Indian unicorns such as Flipkart, Snapdeal and Ola have spawned 700 start-ups

Livemint 04-Jan-2017

Since its inception, employees who have left Flipkart have founded 177 start-ups, though the mortality rate of these start-ups is high

Flipkart and India’s other unicorns are following the footsteps of the original glimmer twins of the Indian software services space, Infosys and Wipro, which fostered entrepreneurs who went on to found 867 and 685 companies to date.

India’s 12 unicorns, including MakeMyTrip and Naukri (both from an earlier generation), and Myntra (acquired by Flipkart), have created a mini-army of entrepreneurs that has gone on to found 700 companies, highlighting the role of these firms in shaping the start-up ecosystem.

According to data from start-up and venture capital tracker Tracxn, these firms are following the footsteps of the original glimmer twins of the Indian software services space, Infosys Ltd and Wipro Ltd, which fostered entrepreneurs who went on to found 867 and 685 companies to date.

Notable ventures formed by former employees of Flipkart, Infosys and Wipro include Urban Ladder, Zopper, Roadrunnr, Housejoy, CureFit, Udaan and Mindtree Ltd.

Since its inception, some of Flipkart’s employees have left the company to found 177 start-ups. Of these, 168 have emerged since 2010. That isn’t surprising, given the start-up wave that has surged through India over the past half-a-decade, powered by venture capital firms that put down roots around 2006-07. In Infosys’s case, the corresponding number of start-ups is 768; in Wipro’s, 574.

Not all these firms last.

The mortality rate of these start-ups is high, highlighting the broader challenges facing the Indian start-up ecosystem, where only a handful manage to scale up into sustainable ventures.

Then, there’s the lack of exits in India.

“Exits are really far and few between and hard to come by,” says a former Flipkart executive and founder of a start-up, pointing out that India is no Silicon Valley, which has hungry acquirers such as Google Inc. and Apple Inc. And large Indian conglomerates do not buy into a lot of start-ups, added this person on condition of anonymity.

“I think it’s too early to say that most of these ventures have failed. You can’t create an Infosys or Wipro overnight. Don’t forget that even Infosys took almost two decades before it really took off. And for software product start-ups, the cycles are usually even longer. They need to be given more time,” said Mohandas Pai, chairman of Manipal Global Education Services and former chief financial officer at Infosys.

Capital is a problem for some. “Less than 10% of start-ups manage to convince an institutional investor to invest capital in their companies. Less than 3% manage to reach Series B stage. So building and scaling business is exceptionally hard. So we can continue to see a fair mix of successes and failures, and potentially success after multiple failed attempts,” said Abhishek Goyal, co-founder at Tracxn.

Still, he added, it’s important to understand the important role played by companies such as Infosys and Flipkart. In some cases, this translates into the right kind of infrastructure and environment.

“The culture and workplace (of Infosys) were the benchmarks for me when I was setting up my own entity,” said Rajiv Srivatsa, co-founder and chief operating officer at Urban Ladder, who worked at Infosys for two years till 2002. “The biggest encouragement for me was to have a personal website on the Infosys intranet. That was the start of my entrepreneurial journey in a small way.”

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