Last year saw a sharp dip in startup funding in India. According to startup tracker Tracxn, in 2016 investments halved to $3.9 billion from $7.5 billion in 2015. Devaluations, shutdowns and layoffs plagued the sector, and profitability and business model sustainability became the new buzzwords in place of growth and market share. None of this, however, dampened the enthusiasm at the Wharton India Startup Competition (WISC) hosted by the 21st Wharton India Economic Forum (WIEF) in Mumbai earlier this month.

India

India

With a goal of celebrating and promoting entrepreneurship in the country, this year’s WISC received more than 500 applications from startups focused on a wide range of areas from sanitation to artificial intelligence. “What’s been most impressive about the applications is that they are not just ideas on pitch decks. Most entrepreneurs have demonstrated traction to validate their hypotheses and have a well thought out execution plan,” said Ayush Tapuriah, a Wharton student and director of WISC. He added that a majority of participants “have already closed in on their pre-seeded and seeded funding arrangements.” Talking about the 10 finalists, Bharati Jacob, jury member and cofounder/managing partner of early stage venture capital fund Seedfund Advisors, said: “I was very impressed with the quality of ideas, quality of pitches and the quality of entrepreneurs. The majority of them were different and not simply copy-paste models.”

The winner of the $12,000 Judges’ Choice award was Chennai-based Detect Technologies. An Internet of Things (IoT) startup incubated by the India Institute of Technology (IIT) Madras, Detect Technologies was formally incorporated in February 2016. Its area of focus is to enhance productivity in industries through artificial intelligence and non-destructive evaluation. The 35-member Detect Technologies team has developed GUMPS — guided ultrasonic monitoring of pipe systems — for industries such as oil and gas, chemicals and fertilizers. This product has been built indigenously at IIT Madras after more than five years of research and development and enables continuous monitoring of pipes at operating temperatures. Daniel Raj David, cofounder and CEO of Detect Technologies, said: “Our solution can detect any corrosion in real time and, in turn, ensure high levels of safety and prevent loss of life and productivity and environmental damage.”

So far, the startup has received around Rs10 lakh ($15,000) from IIT Chennai. It is presently in talks for raising funds of around Rs400 lakh. Detect Technologies is currently piloting its solution with a few large oil and refinery firms in the country and expects to be operational by March. David believes that a high entry barrier product and a large, universal market are two key differentiators for his startup.

The slowdown in startup funding is “a minor course correction and should be welcomed as a period of introspection.” –Sumit Mody

According to Seedfund’s Jacob, Detect Technologies stood out and emerged the winner because “its approach is very innovative and it has strong commercial benefits for users in terms of savings costs, improving productivity and ensuring safety. We have not seen something like this before.”

The $6000 People’s Choice award went to HelpUsGreen, a Kanpur-based social enterprise that recycles waste flowers from temples into patented products like organic fertilizer and incense sticks. Traditionally, these flowers are dumped into the Ganges River. The startup’s aim is to help make the Ganges pollution free and at the same time provide livelihood to rural families. HelpUsGreen and Detect Technologies also won WISC’s award of pro-bono legal advice from Khaitan & Co. All the 10 finalists were chosen for mentoring by Innoven Capital.

“Being a winner [of the WISC] is humbling and inspiring. To see that a group of esteemed judges shares our view [of] the disruptive nature of what we are building is quite rewarding,” said David.

The Power of Disruption

In fact, the ability to disrupt was emphasized in the forum’s opening keynote address by Kunal Shah, founder and chairman of FreeCharge, India’s leading payment app and mobile commerce firm. Entrepreneurs, he said, must work on solutions that make the previous way of working irrelevant. Citing the examples of railway ticketing in India, Uber and Truecaller, Shah said: “Everything is ripe for disruption as long as you have a ‘delta 4’ solution. Once a delta 4 solution is created, customers do not go back to the previous inefficient system.”

During a panel moderated by Kartik Hosanagar, Wharton professor of operations, information and decisions, participants discussed various issues ranging from the investment scenario in India to how Indian companies can stay relevant in the face of global competition.

Pointing to the ratio of GDP versus investments, Hosanagar noted that while the U.S. GDP is around nine times that of India, the capital that went into the venture capital space in the U.S. in 2015 was six times compared to India. Responding to Hosanagar’s question on whether India is overfunded, Rehan Yar Khan, founder of Orios Venture Partners, said he believed that the gap was because of “India’s faster pace of growth as compared to the U.S. and also because of the large number of white spaces here.” Khan added that “fundamentals like the rate of growth of consumers, the growing number of online users and increase in disposal income are all in place in India.”

Talking about profitability among Indian startups, Nipun Mehra, vice president of Sequoia Capital, said: “Competitive dynamics are forcing companies to spend more on customer acquisition. Firms are looking at the end-state versus the current state, and based on certain indicators they are willing to take an educated guess that there is light at the end of the tunnel.” Sumeet Thandani, founder of Presto, added that since India does not have any firewalls unlike China, Indian entrepreneurs have no option but to “up their game, focus more on quality and constantly innovate” in order to compete successfully with global players like Amazon and Uber who are investing heavily in India. Other important steps include developing domestic capital and focusing on localization, panelists added.

The panelists were unanimous that despite the slowdown in funding in 2016, there has been no bubble burst. “It’s a minor course correction and should be welcomed as a period of introspection,” said Sumit Mody, general partner at Health Passion Fund. Added C. Venkat Nageswar, deputy managing director-global markets at the State Bank of India: “2016 was a period of consolidation. We see tremendous opportunity in the coming years.”

The Need to Differentiate

The confidence in India’s growth story was reiterated at the Speaker’s Series on the concluding day of the two-day WIEF.

Delivering the inaugural speech, Adi Godrej, chairman of Godrej Group, noted that for the past two and a half years, India has had a “reforms- oriented and free enterprise-oriented government” and “several steps towards reforms and growth have been initiated.” Speaking strongly in favor of the recent demonetization scheme in which Rs500 ($7.40) and Rs1,000 notes were rendered as invalid currency, Godrej said that “while it may take some time to take effect,” he believes that “in the long term demonetization will have a very strong positive impact on India’s GDP.” The biggest reform, he added, was the goods and services tax (GST) which is slated to be introduced later this year. The objective of GST

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