The slowdown has occurred despite favorable conditions: The broader Indian economy is booming, and inflation is low. Global investors are on the hunt for the next Facebook ( , Tech30) or Amazon ( , Tech30).
With 1.3 billion citizens and a surplus of skilled IT workers, Indian startups proved irresistible to many investors. The success of homegrown e-commerce darlings Snapdeal and Flipkart, and ride-sharing app Ola, added credibility.
Yet there is a simple explanation for the reversal: Investors say India’s tech sector experienced a classic bubble, similar to the one that rocked Silicon Valley when it burst in 1999.
“I think India is going through its first bubble,” said Kashyap Deorah, a former Silicon Valley entrepreneur who now runs a startup in Delhi. “It is a bubble and it is normal.”
After a sustained funding frenzy, India’s tech startups are laying off employees and some have closed up shop altogether.