By Nitya Pandit
Sistema, Russias $10 billion conglomerate, has decided to increase its engagement with Indian startups by floating a new unit in India. The unit will be owned entirely by the Russian corporation and will provide business execution support to the local startups in the domains of e-commerce, financial technologies, digital analytics and lifestyle brands.
The subsidiary will be registered in Singapore and is, at present, undergoing legal formalities. Even though the growth of Indian startup ecosystem remained sluggish last year, the implementation of GST and Make in India initiative, through the first half of 2017, has brought the ecosystem back on track.
The Sistemas subsidiary situation
The Russian conglomerate will provide guidance to its Indian subsidiary through its Scalerator platform, which offers services like go-to market strategies, increasing the scale of businesses in a cost-efficient manner, and support for the backup operations team. Sistemas venture capital team is in India to pick potential startups in cities like Bengaluru, Chennai, Hyderabad, and Kochi.
Startups in association with this platform may receive financing from the Sistema Asia Fund, which currently offers funding to technology and consumer-tech startups. After getting involved with financing startups in 2016, the Russian giant now eagerly wants to tap opportunities in its focus markets in India and Southeast Asia.
What is driving the interest of the investors?
The second quarter of this year shows improvement in the Indian startup ecosystem. The startup sector not only saw companies getting selected for Googles accelerator programme but also benefitted from increased funding from Chinese investors. The latter have been attracted to and invested in Indias startup segment given the slowdown of the Chinese economy and overlap of business scenario aspects in India and China.
There is also a generally positive sentiment in the startup sphere, which has led to the constant momentum of the startup ecosystem which will continue for another 6 to 12 months. Additionally, the governments role has been key in improving the sectoralong with Make In India and the GST implementation, the government is also in the planning phase of a meet between South Asian startups to encourage the exchange of ideas and to promote international interaction. Furthermore, the increase in mergers and acquisitions in the past months potentially attracted more investors to the Indian start-ups. In addition to this, Naspers acquisition of more shares in Flipkart, the main player in the startup industry, has helped regain the confidence and interest of investors in this industry.
Characteristics of the Indian startup ecosystem
The ecosystem is marked by uncertainty; In 2014, after a woman was reportedly raped in an Uber taxi, the government demanded that the states ban app-based cabs and now the Delhi government might be planning to ban UberPOOL and Ola Share. Considering such policy changes and regulatory pressures, startups are impacted by indecision and confusion, which in turn affects their decision-making processes.
There is an increase in the need to relocate abroad, as the access to the market is much larger and rent is minimal. The incorporation expenses, however, are high and obtaining the visa is tough. While UK, US, and Singapore have been traditional choices, now entrepreneurs are attracted by the likes of Estonia, South Korea, and Dubai, among a few others. Such countries are themselves increasing the ease for Indian startups to make the shift, given that they are attracted to the Indian tech talent.
With start-ups concentrating on minimising any losses and increasing their valuation, the positive attitude of investors and governments growing involvement, the growth of the startup ecosystem is expected to last at least till mid-2018.
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