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The Roadmap for Indian Startup Ecosystem – Trends in 2018

Author: Srinath Venkat

Indian Startup Ecosystem is maturing to provide more B2B focused solutions. Nearly half the firms founded in 2017 operate in the B2B space, after nearly a decade of dominance by e-commerce and ride-hailing startups in the ecosystem. With such prolific growth, the B2B segment has also caught the attention of investors, with significant funding growth seen for B2B startups year on year. Funding for the B2B segment rose from 27 to 32 percent, which is dominated by big data & analytics, ERP and marketing solutions.

India continues to be the world’s third largest startup ecosystem after the United States and Israel, and in 2017, India has added about 1,000 new startups, taking the total to over 5,000. India had some of the start-up success stories in the past, but nothing compared to the present times that Indian Startup ecosystem enjoys. Experts suggest that the major growth drivers are due to large domestic market, easy access to capital & mentors and increased M&A activities. While social startups have reported an 18 percent year-on-year growth, other sought-after sectors include Internet of Things (IoT), Augmented Reality (AR) and Blockchain. Robotics and 3D printing are also some sectors witnessing development.

Indian startups have raised about USD 10 billion in 2017, and 2018 is likely to be more about innovation and technology than about funding rounds, with well-funded unicorns likely to focus on utilising technologies like artificial intelligence (AI), and wearable devices to improve their offerings and create better customer experiences. We can expect to see AI applications for better diagnosis in Healthcare, personalised/targeted marketing for brands, and conversational interfaces for search applications or personal assistants to become much prevalent. As these new technologies emerge, sectors like e-commerce and ride-hailing will continue to be eventful, where players are likely to look at acquisitions to give a boost to their revenues. 

Convenience, affordability, and inclusivity will become the mainstay of innovations that take center stage in India in 2018. Technology acquisition, customer acquisition, acqui-hiring and market consolidation are the main drivers for increase in M&A of Indian startups. With increase of momentum in M&A in India, investors are getting more exit opportunities. Startups are adopting innovative approaches to attract and retain top talent.

AI & Machine Learning will redefine our everyday solutions

Voice recognition, image recognition, and natural language processing have come of age. Applications include voice typing, voice and image compression, security and defence applications, targeted marketing, and even Deep Learning-based design.

Amazon’s Alexa, Apple’s Siri, Google Assistant and Microsoft’s Cortana are virtual assistants that use Deep Learning and other AI tools as their backbone.  Alexa has also opened the ecosystem, which will drive widespread use of voice commands. During 2017 it was hard to escape predictions that artificial intelligence is about to change the world. In 2018, this is unlikely to change. However, an increased focus on repeatable and quantifiable results is likely to ground some of the “big picture” thinking in reality. 

AI will find wider usage in our daily lives, from intelligent shopping assistants to helpful conversational bots, and find greater adoption in sectors like e-commerce, fintech, banking, surveillance, customer service and support. In 2018, we will see the simple machine learning, NLP, and AI creeping into our phones, our machines, the apps and software that we use, slowly simplifying our lives, enabling us to talk to machines, or enabling ecommerce players to understand customer behaviour, or helping banks service customers through AI-powered chatbots. 

Indian startups are beginning to create noteworthy products in AI, evidenced by the acquisition of Halli Labs, a four-month-old startup, providing AI and ML solutions, by Google in 2017, and the whopping fuding of USD 25 million to Qubole which delivers a Self-Service Platform for Big Data Analytics built on Amazon, Microsoft, Google and Oracle Cloud.

AR and VR will bring immersive experience in Gaming, Education and Retail

Virtual reality and augmented reality are predicted to be two of the most important trends for the next 10 years, but both have a long road to get there. At the end of 2017, VR is inside its trough of disillusionment in Gartner Hype Cycle, while AR is relegated to rough headsets and some interesting apps on mobile platforms. 

In 2018, we can expect more AR, VR and simulation based content will make learning more interactive and engaging. Virtual reality is a potential multi-billion-dollar market worldwide, with an emerging presence in India today, and Seeing the attention Virtual reality is garnering in India, a number of companies here are working on the concept and coming up with their own products focused around Virtual reality.  It has applications in a number of verticals including gaming, education, healthcare, real estate, architecture, online shopping etc. the buzz around AR started to escalate when Facebook acquired Magic Leap which had Google and Alibaba as investors. In recent launches of Iphone and Pixel smartphones, AR capability was much talked about, and Microsoft, with its Mixed Reality product, HoloLens, is planning to make it big in this space. 

Y-Combinator startup Innov8, based in India, touched base with Augmented Reality four years ago with Alive App, which was acquired by Times of India to enable readers to acess news by just focusing the phone camera on any content in the newspaper with Alive Logo. GridRaster, with its development office in India, has raised close to USD 1.6 million, and provides technology for VR/AR devices, to drives mass adoption of VR/AR by dramatically improving the reach of exciting content.

There is greater adoption of VR and AR technologies in industries like Retail and Education for creating immersive experiences. It’s no secret that both VR and AR have a substantial potential of disrupting the entire e-commerce field, and Consumers will be able to test out clothes, gear as well as a range of different products before they place their purchase. Recently, Myntra has launched a brick-and-mortar retail outlet in Bangalore, leveraging VR to provide a greater customer experience. Byju’s, a learning EdTech startup is moving forward with an initiative to drive experiential learning, by developing the some of its content for VR as well. 

3 D printing advancements with voxel control, expanding materials and improving software will pave the way for mass production, making it a reality

Reducing cost, new processes, and greater research are key drivers that will grow the 3D printing, or additive manufacturing, market in 2018. The advancements in the 3D printing technology have come a long way in the last few years. The traditional industries like manufacturing, prototyping have been heavily benefitted by 3D printing. Making printers user-friendly, finding way to reduce support materials, finding errors in CAD models before printing, and suggesting design changes for more efficient printing will give savvy players a leg up in the additive manufacturing industry. Whether for medical devices, or manufacturing parts for planes, trains, or automobiles, metal 3D printing is expected to grow continuously through 2018. The concept of 3D printing is slowly gaining momentum in India with a number of start-ups successfully raising venture capital investments. Flipkart has invested in Pandorum Technologies that manufactures three dimensional functional human tissues; intended for medical research and therapeutics, and Supercraft3D that provides patient specific visualization solutions that help hospitals, doctors and the academicians get a unique perspective about the anatomy. 

Bengaluru based Fractal works delivers low-volume manufacturing capabilities to its customers leveraging on its digital manufacturing back-end, and is working with manufacturing giants across industry verticals, researching and developing disruptive applications, which would give game-changing advantage for its clients. Ethereal Machine, another Bengaluru based startup, was awarded in GES 2017 for inventing the world's first 5-axis additive and subtractive printer.

Blockchain will cross the phase of inflated expectation showing promise of real-world applications 

Enterprises are still deciding how to navigate this technology, but the lack of proven use cases and the volatility of bitcoin have created concerns about the viability of the technology. Blockchain, which is being tested for digital identity management purpose by many banks around the globe can be a potential winner, and since India has also seen a lot of activity in the fintech arena, blockchain can show greater traction in cross-border payments, and clearing and settlement.

In 2018, we will witness greater adoption of blockchain applications in FinTech and InsureTech, as organizations move from trials to productions, along with supportive regulatory ecosystem. With stakes high and with a supportive regulatory regime and technology ecosystem, it is natural that Indian companies have decided to take a dive.

Axis Bank, India’s third largest private sector bank, also announced a trial using an alternate blockchain technology, Ripple. It is testing the PoC to try out cross border payments. State Bank of India, India’s largest bank, has reportedly started a consortium of banks and other organizations to create a multi-party permissioned blockchain, called Bankchain.

At this point, the potential for Blockchain likely exceeds its practical utility for information assets today. Nonetheless, with its capabilities applicable to so many different facets of data management, its influence will continue to grow throughout 2018. Just like IoT, Blockchain’s creating a whole lot of data about different things making it possible for organizations to serve as an authority where previously they had to rely on others.

Moving intelligence to the edge of IoT will be focus in 2018

More enterprises will push processing and analysis of data to the edge of the network in order to cut data ingestion costs and reduce network latency. More than 8.4 billion "Things" are on the internet today, up more than 30% from just one year ago, and 40% of all compute will happen at the edge in just the next couple of years. In a mobile-first and Cloud-first country like India, there now lies a new over $100 billion opportunity if we can leverage Intelligent Cloud and Intelligent Edge solutions across industries. The Intelligent Edge will usher the power of the Cloud to mobile and Internet of Things (IoT) devices, thus creating a connected ecosystem. 2018 will be a prelude to the decade, where almost every company will eventually become a software at some point of time with the fourth industrial revolution and an Intelligent Cloud charting their digital journey.

Pune based Altizon systems, with USD 4 million in funding, has a family of sensor data appliances and SDKs that drive data from sensors in Industrial Equipment to its flagship Datonis™ platform.  Altizon and Novecom, an Advitech Group Company, and leader in environmental monitoring and data management systems for industry, recently announced their partnership to deliver an end-to-end IIoT and industry 4.0 offering. The government of India has announced a draft policy on IoT, in areas like accelerating R&D efforts, providing startup funding, and establishing standards and frameworks. The IoT market in India is poised to reach USD 15 billion by 2020, and Indian statups in IoT like Altiux, Altizon, SensGiz, iBOT, GreyOrange, Cardiac Design Labs and Loginext have delivered promising B2B solutions in Manufacturing, Healthcare and Logistics. 2018 will witness a significant adoption of sophisticated technology platforms in IoT to deliver faster and seamless data intelligence to enterprises.

To Sum up

Some of the technologies that were in the early or experimental phases in 2016 and 2017 will become mainstream in 2018. India’s thrust in building a robust broadband infrastructure, coupled with its high mobile penetration, will boost technology adoption further. Sector-wise, game changers vary, and 2018 promises further disruptions. 2018 will see businesses adopting ML as part of their larger analytics strategy, pairing algorithms with the right tools and processes to find hidden insights in data. While AI continues to rule the industry, chatbots are believed to be getting smarter at an accelerated pace with various industries adopting it at a large scale, largely to improve their customer experience. Like AI, AR will find value added business use cases, breaking the tag of being a fad, with recent advancements in hardware and software. We would witness B2B startups dominating the Indian Startup Ecosystem in 2018, well above the 50 percent contribution seen in 2017. As we see larger players establishing their stronghold with greater appetite, Olas, Flipkarts and the Paytms would continue to scale inorganically in 2018, by becoming large acquirers. 

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