With a number of startups, some big names from food tech, shutting shop and over 100 getting snapped up in mergers and acquisitons, the theme at a panel discussion at International Management Institute (IMI), New Delhi, for its startup summit Emerge was apt: Is consolidation of startups a sign of market maturity?
Emerge is the second startup summit of IMI. Held in the institute's New Delhi campus, the summit had two sessions and had a number of startup founders, co-founder, mentors and investors who spoke on issues ranging from funding, shutdowns and mergers.
Firstpost was one of the sponsors of the summit.
Talking about consolidation and mergers, all the speakers on the dias – Saurabh Kochhar, Founder, Foodpanda; Dinesh Homagi, Co-Founder and CEO, Wow! Momo; Abheek Barman, senior editor, ET Now; Angad Bhatia, Founder Mensxp and Head, Times Internet and Neeraj Kumar Singhal, angel investor and CEO, SEMCO Group were unanimous in their view that mergers and acquisitions (M&A) were the rule of the game.
Every industry has a life cycle and as a startup takes off with a business model and at times unlimited growth, they soon will find competitors and the growth pie has to be shared with others. Soon enough, the most dominant takes over or acquires the one with whom it sees synergies with for a buoyant growth. Thus mergers and acquisitions become the name of the game and solidifies the combined entity’s hold on the sector.
“Consolidation is natural for any sector,” said Singhal, adding, when companies become more mature consolidation can happen. One of the reasons for consolidations and mergers are because e-commerce as a sector is doing badly in India. The golden era of Indian startups, when any and every entrepreneur managed to get funding, is surely all but over but there are still some venture capital funds that are willing to give money to those who are willing to disrupt the market, experts say.
Recent surveys and studies indicate that the funding for start-ups is likely to become a trickle with fund managers tightening the scope and flow of capital.
A joint report by KPMG and CB Insights reveals that venture capital funding continued its slowdown in third-quarter of 2016 to decline to just over $1 billion from $3.4 billion in the same quarter of 2015. The whole ecosystem got light headed on account of easy money flow to fund ideas and companies. Serious question are being asked to start-up founders now before VCs decide to fund them.
Kochhar of Foodpanda emphasised that when the word startup is mentioned, it is presumed that it is internet-based. That’s a fallacy, he said. “Startups don’t mean internet.” He said for the sector to survive and have a robust growth trajectory, it had to have innovations at the ground level. He urged entrepreneurs to confirm that the problems they were attempting solutions for were worth their time and effort.
One of the reasons for startups failure, according to Daryani of Wow! Momo is that while entrepreneurs pay attention to ideas, people, and the like; they somehow fail to focus on operations, he said. “An entrepreneur should think beyond his growth and of the consumers he is targeting his product at.”