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By Amal Vats, Sajith Pai

We very excited to release the 1st Indus Valley Annual Report to the world. Indus Valley is our moniker for India’s startup ecosystem. This issue takes stock of the rise and evolution of this ecosystem, reviews 2021, and finally looks at what to expect in the future.

In this article, we have tried to present a brief outline of the report. The full report stands at ~100 slides and can be found at http://bit.ly/IndusValley2022

The report has 3 sections

  • Understanding India
  • Understanding Indus Valley
  • State of the Valley 2021

Section 1: Understanding India

‘Understanding India’ tries to understand India

  • As a country of contradictions
  • Through data
  • Through ideas of India

Understanding India as a country of contradictions

Here’s an astonishing fact – India has the highest number of women pilots at 12.4% of total pilots (one in every eight pilots is a woman), but simultaneously also one of the lowest female labour participation rate!

Understanding India through data

While we all think of India as a billion-large population, much of the heavy lifting on consumption is by a slim class of consumers, about 10-12% of the population, though still sizeable at ~100m.

While we were hoping for this consuming class to expand steadily, COVID has led to the poor taking a massive hit from the economic disruptions.

As a consequence, Post-COVID, India1 has further pulled away from India2 and India3. While we are still calibrating these numbers, we expect the broad trends to still hold.

Understanding India through ideas of India

Here, we try to understand how English fluency, success in exams, and achieving exit to a country abroad can be taken as the three axes of advancement in India.

Section 2: Understanding Indus Valley

While startups are now commonly discussed, we tried to look at how Indus Valley has changed positions in the Indian business ecosystem, from the periphery to the mainstream.

Think of Indus Valley as the new IT sector in terms of jobs and value created. The IT sector created 4.5m direct jobs & 12m indirect jobs, ~30% of India’s white collar sector vs the estimated Indus Valley’s 3m / 6% of white collar jobs.

As a result of this changing landscape, we did a deep dive into a few sectors – eTailing, Fintech, and SaaS to definitively understand the impact of the evolution of Indus Valley.

The size of the eCommerce / eTailing sector has grown 2x in last 2 years, spurred by COVID tailwinds.

Much of the development in the eCommerce sector has been on the back of systematic improvements in delivery, costs and coverage by Indian e-logistics companies.

However, even after this highly expanded reach, a big part of the GMV rests on a narrow sliver of power users. Kunal Shah talked about it a few days ago – India’s top 5m users power 60% of online sales in India.

Now for SaaS. India’s success in global SaaS (Zoho, Freshworks, Postman etc) is well-known. Less known is our Bharat SaaS / SaaSTra (SaaS + TRAnsactions) model that Indus Valley to expand the relatively small size of the organised enterprise market in India.

We took a look at two Bharat SaaS players in our portfolio – Procol and Classplus. While Procol is layering on financing, Classplus helps their clients sell more to their customers through a marketplace.

And what explains this amazing rise of Indus Valley? We believe there are primarily 5 growth drivers underpinning its rise and impact.

We have talked about all these growth drivers in the full report. However, a special mention in this article has to go out to the exceptional state-of-the-art public digital infra layer that has been built over the last decade India has built out. Beyond Aadhar and UPI, we are seeing the base layer for health, lending, commerce emerge for private companies to build on.

State of the Valley 2021

We’ve talked about the growth drivers spurring Indus Valley’s growth. However, crucial in how it has shaped over the years, have been the following ‘Forcing Functions’:

We’ve talked about the growth drivers spurring Indus Valley’s growth. However, crucial in how it has shaped over the years, have been the following ‘Forcing Functions’.

The report also takes a closer look at EdTech – the hero sector of the Indus Valley in the last couple of years. COVID shaped much of its evolution in the last 2 years, and we’ve taken a look at it through 2 lenses – customers, and schools.

Here is how the 2 Indias reacted as COVID pushed education online.

As for schools – well, they managed. Barring a fifth of them.

A drop in income amongst India2 also meant a shift away from private to government schools.

We also covered a few trends, behaviours and playbooks in this section! A quick look!

1) Amazon makes more ad rev than Times of India newspaper!

2) India is a full stack nation.

3) Dubai is India’s fastest growing startup hub, creaming off our top crypto founders.

4) Crypto has the potential to leapfrog equity markets investing in India.

Finally, after taking a look at what happened and what is happening, we end by discussing what could happen by 2030.

This article is merely a shadow of the overall picture we’ve tried to show in our full report. We say ‘tried’, because we took a data and observation oriented approach. While the observations are ours, the time spent in writing this report made our conviction stronger on the fact that India is a data-starved nation. So. a special thanks in particular to all of the analysts, writers and researchers whose work we built on; in particular RedSeer and Bain & Co. for their data rich reports.

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