Startups can generate impactful solutions through innovation and scalable technology and act as vehicles for socio-economic development and transformation. Over the last two decades, the Indian startup ecosystem has developed dynamically. In the 2000s, some startups were founded. However, the ecosystem was still immature because only a few investors were active. There was a limited number of support organizations such as incubators and accelerators (1).
Because of its massive economic viability for startups, India is often described as the perfect symbol of emerging markets. Even genre products can have significant market potential in a country with a population of close to 1.3 billion people. Economic reforms shifted India towards a more market-based economic system in the 1990s. The overall economic development since this liberalization has been dynamic, and the Indian economy had a GDP of 2,726 trillion dollars as of 2017. India is a major name in the world’s largest emerging major economies, with a GDP growth of 7 percent in 2018. The Indian market is therefore perceived as being capable of offering startups an abundance of opportunities (2).
India’s enormous diversity in culture, language, ethnicity, and religion has proved to be both a curse for startups and a blessing. On the one hand, clients’ understanding by startups is often limited to certain regions where they understand the local language and local people. This makes it difficult for startups to reach customers across the country with their products. On the other hand, if solutions successfully address diverse pan-Indian customers’ needs, market uptake in other regions, such as Africa and Latin America, and even in the developed world, is likely to occur (3).
For example, in the United States, Indian startups often pilot and serve clients, where the user base has a much greater ability to pay. Revenues and purchasing power are steadily increasing as the Indian economy continues to grow. The growth of the upper-middle and high-income segments of the population, which will grow from one in four households today to one in two households by 2030, is driven by increased consumption. The demographics of the population have long been an additional advantage. Half of the country’s population is under 25 years of age, and the young are aspiring. He carries material ambitions and can spend and make those goals a reality for almost 700 million people born between the late 1980s and 2000s (4).
The Startup support in India
Technological innovation has lowered the cost of building digital goods over the last few decades and has given consumer markets access. In the past, businesses had to set up physical infrastructure to interact with customers, implying high customer acquisition costs that proved prohibitive for small businesses in the same field as established corporations. As India has improved its digital connectivity, obstacles to market access have been reduced. The penetration of broadband is increasing rapidly. (5) The number of wireline subscribers is expected to increase by 44 percent over the next four years in 7 2018.
Under Prime Minister Narendra Modi (6), who turned as the nation’s leader in 2014, the government has put digital transformation at the center of its plans. Startups are increasingly recognized by both the federal and some state governments as important engines for economic growth. Also, startups are expected to create jobs that will reduce the country’s high unemployment rate. Startups accounted for 2.64 percent of total jobs created in India that year in 2018; in 2019, they are projected to create between 200000 and 250000 jobs. The Modi government has made different efforts to support startups. In 2016, the prime minister launched the flagship initiative Startup India to build a strong ecosystem conducive to startup business growth, drive sustainable economic growth, and promote sustainable economic growth (7).
Generate opportunities for employment on a large scale. Measures include, but are not limited to, the 100 billion rupee fund, financial support for incubators, the establishment of tinkering laboratories, tax advantages, and the simplified recognition process for setting up businesses. As per the DIPP definition, 14,036 startups have been recognized, 660 startups have received business support, and 132 startups have been funded. Large businesses face pressure to innovate ever more rapidly in an increasingly uncertain and fast-moving business environment (8).
Their problem is twofold: to gradually innovate to grow their existing business while acknowledging their industry’s ongoing changes and making provisions for more innovative products. The latter proves to be difficult, and larger businesses understand that they can not simply rely on knowledge generated internally and build everything themselves. As this paradigm of ‘closed innovation’ loses its significance, more organizations are switching to open technology development strategies. Therefore, businesses in India are increasingly reaching out to startups to boost their creativity. They enter into an exchange and strategic partnerships with startups, with different corporate-specific resources to support them. Such engagements can be of mutual benefit. While corporate managers had to be convinced of the advantages of working with startups a few years ago, there has been a noticeable change in attitudes. Many established companies today recognize the competitive advantages of startups, particularly in terms of speed and passion.
The ones who can convert their ideas to reality and seize opportunities are willing to take risks. Most startup founders in India have motivations and report that their passion, curiosity, problem-solving satisfaction, and desire to make a difference in society drive them. Many Indian founders have previously worked in a corporate environment. However, they perceived those jobs as constraining their creativity, despite their stability in those jobs and the benefits of high wages and other benefits. A lack of corporate culture identification often leads them to create something on their own, allowing them to define their values and control.
Apart from many startups in India, Unicorns have been a boon to India’s economic growth. Startups like PayTM and much more have been unicorns in their process of growth. The unicorn sector in India is an unparalleled success. It has so fruitful; this is one of the biggest reasons why Idia’s mark on the world map is based on these unicorns (9).
The UNICORN sector
The year 2020 saw a bunch of unicorns emerge. Over the past 12 months, 11 unicorns have emerged, and 2021 has already seen its first unicorn. The current total stands at 37, a 33 percent growth over 2019. India is the third-largest startup ecosystem in the world and is certainly the fastest-growing. These businesses have grown exponentially, not despite the pandemic but because of it. They took advantage of changing consumer behavior and tweaked or swiveled themselves rapidly to meet customer needs. These businesses underlined the fact that market focus and the customer ensured that they grew. And they were backed by marquee investors from India and around the world with funds.
India is surely the globe’s cynosure. A few factors that provide to the startup growth story are large, diverse markets, technology innovation, disruptive proposals, and extremely high-quality talent. The global investor community is keenly focused on investing quickly in the country and its startups. India has seen 250 billion dollars in foreign direct investment funding over the last five years, starting in 2015. Of the total, nearly 75 percent of this FDI, which is 184 billion dollars, came through venture capital and private equity financing, which invests in unlisted, startup, and growth companies, leading to unicorns being created. Each of these businesses raised funds and generated value for their investors (10).
Interestingly, across several sectors, India has seen innovation and fast-growing businesses. Indian unicorns have emerged from education, beauty, distribution, retail, fintech, e-commerce, mobility, software for salon and spa management, healthcare, trucking services, food, insurance, food technology, analytics, mobile advertising, etc. And these businesses, with various business models, such as B2B, B2C, and B2B2C (11), are both business and consumer-focused. And more significantly, the Indian ecosystem has seen two other unicorns breed into a unicorn. This is truly unique because it helps founders build valuable businesses and reflects the value that its investors have created.
A joint report by Nasscom and Zinnov (12) also predicts that India is on track to have a strong unicorn club of more than 50 in 2021 and a unicorn club of more than 100 by 2025. This is extremely achievable. The nation has a large number of unicorns today, soon-to-be unicorns. We will not be surprised if, by 2025, India will exceed 100 unicorns! And, unsurprisingly, these will emerge from industries that are not yet covered, such as agritech, health technology, cleantech, etc. In line with the clarion call for Atmanirbhar Bharat from the prime minister, these companies create solutions for India. But these are also the world’s solutions as they have gone global.
It needs to be noted that most unicorns still are losing money and, from a GDP point of view, also are value-destructive. But until 2016, more than two decades after its founding, Amazon did not generate a profit. His bottom line has been rocketing. Some Indian unicorns are already turning the corner. Besides, valuation is also an asset that can be used to acquire or merge with companies with a lower value that directly profits. The big investors are from overseas: SoftBank of Japan, Alibaba of China, and Sequoia of the U.S. That’s even with risk tolerance, India has no serious venture capital sector.
According to a recent report, India’s ambassador to the U.S. Taranjit Singh Sandhu said Indian startups raised 9.3 billion dollars by mid-December this year. India is currently the world’s third-largest startup ecosystem and is home to 21 unicorns worth 73.2 billion dollars. India’s top U.S. envoy said he expressed hope that as early as 2022, more than 50 startups could join the unicorn club. “By some estimates, as early as 2022, more than 50 “soonicorn” startups could join the unicorn club,” he said (13).
India’s startup ecosystem’s growth has contributed to the rise of Indian I.T. companies, large talent pools, increased expendable income of the Indian middle class, and capital availability. More recently, the increased use of smartphones, internet access, and recent digital finance reforms have given further impetus. There was also a major push by the government through initiatives such as Start-up India and Digital India, he said. Three cities have changed the face of modern India, including Bengaluru, Mumbai, and NCR Delhi. They have found a place among the famous Global Startup hubs. Cities such as Pune, Hyderabad, Ahmedabad, and Kolkata are among the emerging hubs of startups. (14).
In the last decade, InMobi, Flipkart, Ola, Paytm, Byju’s, OYO, Swiggy, Zomato, PhonePe, Lenskart, and more, including recent ones such as Unacademy, Glance, Nykaa, Zerodha, FirstCry, etc., have been added to the unicorn list. Forty-four such one-horned digital entities have been produced by the ecosystem that has cumulatively generated around 106 billion dollars in value so far and over 1.4 million direct and indirect jobs annually. Importantly, the average time that startups took to reach the 1 billion dollar valuation mark was eight years (15).