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India’s home-grown <a href="http://www.businessinsider.in/searchresult.cms?query=Silicon+Valley&amp;sortorder=effectivedate">Silicon Valley</a> is facing stiff competition from unexpected quarters. In the first six months of 2016, startups in the Delhi National Capital Region (NCR) attracted almost twice the amount of investments. Looks like Tier II and Tier III cities are also catching up, and fast. 
 Delhi NCR’s <keyword id="1973995" type="UNKNOWN" weightage="80" keywordseo="Startup-ecosystem">startup ecosystem</keyword> accounts for more than half the total $1.8 billion raised by Indian startups in 2016 so far, <a href="http://blog.tracxn.com/2016/06/24/delhi-ncr-bangalore-mumbai-pune-and-hyderabad-are-indias-top-5-startup-cities-for-2016/" target="_blank">according to data</a> from research firm Tracxn. Delhi is closely followed by <keyword id="6354321" type="CITY" weightage="60" keywordseo="Bengaluru">Bengaluru</keyword>, Mumbai, Hyderabad and Pune. 
 “Around 28% of the country’s startups are in Delhi. It’s one of the most vibrant cities for startups. We’ll soon see the emergence of new startup capital in India. Jaipur, Ahmedabad and Surat are cities of the future”, Dr. <keyword id="3189968" type="UNKNOWN" weightage="40" keywordseo="Apoorv-Ranjan-Sharma">Apoorv Ranjan Sharma</keyword>, President and Co founder, Venture Catalysts said. 
 Bengaluru has long been an investor’s darling, thanks to its readily available tech talent. However, cities like Ahmedabad, Chennai and Jaipur are becoming startups hubs too, accounting for 30 deals in 2016, with a total <keyword id="6357455" type="EVENT" weightage="80" keywordseo="Funding">funding</keyword> amount of $34 Mn. 
 
<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td>
				City</td>
			<td>
				No. of Deals</td>
			<td>
				Total Funding</td>
		</tr>
		<tr>
			<td>
				Chennai</td>
			<td>
				10</td>
			<td>
				$17 Mn</td>
		</tr>
		<tr>
			<td>
				Jaipur</td>
			<td>
				9</td>
			<td>
				$16 Mn</td>
		</tr>
		<tr>
			<td>
				Ahmedabad</td>
			<td>
				11</td>
			<td>
				$1 Mn</td>
		</tr>
	</tbody>
</table>
 
“With <a href="http://www.businessinsider.in/searchresult.cms?query=Reliance+Jio&amp;sortorder=effectivedate">Jio</a> coming in, the internet connectivity in Tier II-Tier III cities will better dramatically. There’s enough capital availability in tier II cities any way. Companies will no longer shift from Nashik and Pune to Mumbai”, Sharma adds. 
 
Today, Bengaluru houses nearly 30% of the country’s technology startups, including unicorns like <a href="http://www.businessinsider.in/searchresult.cms?query=Flipkart&amp;sortorder=effectivedate">Flipkart</a>, <a href="http://www.businessinsider.in/searchresult.cms?query=Ola&amp;sortorder=effectivedate">Ola</a>, and <a href="http://www.businessinsider.in/searchresult.cms?query=InMobi&amp;sortorder=effectivedate">InMobi</a>. The city has the world’s second-fastest growing <a href="http://www.businessinsider.in/searchresult.cms?query=startup+ecosystem&amp;sortorder=effectivedate">startup ecosystem</a>, and ranks 15th among the largest startup ecosystems globally. 
 
<a href="http://www.nioh.org/26thISSRF/sys/riverfront%20park.jpg">Image Source</a>

Reliance
Jio will be a game-changer for India’s Tier II-Tier III startups

<ul><li>In an interview with Business Insider, Dr. Apoorv Ranjan Sharma of <keyword id="3189966" type="PERSON" weightage="20" keywordseo="Venture-Catalysts">Venture Catalysts</keyword> spoke about policies the new government can bring about for <keyword id="6362513" type="UNKNOWN" weightage="20" keywordseo="startups">startups</keyword>. </li><li><keyword id="6406536" type="UNKNOWN" weightage="20" keywordseo="Angel-Tax">Angel tax</keyword> has been one of the most hotly debated issues, and Sharma believes tax incentives will encourage <keyword id="1848628" type="PERSON" weightage="20" keywordseo="angel-investments">angel investments</keyword>.</li><li>Sharma believes that in India, private incubators too need to be given incentives</li></ul>One of the biggest debates in the Indian startup ecosystem has been angel tax. From pleas to removal of the tax to outrage over issued notices, startups in India along with angel investors have pleaded to the government for better policies ahead of the upcoming budget on July 5. In February, the Indian government came up with a decision regarding angel tax. The exemption for angel tax for shares issued or proposed was hiked to an aggregate limit of ₹25 crore from ₹10 crore. However, that is not enough. As the new government begins work, investors and entrepreneurs are once again hopeful for better, encouraging policies. In an interview with Business Insider, Dr. Apoorv Ranjan Sharma, co-founder &amp; president, Venture Catalysts spoke about policies that the Indian government needs to bring about. Venture Catalysts, as an integrated incubator based out of Mumbai. It provides investment of $500,000 to $1 million per startup with incubation support for one year. “People are talking about removing angel tax but just doing that is not okay. We need to incentivise angel investors, like is the case in some other countries. This policy needs to go in that direction,” said Sharma. He further explained that with startups, especially in the early stages, being a risky asset, it’s a difficult investment to make. “Tax rebates need to be given to angel investors to encourage them to invest. The government can define who can be an angel investor,” he said. In fact, the Department for Promotion of Industry and Internal Trade (DPIIT) is already working on the definition of accredited investors, who could be given tax incentives for investments. Another factor that boosts startups is incubation. Sharma believes that in India, private incubators too need to be given incentives. He cites the example of the US and China, where successful incubators and accelerators are the private ones. “Infrastructure costs are high to set up an incubator. In India, there are so many government-funded incubators coming up but the outcome is limited then. Private incubators should be encouraged either with land benefits to set up or tax incentives,” he said. He further said that India doesn’t even need a startup ministry, what it needs are fundamental changes. The <keyword id="6360789" type="UNKNOWN" weightage="20" keywordseo="Modi-government">Modi government</keyword> has come back to power with a resounding majority in the Parliament, including the <a href="https://www.businessinsider.in/bjp-may-win-majority-seats-in-the-upper-house-of-indias-parliament/articleshow/69511804.cms">Rajya Sabha</a>. This will give the seemingly “pro-startup government” an opportunity to show that it is serious about promoting entrepreneurship in the country. And the upcoming Budget may be the ideal opportunity. See Also: <a href="https://www.businessinsider.in/angel-tax-startup-definition-changed-exemption-up-to-25-crore/articleshow/68063050.cms">Indian government finally comes to a decision on Angel Tax, changes definition of startups</a> <a href="https://www.businessinsider.in/income-tax-department-freezes-bank-accounts-of-babygogo-travelkhana-over-angel-tax-issue/articleshow/67904786.cms">Two Indian startups say the government broke their faith by raiding their bank accounts</a>

The government can be an 'angel' if it replaces tax with incentives, explains a startup groomer

<ul><li><keyword id="3189966" type="PERSON" weightage="20" keywordseo="Venture-Catalysts">Venture Catalysts</keyword> has launched a new fund called 9Unicorns of ₹300 crores.</li><li>The fund will invest in 100 startups every year with a focus on startups in the segments of Electric Vehicles, mobility, Augmented Reality VR, AI and ML, fintech, retail &amp; FMCG.</li><li>It will invest ₹60 lakh for 5% equity in the initial stage.</li></ul>Mumbai-based incubator and fund Venture Catalysts announced a new fund called 9Unicorns with an outlay of ₹300 crores. The 9Unicorns fund claims to be the first ‘accelerator VC’ in India, and aims to invest in 100 startups every year. The fund will focus on early stage startups from segments such as electric vehicles, mobility, augmented reality VR, AI and machine learning, fintech, retail and FMCG. The fund hopes to identify the next set of unicorns and help them grow. India is home to over 600 accelerators. Yet, it is much lower than that of China and the US, which have over 32,000 and 20,000 accelerators respectively. The fund will mentor startups and help them grow faster, as a part of a 13-week programme. If a startup shows promise, it will invest ₹60 lakh for 5% equity and could follow up with a round of ₹3-5 crore going ahead. “9Unicorns Fund will revive idea stage funding in India,” said Dr. Apoorv Ranjan Sharma, Co-Founder and Managing Director, 9Unicorns. “The startups from the fund will benefit from ready access to business angels, Venture Catalyst’s corporate community of over 4,500 members. They will also be able to access markets across 26 cities across the world as well as tier-II, III and IV cities in India to build a large customer base quickly,” he added.

Venture Catalysts launches a ₹300 crore ‘idea stage’ fund to net next unicorns

Indian <keyword id="6362513" type="ORGANIZATION" weightage="20" keywordseo="Startups">startups</keyword> are facing a tough time and entrepreneurs are finding it hard to secure investments. Several startups had to fold up their operations due to lack of funds. Almost 30 startups funded by either angel investors or VC firms have, reportedly, closed down since the turn of the year, while around 11 ventures had to shut shops within just two months. 
 
High cash burn rate and failure to secure more funds have been the most prominent reasons quoted by these startups for discontinuing operations. 
 
The investment numbers seem to corroborate with the slowdown in funding. The total funding into Indian tech startups for the first half of 2016 was around $2.1 billion, a decline of nearly 40 percent from $3.5 billion when compared to 2015. 
 
Moreover, according to a joint study conducted by KPMG and CB Insights, the total amount of funds injected into the country’s start-ups has decreased by a steady 24 percent per quarter since Q3 2015. 
 
Industry experts have attributed this decline to the decreasing investor confidence in the Indian startup ecosystem, which seems to be in hot water owing to faulty unit economics and unsustainable business models followed by many ventures. 
 
While there is a tangible decrease in startup investments in terms of the total value of deals, the number of deals conducted has gone up substantially since the turn of the year. 
 
Indian ventures closed 307 investments in Q1 2016, marking an increase of 108% over the number of deals completed in Q1 2015. So if the number of investment deals is increasing, why is there such a sharp decline in the overall funding amount? 
 
This apparently baffling trend is not as mystifying as it seems, especially when considered that the same timeframe has also seen a sharp rise in angel and seed investments in India. Startups across the country have raised nearly Rs 113.6 crore in angel investments through 69 deals so far in 2016. The value of angel investments has grown by about 62% over the previous year, while the deal volume has also demonstrated a concomitant growth of 47%. 
 
A major part of this growth is due to an increased involvement of the country’s HNI segment as angel investors to start-ups. Indian tech ventures, owing to their potential and disruptive impact, have emerged as a highly viable asset class for investments. Several initiatives, such as ‘Start Up India, Stand Up India’, rolled out by central and state governments to foster entrepreneurship in the country have also made investments into upcoming ventures more attractive for potential investors. This has resulted in nearly 100 percent growth in the number of private investors and investment firms operational in the country over the past one year, thereby giving a massive boost to the Indian early-stage investment landscape. 
 
However, despite the growth witnessed by early-stage investments, several fast-growing start-ups often struggle to secure VC funding needed to unlock the next phase of their growth. This is mostly because start-ups don’t realise that greater amounts of risk capital involved makes VC funding a completely different ballgame from an angel or seed investment. Moreover, with the market renewing its focus on profitability and sustainable unit economics in lieu of hyper growth, traction and aggressive scale, most venture capital firms are now raising the bar of what it takes for start-ups to secure funds. This, in addition to the negligible help available to guide start-ups about VC investments, causes most ventures to find the transition tough. 
 This is what makes the rise in the number of structured investment platforms, such as <keyword id="3189966" type="UNKNOWN" weightage="20" keywordseo="Venture-Catalysts">Venture Catalysts</keyword>, in the country good news for the Indian entrepreneurial community. By focussing on innovation and technology, these platforms have been providing highly personalised, end-to-end solutions to various issues faced by emerging start-ups across the country. Be it investments, access to mentorship, or better networking and business opportunities, new-age ventures have been benefitting from the advent of such start-up enablers, growth facilitators and innovation platforms. 
 
The writing on the wall is clear: investors, be it at early-stage or VC, are increasingly averse to make heavy capital investments into overvalued ventures. In such a measured funding environment, start-ups which focus on sustainable growth, robust unit economics and profitability are the ones who will eventually emerge as winners with investors. 
 
(The article is authored by Dr Apoorv Ranjan Sharma, Co-Founder &amp; President, Venture Catalysts) 
 
(Image: Thinkstock)

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