2018 : Year End Review and 2019 Trends
This article was written while working for T-Hub
We are now at the end of 2018, and it has been an extraordinary year for technology entrepreneurs, and of course, the Indian ecosystem has much to rejoice about. Sure, there were some lows, but the highs outweighed them as the startups made some big moves. Whether it be cutting-edge developments in Artificial Intelligence and IoT, or bureaucratic and industrial standards for data privacy and security, 2018 had it all. Plenty of technologies that were primarily 'buzzwords' in 2017, matured in 2018, with greater stability and broader appeal.
2018 was a tremendous year for the entrepreneurial community in the Indian ecosystem as well, where a final boost was observed for funding in late-stage ventures (Eg: Berkshire Hathaway's stake in PayTM). The shifting pattern of funding clearly illustrated a move towards India becoming a more mature market. Another noteworthy point was the slowdown in early-stage venture funding, which is in line with our earlier observations and the recent move on the Angel Tax is something to dwell upon. Despite the minute hiccups, deep-tech startups continued to raise eyebrows and attract capital even in early stage and initial seed rounds.
With the Indian e-commerce market heating up, two of the world's largest brands in e-commerce - Amazon and Walmart have made India their battlefield in 2018. Amazon India was valued at USD 16 billion by CITI Research in 2018, while Flipkart, the homegrown unicorn and most significant player in the Indian e-commerce section was annexed by Walmart in a deal where a controlling 77% stake was acquired in the local seller for USD 16 billion. As per latest figures, both Amazon India and Walmart-owned Flipkart are poised equally with 30% market share a-piece, and the coming few years can be crucial as these behemoths battle out for market dominance in a war on prices, where the consumer is a sure-shot winner. Zomato has long maintained a foreign presence, though 2018 saw Zomato expand to a total of 24 countries. Wittyfeed, an Indore based viral media startup also established itself offshores with a presence in North America, UK, Australia, Argentina amongst others, while Practo made strides into the Brazilian, Indonesian, Philippine and Singaporean market.
2018 also saw many Indian startups look out of the local markets for potential customers. These include the hotel-aggregator OYO Rooms which recently expanded its services from Nepal and Malaysia to contain China. The current model is looking to cash upon Indian tourists that visit China, but the company has larger dreams for the market. Ola Cabs also expanded globally in January 2018 when it entered the crowded Australian market, by year-end Ola has a sizable presence in Australia, New Zealand and the United Kingdom.
In the following sections, we'll take a closer look at the most happening technologies of the year 2018, and elaborate upon the possible trends of 2019.
Fig : Global startup funding, 2008 - 2018 - Source: Tracxn Technologies
Artificial Intelligence took almost every sector by storm in 2018, and if we attempt to break down the causes for AI's meteoric rise, it comes down to rapid advancements in machine learning algorithms and the development GPUs that are pushing computational boundaries and making faster and cheaper processing available to developers and users alike. The rate of advancement has beaten all expectations and has, quite frankly, been phenomenal. Experts had predicted that the artificial agents will beat humans in the 'Go' game by 2027, though it ended up doing that in 2017 itself, an entire decade earlier than anticipated. In an experiment in self-monitored learning, Google's AlphaGo trained for 40 days and ended up becoming the best Go player in our history.
2018 witnessed further creation of developed, self-taught artificial intelligence with breakthroughs in decision-making, data analysis, recognition of objects, emotions, scientific models natural language processing among others. Besides performance improvements, the accessibility of technology was also made better, faster, and cheaper for users. Though with developments, concerns have also been raised throughout 2018 about the potential threat of advanced Artificial Intelligence by some of the most visionary leaders of the technology world, including late Dr Stephen Hawking, tech mogul Elon Musk among others.
Fig : Funding for AI-based Ventures - Globally - Source: Tracxn Technologies
For example, in recent times Google Brain developed algorithms based on self-learning and created new encryption methodologies which were unlike any seen before. This was done with an aim to protect data from other neural networks. In a similar incident, Facebook had to shut down two artificial agents that created their own secret language, without any instructions or human intervention, and used complex strategies to communicate. One thing that appears is that Artificial Intelligence is going to be fundamentally different from Human Intelligence and careful research is necessary to understand the societal impacts of the technology at hand.
Blockchain was still a relatively nascent technology when it grabbed headlines in 2017 owing to the unprecedented media coverage over the price bubble that formed around Bitcoin and other cryptocurrencies that are based on blockchain technology. Bitcoin reached an all-time high exchange rate of USD 19,783.06 in late 2017, and the resulting public frenzy grabbing a lot of eyeballs. All this brought blockchain to the limelight, and 2018 witnessed the testing and gradual adaptation of blockchain in various different domains, from medical records to mainstream financial transactions.
Potential applications of blockchain include supply chain management, real estate listings, robust financial services, better tracking of patient records in the healthcare system among others. Despite its promises, blockchain has its fair share of setbacks with huge computational and architectural requirements which have held back market leaders from adopting blockchain on a broader scale. This also witnessed pilot studies and research into application and adoption of the technology. The technology was also a favourite for entrepreneurs and venture capitalists with over USD 3.9 billion being invested in Blockchain throughout 2018.
Fig : Lower Early Stage Funding - Source: Tracxn Technologies
2018 was also a year of self-introspection for the internet, and the technology industry at large. Major technology companies that have a business model where user-data is used for commercial purposes (like selling targeted ads) were put too close scrutiny by some different nations. The founder of Facebook, Mark Zuckerberg had to appear for a widely publicised congressional hearing in early April of this year for the alleged abuse of user data by analytics firm Cambridge Analytica for campaigning in the US presidential elections. Search engine giant Google was similarly scrutinised in Europe for its violation of market dominance in the mobile software segment and penalised billions of dollars. The revelation brought user privacy concerns to the forefront, and 2018 witnessed hotly contested debates on the subject in public and private forums.
Different sovereign states passed resolutions to govern user data privacy, most notably the European Union adopted the GDPR - (General Data Protection Regulation) which raised the standard of data privacy in Europe and catalysed similar resolutions in other countries and regions as well. All in all, with the ubiquitous nature of technology today, and the obsession of technology giants with data collection, utilisation and eventual monetisation, 2018 was a mature step in the right direction that brought data privacy concerns to the streets. Hopefully, we head into a safer world in 2019 where privacy is a fundamental right like any other.
2018 was an excellent year for the Indian Fintech industry with startups of the likes of Paytm receiving funding from Wall Street legend Warren Buffett's investment firm Berkshire Hathaway. A cumulative of USD 2 billion was raised by Indian financial startups in 2018, with Sequoia Capital and Action Ventures emerging as the lead investors. Policy Bazaar, Pine Labs and Phone Pe were among some of the recipients of the funding boost in fintech.
Innovations centred around mobile payment, proximity-based payment systems, insurance tech, crowdfunding and banking technology. Several payment applications based on the government of India's Unified Payments Interface (UPI) continued strong growth for the sector in 2018, maintaining sustainable growth figures in the post-demonetisation era. This was further propelled by the launch of UPI 2.0 in August 2018 with the integration of new features like IPO subscription, block features on digital payment and overdraft facility. The government has also revamped its guidelines for active agents in Prepaid Payment Instruments (PPIs). The new guidelines provide for interoperability of mobile wallets (not mandated), EMV chip and PIN compliant cards among others. The modifications aim to transform the fintech landscape of India, making it more transparent and end-user-friendly, while Fintech startups face the imminent need to modify their business models accordingly.
In September 2018, the Supreme Court passed a landmark judgement on the validity and usage guidelines for Aadhar and associated biometric data. In line with government guidelines, Fintech startups that operate in lending and e-wallet businesses require KYC (know your customer) authentication of users. This was done using end-users Aadhar data, but the new guidelines dictate that other forms of authentication need to be looked at, while Aadhar-based authentication will now require the consent of end users, with data storage period cut-down to 6 months from an earlier 5 years as well. The changes pose logistic and legal hurdles for fintech startups, and they'll have to rework their business models which were earlier built around Aadhar authentication.
The dynamic nature of the modern-day banking system with ever-increasing sophistication poses significant hurdles for fintech startups that need to ensure legal compliance and logistic viability. This dilemma has paved the way for Regulatory Sandboxes in the fintech space. A Regulatory Sandbox is essentially a virtual environment where testers and drivers of innovation can run products in real-time and add appropriate safeguards to ensure regulatory compliance. This emerging model of pilot testing allows for more stable public releases and better end-user experience.
Globally as well, mobile payments have fundamentally changed the financial markets. Chinese mobile payment volumes presently exceed USD 5 trillion per annum in transfers. 2018, also looked at biometrics like fingerprints, facial recognition and voice identification to make purchases faster and checking out from shops smoother. Financial market watchers now believe that banking institutions may earn in the vicinity of USD 1 billion per year from blockchain-based cryptocurrencies by 2020. A noteworthy point here is the meteoric rise of Stable Coins, crypto-based currencies that are pegged to other currencies, other cryptocurrencies or prices of commodities. Unlike cryptocurrencies, stable coins are not as volatile with their price relatively stable, hence being a more attractive investment destination for potential investors after the fall of cryptocurrencies in 2018.
In 2018, the European Union adopted a revised version of the Payment Services Directive (PSD2) with an aim to level the European banking ecosystem and make banking smoother for consumers. The issued directives included consent-based sharing of financial institution data of consumers with third parties, (e.g. Fintech based startups) which would open up a broad avenue for startups in the domain to grow and capitalise upon. This also eliminates the possibility of a monopoly by large banking institutions. We might just be on the verge of a revolution in the financial system.
Over USD 510 million was invested in Indian health-tech startups in 2018, a record-high for investments in the sector. Startups like Pharma Easy and CureFit raised funds in the vicinity of USD 115 million and USD 100 million respectively. Another Bangalore based startup SigTuple, which takes an AI-driven approach to healthcare, raised USD 19 million in a significant boost to deep tech startups in healthcare. Around 80 health-tech startups successfully raised funds in 2018 as per data from Tracxn Technologies. The sector has seen boosted investor optimism, with various contributing factors, including institutional support, government schemes and global cues. The government's launch of the Ayushman Bharat Yojna - (PMJAY) further boosted morale in the industry and provided much-needed insurance cover and awareness to all rungs of the society.
Looking beyond India, globally as well, 2018 has been a record-setting year for HealthTech. With half-yearly reports listing USD 10.6 billion as VC investment in the sectors, year-end projections estimated that 2018 could very well have been the best one yet for the health tech industry with money pouring in from various sources, both public and private. The optimism about the sector was also boosted by an unprecedented BioTech boom at Wall Street. Several companies of the industry had successful IPOs, with over USD 460 million being raked in by 8 biotech startups in June alone. Revolutionary new products and diagnostic tools also boosted consumer and investor interest in the sector, for example, the introduction of ECG integrated Apple Watch has been much talked about, with the company emerging as an unrivalled market leader in the segment.
Fig : A surge in late stage funding - Source: Tracxn Technologies
While 2018 was definitely a happening year for technology, 2019 is knocking at our doors with its own promises. Besides strides in the development of new groundbreaking technology, 2019 will also be about innovative applications of existing tech. Whether it be an integration of Artificial Intelligence with IoT or the organisation of our interactions with the technology itself. A growing sentiment has also been observed for B2B business models in the global market, and India is no exception.
With the diversion of high portions of VC funding to deep-tech based ventures, scalability has emerged as the most prominent bottleneck for the growth of such startups. Hence, a large number of such investments are opting for a B2B model, which has seen tremendous growth in the Indian market, owing to a lack of businesses catering to business needs. Reports from various sources confirm this trend, with a TechinAsia illustrating the rising share of B2B startups, from 34% in 2016 to 47% in 2017 and then above the 50% mark in 2018, regarding new startups registered.
A noteworthy point has been the lack of large-scale edtech ventures in the Indian ecosystem, contrary to the global optimism in the sector where investment has reached over USD 6 billion. Though there are breakout startups in the industry, most notably Embibe and Byju's, with the latter being touted as one of the most noticeable startups to come out of the Indian ecosystem in the last 5 years, having already attracted investments of USD 880 million at a valuation of USD 3.6 billion. Embibe also recently raised USD 180 million from Reliance Industries Limited (RIL), marking the behemoth's mark into Indian edtech. Going forward into 2019, edtech India could see more optimism regarding funding and ventures, as more players attempt to gain market share in one of the world's most lucrative education markets.
2019 will start a significant shift in the tools that are available for using AI. Infrastructure, framework and platform tools used to implement AI would start focussing on technologists and the developer community rather than focussing on data scientists. With this expansion of accessibility, developers would be able to directly integrate AI-based solutions into their applications without external assistance. Presently, we are using 1% of data generated by us efficiently. Experts believe that the number could go up to 3-4% by the end of 2020, which is a huge increase considering that 90% of all the world's data was generated last year.
Today, there are plenty of companies like Microsoft, SAP, SAS and Salesforce which are displaying leadership in the promotion of data-based solutions and their application into meaningful business analytics. There is undoubtedly still a lot to be achieved by data-driven organisations to fully realise the power of data they are collecting and their optimal usage, developments in 2019 will hopefully be a step in the right direction.
Augmented Reality (AR) and Virtual Reality (VR) have been around for quite some time now, although their applications have primarily been restricted. In simple terms, systems which combine real-time vision, sound, haptics and possibly even other senses, enable people to fully immerse themselves in real-time simulations. Immersive technologies are now actively being applied across a broad spectrum of industries, ranging from art and entertainment to commerce, education, medical rehabilitation and the military.
For example, VirtualShip is a simulation software which is used in the US Navy to train recruits. Applications include training pilots, doctors, teachers, security personnel etc., and with the launch of Apple AR Kit, as well as steps were taken by Google (Launch of Google Playground) and Facebook to integrate AR and VR in their mobile platform and application respectively, our smartphones might very well be AR integrated by year-end.
Research by Monster.com revealed that opportunities for job-seekers with experience in immersive technologies are up by 37%, while there is an acute shortage in supply. Estimates state that by 2022, over 70% of enterprises would have conducted experiments with AR/VR technologies and over 25% of them would have deployed these to production. 2019 certainly holds promise in this domain.
Fig : Funding in India - all stages - Source: Tracxn Technologies
2019 would bring with itself a wave of automation, in manufacturing, machine learning algorithms and even on our roads. Robots in manufacturing are nothing new, they have been around since the 1960s. In the modern world, significant development is the scale of automation and the resulting transformation it can bring to a wide range of industries. Automation is not limited to factories today, presently, services such as the legal and finance consultancy are facing disruptions by automation, and there is an immense potential for the technology to scale. McKinsey reported that over 60% of all occupations can be partially automated, with 5% being fully automatable.
2019 is also being touted as the year of self-driving cars. Waymo, the Google-owned subsidiary which is credited for being the technological leader in automated vehicles, already has over 10 million miles of actual road experience and over a billion miles of simulation training. Waymo is planning on launching a commercial version of it's Phoenix, Arizona test program at in multiple cities early towards 2019. If Waymo succeeds in meeting its deadlines, the Google-owned subsidiary will have the largest fleet of self-driving cars in operation next year. General Motor, Tesla and Uber are all building rival technologies, but one fact that is crystal clear is that automation will be a crucial focus of technological change, with potentially far-reaching economic and social consequences.
The modern IoT systems require fast server response times. Edge computing is an architectural topology wherein data processing, content collection and delivery are handled close to the sources of data, with the underlying assumption that keeping traffic local reduces latency. Edge Computing addresses challenges like high WAN costs and unacceptable levels of latency. 2019 will see a boost in Edge Computing topologies with IoT set to become a significant driver for growth in a cross-industry spectrum. Estimates state that by 2022, the global edge computing market is will reach USD 6.72 billion.
As per reports from Gartner, a leading research and advisory firm, there are expectations for a sustained increase in the embedding of the sensor, storage, computation and AI engine in edge devices by 2028. The general notion states that the industry will proceed towards the edge of computation in a variety of endpoint devices, whether large or small, personal or enterprise. This would significantly improve the performance of IoT based devices and traditional networking infrastructure alike by minimising latency in response time.
After the launch of 4G - LTE (Long Term Evolution) at Oslo in late 2009, the high-speed mobile broadband technology has revolutionised data consumption all over the world. Possibly, the most dramatic of these results have been seen in India, where the December 2015 launch of Jio brought with itself a telecommunication revolution took the country by storm and increased data consumption by 15 times in 3 years.
As a direct impact of this immense increase in consumption, India has emerged as an extremely lucrative high growth market to video content and entertainment ventures like Netflix and Amazon Prime. Although presently, Hotstart holds an overwhelming majority in the Indian market with a market share of 70%, both Netflix and Amazon Prime are fringe competitors, lagging behind the likes of SonyLIV and Voot. Though this may change in the immediate future with Netflix joining hands with Tata Sky, one of India's largest DTH providers for content delivery on Tata Sky's platform. Following is a quantification of Indian streaming market's potential growth.
2019 brings with itself another revolution - 5G telecommunication. A consortium of companies like Qualcomm, Intel, Nokia, Ericsson, Samsung and Huawei have already started testing for deployment. 2018 has been the year when groundwork has been laid for 5G rollout in several developed markets, while it is in 2019 only, that we are going to actually see 5G being launched and made commercially available. Though it might still be at least a couple of years before the service is made available to consumers in the Indian market. While Apple users will have to wait till 2020 too, with the company stating that it won't be making 5G devices in 2019.
We live in exciting times, a world where each new day brings with it the optimism for a better tomorrow, and we have, in large parts, technology to thank for this positive outlook. With revolutions in Data, AI, Automation, Immersive Tech and other core areas knocking at our doors, only time will tell the real significance of our current innovations and modern advancements.
2018 : Year End Review and 2019 Trends