Mumbai: Consumer Internet and e-commerce companies have emerged as the most preferred industry segments across start-ups, according to the India Startup Outlook Report 2016, released by venture debt firm InnoVen Capital on Friday. The report also maps key trends in funding, hiring, opportunities and challenges for 2016 in the start-up ecosystem.
Delhi emerged as the most sought-after location for starting new ventures, followed by Bengaluru and Mumbai.
The report said 44% of companies backed by venture capital (VC) firms believe that access to equity is one of the greatest opportunities for the sector. In FY2016, more than 50% bootstrapped start-ups and 45% angel-funded start-ups expected to turn profitable, whereas only 22% VC-funded companies expected to turn profitable. The report said 130 companies are expected to raise $700 million in the next 12 months.
Also, 97% start-ups felt they were likely to hire new employees, where on an average, 28% would be on the technology front. The study shows that more than 5,000 jobs are expected to be created by about 130 start-ups in the next 12 months.
The report also highlights that there has been gender diversity in the workforce of start-ups. 41% of the VC-funded start-ups had women founders or CEO-level executives, while this number stood at 31% for boot-strapped ventures and at 29% for ventures with angel funding.
While the size of the domestic market, proximity to customers and suppliers are the top factors that make India’s business environment conducive to entrepreneurship, there have been challenges as well. Taxation, work ethics and regulation topped the list . 74% of bootstrapped and angel-funded companies were not aware of angel tax as per section 56 of the Income Tax Act.
More than 70% respondents believed the Indian education system was not preparing future employees with the skills their business needed. Overall, 65% of all companies felt current business and political conditions are better than last year and 76% expect next year to be even more favourable for start-ups.
The findings of the report are based on a survey conducted by InnoVen Capital, which captures responses from start-ups across industries and funding stages, to map the key trends, challenges and opportunities in the industry.