The myth that too much money is chasing too few entrepreneurs in India

There is a self perpetuating myth in the Indian startup ecosystem that too much money is chasing too few opportunities. There are variations of this myth including there are “too few quality entrepreneurs” and “too few good deals to be had”.

I admit, even I was convinced about this myth until recently, so I decided to do some digging.

Since 2007 there’s been between $3 Billion and $5 Billion  (till 2011) in seed, early and growth stage (I know its a large band, but there’s really no other dependable source. (source, and another source). The number of  “deals” in these stages for the 4 years is about 400. This money does not include friends & family rounds.

The total money in all stages (PIPE, PE, included) is 4-5 times that number.

IT and ITES has been growing part of the early and growth stage, currently at about 16% – 23% of the early stage.

The total number of companies that are being started annually according to the MCA numbers is 20,000 of which technology (its a broader term than IT and ITES) is about 2800 (source). There’s a 10-20% variance unfortunately, but I am confident I am in the range.

Lets say 2500 per year, so 4 years totals 10,000 companies.

In India over the last 4 years out of 10,000 companies, about 500 got funded by an institutional investor, or about 4%.

Yes at the high level that seems high. Very high.

Especially given that US has seen between 600 to 1500 companies get funded EACH year in IT and ITES from 2007 to 2011. Out of a total of of 3800+ companies each year in IT or ITES. (source).

Lets say 3500 per year, so 4 years totals 14,000 companies.

In the last 4 years, out of 14,000 companies, 3000 got funded by an institutional investor or about 20%.

Lets assume the numbers are inflated 50% (I doubt it, but hey we are doing some mental mas*r*b*tion anyway. Still 10% or twice the % of companies get funded in US than India.

Lets say that’s typical of India – same numbers probably hold true for IIT and also Harvard University. Its a lot more competitive in India.

I can attribute this to the fact that markets in India are not a large or mature. Which is why I suggest Indian entrepreneurs should disrupt US markets.

The second myth is that Indian entrepreneurs are not of high quality OR that Indian entrepreneurs in India are not of high quality since when they go abroad they do very well. I plan to dispel this with more data in my next post.

Dont buy the myth. Either as an entrepreneur or as an investor.

Above all, be a force of good.

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One thought on “The myth that too much money is chasing too few entrepreneurs in India”

  1. Being an Indian entrepreneur myself, having received foreign investment, building a product for the US market and working out of India initially, I can say from my personal experience that everything you have written is spot on.

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