Indus Valley Annual Report 2023 by Blume Ventures
scroll to the bottom for a couple of funny memes
Blume Ventures - one of the most successful venture firms in the country (Slice, unacademy, Dunzo, Grey Orange, purplle) - has released the second edition of its annual report on the Indian startup ecosystem. Blume has dubbed the scattered but vibrant scene - the ‘Indus Valley.’ It does not carry overt geographical connotations because successful startups are increasingly found outside the BLR, NCR, Andheri-Powai belt.
The first edition can be found, quite amateurishly, if I may add, on this official drive link.
The latest can be found here.
Find screenshots, one-liners (from the deck), and personal commentary (in block quotes) below:
Highlights
Interpreting India - or as MICAns would like to call it Imagining India
India under-invests in Gross Fixed Capital Formation (growth chokepoint); individual consumption disproportionately drives GDP,
Super-sized services sector, >50% of GDP,
software exports has grown to ~26% of overall exports in 2021-22, versus 13.5% in 2004-05,
80% of IT-BPM sector in India is exports,
30% of all white collar jobs
Macro Indicators
We form a minority of the Indian internet
What this means is - a smaller-than-expected market - for ads, cards, cars, or anything really. A truth foreign venture capitals have bumped against time and again. The billion users promise is a lie. See the consumer stack below. Great visualisation
Factors driving India’s manufacturing
Government Incentives
India’s Low Labour Costs
Imminent Capex Recovery Cycle
Indian growth model - WEAGan model - ‘Weak’ East Asian Growth
Strong manufacturing exports & growth
Transport & trading friction reduction across India
Welfarism
Supersized services sector
Vibrant startup sector
Challenges to growth
a sharp drop in consumption outside the top 30 million HHs (truncated TAM)
tapering in frequent user base
rational optimism at best, about tapping Indian consumer base. see bone chilling charts below
e-commerce penetration set to plateau, where do we go next? Rural HHs —> Low ARPUs. Top-of-funnel is slowing as the impact of UPI-Demonetisation + Jio + COVID-led digital adoption is slowing. Party time is over.
VC in India as of date
India punches above its economic class in VC funding (3.4% of global GDP share, vs 4.8% VC funding share) versus China (18% of global GDP share vs 13.6% VC funding share)
Indian startup playbook set to become standard in other Asian emerging markets, as a Bangladesh has more in common with India than a USA
VC = disproportionate share of Indian capital market (exceed Mutual Funds inflow unlike US market)
Fintech
Growth led by unsecured, small-ticket loans from new-to-credit consumers,
Fintech cos don’t enjoy the high involvement that traditional banks enjoy, but frequent use increases opportunities to cross-sell,
Manufacturing & Labor
parallel manufacturing that leverages MSME manufacturers has given rise to ‘cloud factories’ and increased use of technology,
startups have also organized labor pool - 10% of all white collar jobs are in startups
gig work model also emerged from startups,
read my super-short summary of the NITI Aayog’s Gig Economy Report here
Money Talk
growth funding cools down
average seed round size has increased by 3x in the last 5 years
capital supply,
rise of pedigreed founders
2nd time founders,
top executives spinning out
Blume is also an early-stage investor
unicorn minting slows down (44 in 2021, 23 in 2022 H1, 0 in 2022 H2)
ESOP buybacks drops to half,
listing rates go down
retail investors missing out
What can startups learn from traditional cos
I am skipping the sector-wise analysis - Clean Tech (green energy, EVs), Media, e-commerce, SaaS as they are short and packed full of information. Page 90 onwards of the full-length report.
Indus Valley Playbook
I would especially recommend slides 116 onwards - broad stroke analysis of “types” of companies, what they do differently, who they target, and ending with 5 distinct India-unique models.
Bye! Here are the memes.
