In a recent startup conclave organized by Money Control in Bengaluru, the CEO of Zerodha, Nithin Kamath, shed light on the actual size of India’s startup market. Contrary to the widespread perception, Kamath suggested that the total addressable market for startups in India might only amount to around 10 crore (100 million). His statements urged both investors and founders to reconsider their expectations and acknowledge the true potential of the Indian market.
A Subset of 100 Million: Understanding the Monetizable Market Size
During the conclave, Kamath emphasized that India, being a developing country evolving at a rapid pace, should be viewed as a subset of 100 million. He highlighted the importance of recognizing the difference between the overall market size and the monetizable market size. According to Kamath, the actual monetizable market size is a fraction of the total population, underscoring the need for a realistic assessment of market potential.
Revenue vs. Margins: Identifying the Fundamental Problem
Sameer Nigam, the CEO of PhonePe, echoed Kamath’s sentiments at the event. He emphasized that projections focused solely on revenue often overlook the significance of profit margins. Nigam expressed concerns about the fear of missing out (FOMO) model, which leads to erosion of margins due to the presence of numerous market players. While PhonePe boasts an active user base of 300 million, Nigam estimated that only around 100 million users would potentially engage in purchasing their financial services products. He stressed the importance of considering margins alongside revenues for a comprehensive understanding of market dynamics.
The Lending Space: Early Success in a Robust Economy
Nigam further commented on the strong initial results witnessed in the lending space. He acknowledged that PhonePe is capitalizing on the wave of a robust and rapidly growing economy. Nigam expressed optimism about PhonePe’s potential to reach 500 million users by Diwali this year, showcasing their commitment to expanding their user base and offerings.
Funding Winter and Decreased Startup Activity
In a surprising turn of events, the first half of 2023 witnessed a significant decline in startup funding in India, with a plunge of over 70 percent compared to the previous year. This decline suggests that the funding winter is likely to persist, especially as several top unicorns face the challenges of an economic downturn. Market intelligence firm Tracxn reported that Indian startups raised only $5.48 billion in the January-June period this year, compared to the $19.5 billion raised in the same period last year. The number of deal rounds also experienced a substantial drop, with only 546 rounds recorded in the first half of this year, as opposed to 1,570 rounds in the corresponding period last year.
Conclusion
The insights shared by Nithin Kamath and Sameer Nigam during the startup conclave shed light on the realistic size and potential of India’s startup market. Their remarks emphasize the importance of recalibrating expectations and taking into account the monetizable market size, revenue margins, and the challenges faced by the startup ecosystem. As India’s startup landscape continues to evolve, it is crucial for stakeholders to gain a comprehensive understanding of the market dynamics and adapt their strategies accordingly to thrive in the ever-changing entrepreneurial ecosystem.
Source: Zee India
