Andesh Bhatti is an Angel Investor facilitating and enabling the future of a technology driven world. A former IT and Data Services strategist, Andesh is an angel investor helping develop early-stage tech start-ups. Devoted to facilitate automation in business processes and marketing initiatives, he strives to change the face of customer experience. His endeavour is to convey this crucial relevance to new start-ups, systematizing customer acquisition, which is their biggest hurdle. An expert in product development and passionate about technology, Andesh aspires to enable game altering ideas and unique, multifaceted, comprehensive solutions to problems globally.
More than $67 billion has been invested in Indian businesses in just the last three years, making it the third largest startup ecosystem in the world with 61,400 start-ups recorded as of January, 85 of which are unicorns. The numbers leave no doubt that India’s startup ecosystem has grown significantly.
Seed, angel, venture capital, and private equity investments, as well as actual, hands-on support from incubators and accelerators, have all contributed to this success. The economic growth of the country is currently being turbocharged by its flourishing startups. In fact, 50% of the country’s GDP comes from unicorns in the services sector alone.
All this is well and good. But to maintain the growth trajectory as well as to understand the sturdiness of this boom, we need to evaluate the drivers behind such unprecedented highs.
The drivers
The inflection point in the Indian startup ecosystem came way back in 2014-2015 when, within two years, six unicorns emerged in the country. In the shadow of these unicorns, motivated by the promise of more growth, in 2016, the government found a golden opportunity to launch its flagship Startup India project which, since then, has been providing the necessary ICT infrastructure and policy support to back entrepreneurs and move towards making India a knowledge and digital economy.
These efforts have been replicated further by enhancing e-governance, investments, and technology innovation through research and higher education. While these were kick starters, there’s more than a single reason that the Indian startup environment has grown so significantly over the last few years. These include:
- More than 50% of India’s current population is below the age of 25 and over 65% below the age of 35. They have access to ever increasing internet, mobile, and financial penetration – new entrant Reliance Jio’s price battle over data in 2016 sparked a fundamental change toward making digital services more accessible to the general public. And now due to the internet’s near-commoditization, Indians now have access to the lowest-cost data plans in the world, creating an altogether new market, that serves as a well of possibilities for being both consumers and founders.
- Changing customer demographics, which have made previously unreachable consumers – consumers, mind you, from an expanding middle class with more disposable income in hand than their predecessors possessed – reachable thanks to low mobile and data pricing and a love of social media.
- A political intention to drive start-up growth. The upsurge of university-led incubator and accelerator programs, the conception of government patent hubs, along with the establishment of digital technology and government programs like Startup India and Digital India, and the formation of regulatory infrastructure are proof of a political will bent on making India a startup hotbed.
- Large (tier 1) cities and states with deep financial resources, particularly in IT-enabled sectors like ecommerce, transportation, and banking, have led to the agglomeration effect that has created larger concentrations of startup companies, investors, and supporting infrastructure.
- The number of private investments and the number of VC funds from India and around the world have also increased in the last few years (SoftBank is in fact the biggest foreign investor in India, funding 10% of all unicorns). Many of these investors are seasoned serial entrepreneurs – the results of a spillover effect from large, publicly traded tech enterprises that have successfully made the transition from startups to enterprises. Foreign investments are also attracted to India due to the Chinese startup market becoming increasingly crowded and hot, and more mature economies like Japan and the Republic of Korea taking longer than expected to develop their own startup ecosystems. Therefore, incidentally also, India has emerged as a viable alternative.
What the future holds
By leveraging its strengths in human capital and ICT services and transitioning to a digital and knowledge-based economy, India is rapidly becoming a hotbed for innovation and startups. It is now ranked 20th among the top 100 nations in Startup Blink’s Global Startup Ecosystem Index 2021, owing to its ability to fully leverage innovation and research, as well education, skills and talent, to generate, exchange, and apply information in order to thrive.
This is exciting, but it is not without flaws. Despite their achievements thus far, India’s start-up ecosystems face numerous hurdles, including:
- The unstructured and fragmented character of the market in most industries.
- A lack of clear and transparent policy initiatives and infrastructure that startups can swiftly tap into.
- Difficulties in conducting business.
- A lack of knowledge and exposure, with small start-ups outside of major metropolitan areas not being aware of incorporated government programs that support startups with various subsidies and tax benefits.
- The existing system of technology and venture capital tends to focus on number rather than quality, on “unicorns” that disrupt and scale by absorbing consumption. But since their emphasis is on immediate shareholder profits, they lack a long-term strategy that can help scale globally.
In order to branch out outside already overcrowded industries like e-commerce, FinTech, education technology, and mobility and to make up for the decline of labor- and capital-intensive manufacturing, India must change to a knowledge-based economic growth paradigm. With so much room for development, startups need greater incubation support now more than ever before.
In the fourth industrial revolution, new technologies such as blockchain and the Internet of Things (IoT), as well as artificial intelligence and machine learning (ML), will be the axis on which new startups must revolve if they are, in fact, to continue to disrupt and innovate. And for that to happen, the necessary support and conditions, such as a culture of research and innovation that places a premium on intellectual property rights and readily available capital and labor markets, are indispensable.
Startups in India must go beyond merely replicating successful global models and instead focus on the local context while developing solutions that address global concerns if they are to overtake or even maintain the highs that they have been witnessing until now.