Indian startups have been on a tear in the past few years. During the past year, we have been posting accounts of dynamic startups and incubators (link) . But, here is a bit of sobering news for entrepreneurs, founders and startups: There are reports that the number of startups launched in India has dropped this year.

The overheated startup ecosystem in India is showing signs of cooling for the second year in a row.

The downward trend seems to be much more visible in the internet and e-Commerce space. According to an article in Livemint (link)

… there are few new e-commerce start-ups and even fewer that investors believe are appealing enough. So far this year, no new e-commerce start-ups have received funding, according to investors.

The consumer internet and e-commerce market in India exploded in 2014 but in less than three years many entrepreneurs have come to believe that e-commerce is an unattractive sector for a start-up.

The high failure rates of food and grocery delivery start-ups, the implosion of online marketplace Snapdeal (Jasper Infotech Pvt. Ltd) and the growing dominance of Flipkart Ltd and Amazon.com Inc.’s local arm, turned investors off new e-commerce start-ups for almost all of 2016. Entrepreneurs, in turn, seeing that investors had lost interest in e-commerce, moved on to other sectors.

According to data from a startup tracker, Tracxn:

• The number of technology start-ups launched in the first nine months of 2017 has slumped to 800 from more than 6,000 in all of last year.
• Startups have raised roughly $8 billion in the first nine months of the year, compared with $4.6 billion in all of 2016.
• While the amount of funding has increased, the volume of deals has dropped from over 1,000 in 2016 to 700 this year.
• Two mega funding rounds have increased the total funding raised. The deals include $3 billion equity infusion into Flipkart Ltd by SoftBank Group Corp., Tencent Holdings Ltd and others, and the $1.4 billion raised by Paytm (One97 Communications Ltd) from SoftBank.

A recent livemint article (link) quotes experts to gather inputs on the trends:  “The new promising spaces like SaaS and fin-tech in start-ups have higher filters for user adoption, revenue generation and funding compared to hyperlocal and delivery start-ups (that were in vogue in 2014 and 2015),” said Karthik Reddy, co-founder and managing partner, Blume Ventures, an early-stage investor. “The investment outlook overall this year is probably even more muted than last year,” said Pankaj Makkar, managing director, Bertelsmann India Investments, a firm that invests both in start-ups and venture capital firms.

According to our editor, Mohan, all this perhaps has a positive twist “Only the really-good ideas are being launched, perhaps after proper due diligence. Therefore, the rate of failure of startups may come down”