A very Happy New Year to you!
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Dear reader,
As we begin a new year today, expectations are heady and there’s definitely a tinge of a hangover after the $41.4 Bn funding boom in 2021. Startups set a new benchmark for how they can contribute to the bigger picture and also passed new milestones in 2021, which we have recapped all through December.
Of course, one cannot forget Covid-19 and the third wave now looming in many states in India. There’s some caution being thrown in the mix along with all the optimism because of the Omicron variant, even though it’s less dangerous than previously thought. Having faced the worst of two devastating waves in 2020 and 2021, startups are now ready to tackle whatever comes next as long as the status of vaccines doesn’t change.
But now’s also a great time to look ahead. So what are the broad strokes that will paint the picture of tech in 2022? Here’s how the team at Inc42 believes things will pan out in the year.
Tech IPOs In 2022 Will Be Different
Following 2021, at least a dozen tech startups will go for public listings later this year, likely starting with travel tech platform ixigo. These IPO contenders will have learnt plenty of lessons from the market and the experiences of Paytm, Zomato, Nykaa and other companies.
The primary takeaway is the need to simplify the business model for Indian investors and keep a central focus. The fact that there is just one profitable company among the 10 highest valued tech startups just doesn’t infuse confidence in the public markets.
The Indian stock market investor is still some ways from risking their money and believing in the long-term potential of startups like VCs. In fact, IPOs since November this year have seen some fatigue setting in among investors. So while 2022 will see more startups going public, they will take a far less aggressive approach.
Investors believe there will be a shakeup in 2022 and 2023, when we will see mass consolidation in enterprise tech and ecommerce sectors, after the heights of 2021. As India closes in on 150 unicorns in 2022 and 200 unicorns by 2025, the biggest startups will drive major acquisitions. Indian startups are expected to create a value of over $1 Tn by 2025, and employ over 3.25 Mn people.
Policy Hurdles For Tech Giants
With the massive transition towards apps, and digital services and products, and an active internet user base of over 833 Mn, India is now ready for the next stage of tech evolution. The widening of the funnel at the top has led to faster maturity among the active internet user base in cities and metros, who are paying for everything from hyperlocal delivery to ecommerce subscriptions.
But it’s not only Amazon India and Flipkart that are reaping the rewards. Both giants are facing massive protests and are currently subjects of probes by government agencies and amid this distraction a number of players have emerged including Reliance’s JioMart.
The upcoming ecommerce policy is likely to complicate things further. Unlike previous changes to ecommerce rules in 2018 and 2020, the new policy is expected to have a bigger scope and will also affect the likes of Zomato, Swiggy, BigBasket and others.
At the same time, the government is also preparing the final draft of the Personal Data Protection (PDP) bill, which is again likely to introduce many sweeping changes to the operations and models of ecommerce giants and other tech majors, similar to how GDPR changed things in Europe.
Another policy on the cards is the social security code for gig economy workers, which was supposed to go into effect from June 2021, but was deferred. Backed by startups such as Zomato, Swiggy, Ola, Dunzo and Urban Company, as well as mobility giants Ola, Rapido and Uber, India’s burgeoning gig economy is severely underserved despite supporting the livelihoods of nearly 15 Mn individuals.
This past year the sector has been in focus due to a number of protests from gig economy workers over inconsistent payouts, arbitrary suspensions and other issues. The code is expected to change this and bring in provident and gratuity schemes, and some measure of income security to gig workers, which is currently the biggest point of contention.
Healthtech Will Finally Be Taken Seriously
Sad as it is to think about it, India’s healthcare needed a push like the pandemic to transform itself. Announced in mid-2021, the Digital Health ID and the Digital Health Mission will be the flag bearers of this transition. The government is envisioning an Aadhaar-like digital ID platform for interoperability within the digital health ecosystem, similar to UPI and indeed Aadhaar.
The Digital Health ID will be the central piece of this healthcare transformation and act as the repository of all health-related information of an individual. It will have digital health records for tests, diseases, the doctors visited, prescriptions and diagnosis history.
Data generated through the DHM is expected to lead to better planning, budgeting and implementation for health programmes, and optimise costs for new projects. While there are plenty of privacy and ethical concerns around health data, there’s some hope that the upcoming PDP bill and data privacy legislation will help tackle some of these issues.
Crypto Ecosystem Will Gain Clarity
There was a lot of confusion about the Indian government potentially banning cryptocurrencies and crypto assets but after much talk, the government chose not to publish the draft crypto bill until it is introduced in the parliament at a later date. While the current draft has not been approved by the cabinet yet, in the past government officials have stated that crypto would not be legal tender in India.
The only official digital currency in the country will be the CBDC, which is being rolled out by the Reserve Bank Of India. Private cryptocurrencies pose immediate risks to customer protection, and anti-money laundering and anti-terrorism laws, according to the central bank.
At the same time, the Indian government has been accused of blindly looking to outlaw cryptos without having any data on the number of crypto investors, transactions or transaction sizes in India. Some startups are trying to move away from their crypto legacy. For instance, CoinSwitch Kuber has said that it is looking to become a wealth tech and investment platform.
The crypto industry would be hoping for a little more clarity come 2022, and there’s every possibility that investments might be regulated rather than being banned. And crypto will be key in the next big buzzword for the tech industry: metaverse.
Dawn Of 5G & Metaverse
Even as most of India is yet to experience 4G networks, telcos are all set to launch 5G networks in 2022. And at the same time, there’s talk about metaverse and virtual reality applications. All this seems a little too ambitious in the Indian context, but work has begun.
In 2022, we fully expect metaverse to be the buzzword that many companies try to add to their vocabulary. The rebranding of Facebook to Meta is a major signal of the tech industry moving towards the metaverse with many other companies also announcing plans for it.
While there are no standards yet to create a true interoperable metaverse, startups that enable these links will be in focus for investors and startups in 2022.
A key pillar of the metaverse is 5G. India has finally announced a timeline for its rollout in cities in 2022, but there’s still some work to be done for 5G to become a reality in the metros. Beyond consumer tech applications, 5G will transform how India looks at new-age sectors such as connected auto, digital healthcare, industrial IoT and more.
While the launch of 5G may be slightly delayed in India compared to the US or Europe, it is expected to bring in a revolution similar to the 4G revolution seen in 2016 and 2017. It’s amazing that in five years, 4G is already on its way out. Wonder what will be old news by the time 2022 ends.
Have a great new year!
Till we meet again,
Nikhil Subramaniam
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