smaller exits (as well) and we need these at a rapid pace. What really happened in 2010 [especially the Oct-December quarter] needs to continue for the upcoming year as well.

Some of these exits aren’t the most ideal one (in terms of RoI), but the ecosystem needs smaller exits in order to grow. First time entrepreneurs need to understand the value creation business,need to really understand product creation mantra in order to aim for the larger play.

2010 sowed the seeds and has boosted the confidence among (Internet) entrepreneurs, especially those who are sitting at the fence and looking for success stories.

Notable Funding in Internet space (2010)

There has been a mix of ecommerce, content, finance and advertising related investment in India, which in itself is a healthy sign.

How well will these investments turn out (for company/investors)? Only time will tell. But its important to understand that you need to build a vitamin play in India (Vitamins or Pain Killer? What exactly are you solving?) and solve a real need.

The focus, as I said earlier was mostly on eCommerce and expect this to continue in 2011 [for vertical/niche products].

The MakeMyTrip IPO

MakeMyTrip IPO is probably the most significant activity of 2010 and makes it a milestone year for Indian Internet Industry.

What started as any other ecommerce play has now grown to $988 million in market cap – and that includes a journey of commitment and experiments. MMT’s share price went up by 89% on day 1, making it the hottest IPO since 2007. Of course, the stock is going through  its own Yo-Yo ride, but beyond the numbers – it has given a huge boost to Investors and built a confidence for Internet startups in India.

The biggest lesson from MakeMyTrip story is that you need a lot of commitment to build an Internet business in India. So if you are an Internet startup, ask yourself if you can really ‘do it’ for the next 10 years?

And of course, before you sulk about lack of funding, answer a few tough questions – specifically on the viability of your business idea (are you solving something really unique to India, or creating another Twitter clone?).

2011 – The Road Ahead?

Expect 2011 to be year of consolidation – a lot of VC money is on the ride and some of these funded startups will end up getting acquired. Most importantly, expect more public offers in 2010 [Justdial being the most awaited one] – which is a big boost to any entrepreneur’s confidence.

What’s your take on the Internet business in India? Do we get to see new business models coming up in the near future? For sure, I expect Indian startups to foray in Asia and other regions.

The Dabangg mode is ON.

* – Dabangg – ofcourse, a reference to the movie, but most importantly, a reference to its meaning – i.e the state of being fearless (and ready to conquer the world).

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