India ranks among the top five countries in the world in terms of the number of startups founded. India has made tremendous growth towards the creation of innovative startups and has emerged as the 3rd fastest growing hub for technology startups in the world.
Introduction of initiatives like GST and Make In India have given a momentum to the startup economy. Indian Start-ups are moving on the upper line and are expected to increase in size and number in the coming year. It is measured that India houses around 4,200 start-ups, creating more than 85,000 employment opportunities. With over $5 billion worth of investment in 2015 and three to four startups emerging every day, it is projected that the number of startups in India will increase to more than 11,500 by 2020, with job creation from these entrepreneurs reaching 250-300k. The number of Investors has also risen multi-fold in the past few years.
Indian startups have undergone many developments in the second quarter of 2017. From being selected in the Google’s accelerator program, to raising funds from the Chinese investors, the startup ecosystem has been quite encouraging. Google selected six Indian startups for the accelerator program in July 2017. Startups using latest technologies such as machine learning and artificial intelligence have been chosen for the same.
Despite such promising statistics, only 9% of the Start-Ups have female founders/co-founders. Delhi NCR, Bangalore, and Mumbai, along with Hyderabad, Pune and Chennai account for more than 90% of the Start-Ups in India. The focus is largely limited to information technology-enabled products and services including e-commerce, aggregators, analytics, health-tech and online payments. Amongst all this, the product start-up sector has been largely ignored. A big factor behind India’s growth is software enabled firms such as Flipkart and Ola. Rarely do hardware product companies bring about such success. The reason for this can be attributed to the lack of funds. India’s ecosystem clearly does not have any scarcity in terms of capital. However, only a very small amount of this capital reaches these startups. Additionally, startups in India spend five times the amount of effort to raise funds as compared to US startups.
This is where the Government intervention is required. Through the provision of alternate sources of funding and through a partnership between the Industry and Academia, the government can facilitate and accelerate the growth rate. Alternate debt financing instruments will help Start-Ups and other small enterprises to overcome the problem of lack of adequate collateral, limited cash-flow and the high risk involved. While direct support of start-ups and the right kinds of skills to start & run a business are important, the ease of doing business in the country also matters a great deal. This includes ease of starting a business, obtaining relevant permits, accessing credit, paying taxes, etc. The Labour laws in India are out-dated as well. Thus, appropriate government policies are required to make the Indian Start-Up Ecosystem reach its true potential.
However, Government and international organizations are investing in innovative ideas. Monetary and infrastructure support is accelerated. Start-ups are also making good use of the facilities available and are showing a sign of good times. This can certainly not be dismissed as a passing trend and it’s surely going to change the way the markets are working today in India. Government initiatives are also expected to play a vital role in the startup ecosystem’s bright future. For instance, the commerce and industry department of the Indian Government is planning to organize a south Asia regions’ meet of startups for exchanging new ideas and increasing interaction among them, thereby showing confidence in startups.
Thus, the scenario in the last quarter suggests that the investors’ interest towards funding the India startups remains strong. Next quarter is likely to be more attractive owing to the economic reforms and their implementation. Startups are now focusing on cutting losses, increase their overall valuation and attain operational excellence. These qualities along with the positive sentiments of the investors and support from the government can make the startup ecosystem of India reach new heights in the near future.