Zinnov product startup landscape in India 2012

1. Product Startup Landscape in India -2012
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or reproduced for distribution outside the client organization without prior written approval from Zinnov

2. Zinnov has broadly classified Indian Product Companies into 6 categories with relevant examples
in each category
Segment Definition Sample Companies
Companies in core infrastructure,
Server/Infrastructure S7 Solutions, Sanat Technologies, i-
security, business management, storage
software and Storage Explore, Array Networks
verticals
Companies that are into business
Business and management, business solutions, Idea device, LeadForce1, 3i InfoTech,
Productivity Software enterprise resource management, Abacus Software, Accord Software,
account & analytical solutions, cloud Agile Financial Technologies, Busi
etc.
Companies that are into Search engines, Snapdeal,Redbus, Mginger, Shaadii.com,
Digital cloud, e-commerce, travel, portals, Flipkart, Myntra, Playing11,Fropper
social networking, etc.
Client / Desktop, Companies that are into system
System CK Technologies, Enzigma Software,
platforms, desktop application,
Software and Tools Atlantis Computing, Organyze Systems
software products, etc.
Companies that are into
Avantel, Tejas networks, Rebaca
Semiconductors semiconductors (Chip design, ASIC
Technologies
design) and power semiconductor
Multiple industry solutions, networking, Amagi Technologies, Snap Networks,
Others energy, entertainment, open source, Vihaan Networks, Medsphere
etc. Technologies
2

3. One of the key categories identified is the ‘Digital domain’ which has been further classified into
8 sub categories
Server/Infrastruct
ure software and
Storage Deal websites
Business and
Games
Productivity
Software
Mobiles
Digital
Social Networking
Client / Desktop,
Shopping
System Software
and Tools
Travel and Leisure
Semiconductor
E- Commerce
Others Media and Entertainment
Marketplaces
Source: Zinnov Analysis 3

4. Agenda
1 Detailed Trends and Analysis
2 Digital Domain - Details
4

5. Since 1990, more than 3402 product companies have started in India; however, the YoY numbers
vary dramatically due to various other economic variables
Evolution of the Indian Product Business Landscape from the year
1990 to 2012 Due the economic downturn,
the number of new product
startups reduced in 2009.
458 425 E
395 400 E
377 357
335
280
171 162
145
123 132
86 101 83
78
34 49 38
Till 19951996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Q2 2012
Total= 3402
Note: Only companies with visibility/beta product , live in the market have been considered in the database.; E - Estimated
Source: Zinnov Analysis 5

6. Of the total 3,402 product companies, approximately 51 percent are based in Bangalore and
NCR region
Product companies split across regions
Region Cities
Bangalore Bangalore, Mysore,
Belgaum, Gulbarga, Hubli
Kolkata Hyderabad Hyderabad,
Secundrabad,Vishakhapatnu
121 m,Vijayawada
810
Pune Pune
NCR
NCR Chennai Chennai, Calicut,
Trivandrum, Madurai,
Coimbatore, Cochin, Vellore
Mumbai Mumbai, Goa, Ahmedabad,
Vadodara, etc.
498 NCR Delhi, Gurgaon, Noida,
Chandigarh, Mohali
Mumbai Kolkata
Mumbai
Pune Kolkata Kolkata, Patna,
Hyderabad Bhubaneswar
227 435
Bangalore Hyderabad
Pune
929
Total= 3402 382
Bangalore
Chennai
Note: The cities marked in bold are emerging Tier-II cities for product startups
6

7. Overall 45 Currently, overall 45 percent of the companies are working on Web; however, the
trend is undergoing a change as startups are shifting to Cloud
Startup Companies and platform classification Cloud Computing and its impact on
Startups
Without the need of implementation
of hardware and various other
components which can take several
Ease of hours. Startup setup can be done
33% Implementation within no time. This allows small
companies to compete more
13% effectively with some of the larger
businesses
3%
Cloud computing has been a key
enabling factor in the latest generation
4% Cash Needs of of web startups, allowing them start
47% Startups with small amounts of capital and scale
quickly in response to demand.
Cloud computing involves the shift
Web PC Mobile Cloud Others from IT-based products to business-
Products to oriented services. Although this trend
Services has been present for some time, cloud
computing is dramatically accelerating
Overall startup companies = 3402 the shift.
Source: Company Website, Zinnov Database and Secondary research.
7

8. In addition, obtaining funding has also proved to be a challenge; however, this is changing as VC
investments in this space are rising
VC Investments in India (2005 – 2011) VC Investments by Industry Value – 2012
1200 240
210
16%
900 1110 180
170 3%
34%
150 6%
140 7%
USD million
600 110 120 7%
950
9%
94 8%
876 3% 7%
700
300 44 60
508
475
268
Online Services Enterprise Software and Products
0 0 Mobile VAS IT Services and Others
2005 2006 2007 2008 2009 2010 2011 Healthcare & Lifescience Energy
BFSI Education
Deal Value Number of Deals Food and Beverages Others
Source: Venture Intelligence; Zinnov Analysis 8

9. Overall 58 % of the funded companies from 2005 till today are from Bangalore and NCR
VC Investments by companies Location (2005-2012) Funding timeframe for 2005-2012 companies
3/4th of total 2/3rd of total Interestingly,
1/6th of startups
92
were funded in
the year of
inception
No of Companies
No of Companies
69
69
74
149
117 46
87
37 37 37
46
34
21
6
0 1 2 3 4 5 6 7
Location No of Years for funding
• Overall funded companies from (2005-2012) are around 446 (i.e. 19 % of 2407 startups)
• Around 66% of the companies obtained funding within 3 years of inception
• 69% of the companies which obtained funding during (2005-2012) are from Digital and Software domain
Source of Funding: VCCircle, Crunchbase, Company Website, Zinnov Database and Secondary research.
9

10. From 2005 to 2012, VCs have invested about 58% of the overall funding, followed by Angels with
23% - together contributing up to 80%!
Funding Scenario in Indian Startup eco-system Top Investors
from 2005 till time
Accel Partners, Sequoia, Nexus
VC Funding Venture Tiger Global, Helion, IDG
Venture, InodUS etc..
8% Angel Rajan Anandan, Srini Koppolu, J A
23% 6% 5% Investors Chowdary, Christian Wedell
Illustrative list of startups
mGlitz, N-Axis
Bootstrapped
58% Software, MBAskool.
Family & Dealite.in, Fachak, NextLeap, Gam
Friends es2win, Attribo.
VC Funding Angel Funding Seed Funding
Friends & Family Bootstrapped Capillary, Vdopia, Mymo
Seed Funding
Wireless, Picsquare, Einfinitus
Overall Funded companies from
(2005-2012) = 446 Innovize
Angel Funding Technologies, Rupeetalk, Voicetap
, Itsmymeal
Source of Funding: VCCircle, Crunchbase, Company Website, Zinnov Database and Secondary research.
10

11. It is noticed that between 2009-12 more than 55% of the startup founders have less than 10 years
of experience
Startup Founder’s by Domain – (2009-2012)
Founders 119 Tier 1 40
Overseas 44
Enterprise Software 196
Telecom 9% 7%
72
BFSI 25 33%
Electrical & Electronics 51%
26 Product 178
Semiconductors 30 Engineering
Others 76 Pure Services 243
ITES 118
Total = 1282 Freshers Service Provider MNC R&D Serial Entrepreneurs Other 114
Startup Founder’s by Experience – (2009-2012)
Total = 1282
4/5th of total
Affinity to Startup is very high among people with <15
393
345 years of experience!
304
145 42 33 20
0-5 6-10 11-15 16-20 21-25 26-30 31+
Years of Experience
Source of Founder profiles: Linkedin, Company Website, Zinnov Database and Secondary research.
11

12. About 6% of the startups established in the last three years are having women Co-Founders
Gender Diversity amongst Startups established by year (2009-12) and
startups founder (2009-12) geo split under women entrepreneurship
32
23 20
5
2009 2010 2011 2012 (2nd Qtr)
Number of Co-Founders
80
1202
23 20 17
12
3 3 2
Number of Co-Founders
Male Female
Total Tech startups (2009-12) is 1282
About 45% of the women Co-Founders are based in Bangalore and Hyderabad.
Source of Founder profiles: Linkedin, Company Website, Zinnov Database and Secondary research.
12

13. Key challenges faced by Digital companies in the startup ecosystem
• Everybody is in a cut-throat price war. They want to play the last man standing game.
Online Price
• E-commerce ventures are being very aggressive when it comes to price in order to consolidate their
War
customer base.
• Businesses cannot survive without margins for too long
Low Profit
• Different reasons like Payment Gateway Cost, Packaging Cost, Cash on Delivery, Lost/Damaged Articles
Margins
and Competition have adverse effect on margins.
Service and • Poor Service and Quality of Delivery results in losing customer base.
Quality • Lack of feedback mechanism in place to obtain feedback from consumers, which is essential for
growth of startups.
• Unavailability of right kind of investors
Funding • Poor timing of capital deployment as a result of poor planning
• Failure to understand working capital requirements/capital prioritization of a growing business
Example of Digital company shutdown are Taggle and Exclusively.in.
•The main reasons behind the shutdown of Taggle were Online Price War, Less profit margin, and Improper usage of funds.
•Flush with venture capital and private equity money, online retailers have been pursuing a single-minded strategy of acquiring as many
customers as soon as they can. However, this has come at the expense of running a sustainable business as in many cases revenue fails to
cover even the cost of operations.

14. Key challenges faced by Software product companies in the startup ecosystem
Lack of
• Proper resource for the development of product.
technology
• Lack of technology expertise in management and inability to visualize the big picture
expertise
Time to • If there is a delay in go to market timing then it may erode the first mover advantage.
Market • Product owner must have proper idea about the timing of the launch of product in the market.
Availability of • Acquiring sufficient funding is a challenge for any startup.
Funding • Lack of vision of product owner in channelizing the funding taking into consideration the greater
strategic plan
• Too much time to build a product will make lose the market.
Development • Resources are unavailable to develop the product on time.
time • Improper planning of product development cycle.
• Unreliable product because of inexperienced developers or early release of the product ( without
Unreliable being tested).
Product • Unreliability of the product grows manifolds if unresolved issues/defects are detected. This causes
fatal damage to product reputation.

15. Agenda
1 Detailed Trends and Analysis
2 Digital Domain - Details
15

16. In the last few years, Digital Domain has witnessed a rapid growth. Currently ~ 65% of the
product companies in this space are focused on marketplace and mobile domains
Digital product companies split across various domains Total= ~1538
2% 1%
Deal websites
5%
Games
22%
Mobile
43% Social Networking
4% Shopping
6% Media and Entertainment
2%
15% Other E-Commerce Sites
Marketplaces
Travel and Leisure
Source: Zinnov Analysis
16

17. Of 1,278 product companies in the digital domain, approx. 56% are based in Bangalore and NCR
regions
Digital Product companies 18
6 4
split across regions
150 103 Total= ~1538
34
Kolkata
31 Deal websites
437
Games
NCR Mobile
NCR
Social Networking
123
52 25 Shopping
Media and Entertainment
Marketplaces
313
Travel and Leisure
Mumbai Kolkata
Mumbai
Pune 65
31
Hyderabad 4
72 140
Bangalore Hyderabad
Pune
32 Bangalore 170 42 28
15 80 14
4 24 132
413
Chennai
17

18. Success stories of companies in the digital domain
Employee
Company Company Description Product portfolio Funding details HQ Location Awards
headcount
Independent IP-based • Online real games 2010 International Stevie
7Seas Technologies games development • Mobizill Self funding Hyderabad 100 Business Award in the 'Best
company • Neodelight Website' category
ACL Wireless Limited is a "The Red Herring 100 Asia"
Mobile Value Added • SMS Chat Inter Asia Venture award in 2006 and "Deloitte
ACL Wireless Limited Noida 300
Services (VAS) provider • Frenzo Management Technology Fast 50 India"
for telecom operators consecutively for 3 years.
The company creates
internet based products Deloitte Technology's fast 500
Billdesk is a mobile National venture
Billdesk targeted at banks and NCR 800 Asia Pacific 2006
payment gateway Fund
other financial product
providers.
• Tata NEN hottest startups
• Drona VCast: 2008
Deltecs offers end-to- mLearning product for • Asia Moot Corp 2009
Deltecs Infotech end mobile learning Smartphones. Qualcomm ventures Mumbai 50 • South Asia mBillionth Award
solution. • Drona: Learning 2010
Management Suite. • Microsoft Canaan TechSparks
2010
Flipkart is an online
shopping portal where
Flipkart is an e-
Flipkart you can buy various Tiger Global Bangalore 2500 India Digital Awards 2012
commerce website.
products.
Snapdeal allows multi-
Snapdeal is a Deal Bessemer Venture
channel direct
website which provides Partners, Nexus Indian Digital Media Awards
Snapdeal marketing solutions New Delhi 1000
discounts on products Venture and IndoUS IDMA 2011
for the clients.
and services. Venture Partners
18

19. Some of the key challenges that product companies face iincludes finding & retaining the appropriate
talent and implementing a robust marketing strategy
Product
Marketing and • Inability to market product or services effectively
revenue • Lack of awareness about time to market the product
generation • Limited or no knowledge of competition
Managerial • Poor talent management
and hiring • Difficulty in hiring and retaining top talent due to absence of a brand
Incompetence
• Identifying the right strategy roadmap is essential
Finding the • Gathering comprehensive market insights
right idea • Raising the initial capital amount ( bootstrapping , external funding etc.) for Startup period and
development stage
Staying • Inability to set realistic and incremental business goals
focused • Creating and adhering to deadlines
• Unavailability of right kind of investors
• Poor timing of capital deployment as a result of poor planning
Funding
• Failure to understand working capital requirements/capital prioritization of a growing business

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