INDIAN STARTUP ECOSYSTEM: SCENARIO 2020

With 38 firms being valued at $1 billion, India currently houses the world’s second-largest startup ecosystem. Besides the pandemic, India added 12 such unicorns in 2020. As of research done by the Economic Times, the Indian Government has recognised 41,061 startups creating more than 4 lac jobs.

The Made In India and AtmaNirbhar program has led to a strong Startup ecosystem in the country. 319 startups were even exempted from Income Tax till November 2020 and also set up Rs. 10,000 crore Fund of Funds for startups operated by Small Industries Development Bank of India.

As the Government has also opened up the Space Sector for private firms, 40+ startups have been recognised for the same. Last year, the Government also approved the Startup India Seed Fund Scheme with a corpus of Rs 945 crore to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.

The leading factors that make India appealing as a Startup Nation are the Cost of Doing Business, Proximity to Customers/Vendors and Size of the Domestic Market. The most important enabler for Startups is that India is the second-largest consumer Internet market in the world. Other important enablers being Incubators, Accelerators and Co-working spaces in the country giving early-stage support to the ideas of the entrepreneurs and providing them a helping hand.

India has witnessed a time when there was a rise in manufacturing startups during the 70s and 80s and these were supported through seed funding and soft loans by Development Financial Institutions (DFIs). Entrepreneurs who were enthusiastic about setting up factories were benefited from such endeavours. Companies like Reliance, Infosys were beneficiaries of such loans. However, the DFIs supported predominantly through loans and the companies that did well were the only way for them to make money, the rest of the time they used to write off loans. This model that they were following was not sustainable and eventually, it failed and as a result, we did not have a startup ecosystem.

Based on indicators like new startups, funding and the number of investors in the country, the Indian startup ecosystem has seen a significant shift. Ease of funding, documentation and rise in local demand has been some of the major drivers for entrepreneurs to open up a venture of their own. The unicorn startups have doubled up in the country. In StartupBlinks’s cities ranking, six Indian entries made it to the top 100. The six cities were Bengaluru, Delhi-NCR, Mumbai, Chennai, Hyderabad and Pune. The major challenge now would be to improve the overall quality of startups and to improve the number of unicorns that currently exists.

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