×
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Will M&As define 2022 startup ecosystem?

Undoubtedly, 2022 will be a watershed moment for the startup ecosystem as a whole, with the reverberations of the successes attained until now clearly felt
Last Updated 09 May 2022, 02:37 IST

No matter how uncertain things get with the pandemic and how vulnerable the ongoing geopolitical conflicts make global markets seem, one thing is certain: the coming year will be filled with plenty of opportunities, especially for the startup ecosystem in India.

One major trend indicating this forecast of mine is the fact that the Indian startup ecosystem has begun to consolidate even in the face of persisting market uncertainty. Collaboration in the startup community is at an all-time high as a record number of mergers and acquisitions – 100 to be exact – have been completed in the first quarter.

Moreover, these M&As are spread across a wide range of sectors, with seven of them- enterprise-tech, e-commerce, healthtech, fintech, edtech, consumer services and media & entertainment, accounting for nearly half of the deals.

Just to put it in perspective, this quarter’s M&A activity is more than three times the startup ecosystem’s three-year average and 10 per cent greater than the previous quarter.

Effects of M&As on startup ecosystem

A startup acquisition isn’t only about acquiring a company’s technology or clients; it’s also about developing synergies in which the merged entity has more value to offer than the two companies do separately.

What’s important to note, here, is that of all the M&S that have taken place this quarter, many have happened between start-ups, as opposed to M&As between start-ups and large enterprises. This makes the ecosystem more self-sufficient and increases its overall health. I say this because acquiring a business entails reinvesting the proceeds into the acquiree’s investors, giving these investors, who may have been hesitant to participate in startups to begin with, a chance to learn more about the financial prospects that the startup ecosystem can provide.

And the more savvy of these investors will reinvest their gains in the same endeavor, providing these M&As a better chance for long-term success because of the increased availability of funding.

It’s also crucial to keep in mind that every startup’s success benefits the entire ecosystem. For every firm that goes public on Nifty, ambitious entrepreneurs all across the country are inspired to strive even more to make their dreams come true. The ability to develop more comprehensive, inventive, and profitable products and services is also increased when two established partners, with their own expert knowledge and analytics, work together.

Summing up

That said, I’d like to make it clear that companies who are buying up potential competitors must give them the chance to fight before they do so. Going straight for the kill only to eliminate competition undermines innovation and erodes the benefits of a healthy competition in the ecosystem.

Undoubtedly, 2022 will be a watershed moment for the startup ecosystem as a whole, with the reverberations of the successes attained until now clearly felt. Regardless, if we want to keep moving forward, we have to be on the lookout for new dangers.

We run the risk of stagnating or, worse, becoming obsolete if the startup environment does not strive to evolve on a regular basis. I’d like to see more startup alliances as the rest of the year unfolds, as well as a willingness among businesses to collaborate sensibly and amiably.

Because the ecosystem is only reinforced when two parties work together toward a common objective without sabotaging their own potential or doing justice to their larger purpose.

(The writer is an angel investor and Founder of Collectcent)

ADVERTISEMENT
(Published 08 May 2022, 17:15 IST)

Follow us on

ADVERTISEMENT
ADVERTISEMENT