Startups in India have been the cherry on the top for the Indian economy. Over the years, startups have been the epitome of discussions and fundraisers. Surveys have claimed that startups are the biggest markets that use fundraisers and crowdsourcing to build up their dreams and aspirations. The startup industry in India has been the third-largest in the world. There are around 8000 plus startups in India that have survived over time and have expanded graciously. These startups have been inflicted with the best and the worst of the market only to improve the sector across its dimensions. The market is slowly expanding, and so is the success of the startups (1).
The Indian startup ecosystem has boomed and come into focus on its own in recent years. The numbers are represented by approx. In 2014, 3000, startups with a projection of more than approx. 11000 is certainly not a passing trend by 2020. It’s merely a revolution. And in India, the way the markets function today will change (2). Over the last twenty years, 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, and there was a limited number of support organizations such as incubators and accelerators. Some successful exits in the late 2000s and the number of startups have increased rapidly in the last ten years, and more support has become available. Bangalore has largely emerged as India’s primary startup hub, but in Mumbai and the National Capital Region, and some smaller cities, significant startup activity is also taking place.
The Indian Startup Ecosystem
In the last twenty years, the Indian startup ecosystem has greatly evolved. More actors have joined, and they provide startups with various forms of support. The ecosystem has thus grown substantially and is now in the process of maturing. In the late 1990s, few startups had already emerged in the New Economy, which ended with the dot-com bubble burst. At that time, the broadband spread wasn’t that good, Internet connectivity was low, and there were hardly any support structures. The situation changed slowly in the next decade, and more startups entered the market. Some of them have performed well, and there have been some exits. The number of startups and incubators, accelerators, and other support organizations increased rapidly in subsequent years (3).
The expansion of startups has led to more foreign firms over the years and increased their trust in India. SEBI-registered venture capital funds reported fundraising grew from 326 Crores in 2014 to over 2703 Crores in 2019, an eight-time increase in five years (4). The share of actual capital raised on commitments in 2014 was 35 percent compared to 61 percent in 2019, indicating investors’ growing interest in India in business opportunities. There is a lot at stake because of the pandemic with such enormous money at play. It has already left millions of people unemployed and, in many places, generated a financial collapse. For example, once-lauded metrics such as gross revenue and total addressable market have been usurped by sustainability-focused goals such as EBITDA and economy of scale. In almost every sense, Covid 19 has created a new market.
Post lockdown, 75 percent of startups are gradually recovering. Nearly 30 percent of startups have pivoted to new alternative revenue stream markets, while more than 55 percent of startups focus on profitability and cash burn reduction. Besides, during the quarter ending in September 2020, deal activity, both in terms of total investments and the number of unique funded startups, recovered to pre-COVID levels. Interestingly, four Indian startups gained unicorn status in the middle of the pandemic, and the country is expected to have eight unicorns in 2020. Coming to employment, the report stated that by the end of 2020, the startup ecosystem is expected to have seven to eight lakh direct jobs and a total of 26 to 28 lakh indirect jobs. The study showed a pickup in activities and seeds and late-stage funding, highlighting the variables that helped reflect the revival ecosystem. There were signs of positive recovery in the Indian startup ecosystem (5).
Support and Startup growth
In Indian metro cities, most support is available, with each city having its history and local peculiarities, and thus a unique ecosystem. India’s main hub, Bangalore in Karnataka, is the most advanced in terms of the number of startups, support organizations, and investors. Bangalore is home to one in four of India’s overall tech startups. The location of many engineering colleges and renowned academic institutions is why Bangalore has developed as a startup hub. The ready-made talent pool then provided a locational advantage. Their offices in Bangalore were opened by several Indian and multinational companies and Research and development centers in aerospace, biotech, and later IT industries. Bangalore is home to three of the four largest Indian employers in the IT sector, including Infosys, IBM India, and Wipro.
Startups in India have been gaining support through various funding ventures for time. Many startups in India receive their funding either through an Investor or through fundraisers. Fundraisers have grown to be the ultimate reach for any entrepreneur. Many fundraising opportunities exist within the scope of any person. Websites like killerlaunch (6) and Kickstarter (7) have given entrepreneurs the chance to create their dreams to reality. The imminent need for financial stability might not be a cakewalk for many, and that’s’ what fundraising websites do to eliminate your struggle towards financial composure. Sometimes, Investors are the most liable reach as it’s impossible to locate one in your nearby maps ad meet them up on your own. Investors are the ones who can give a fair chance and explanation of the pros and cons of your ideas and guide you.
Incubators and accelerators (8) funded privately include corporate and independent ones. As a platform for engaging with startups, established businesses launch corporate incubators and accelerators. They are either set up on their own or partnered with third parties described as acceleration-as-a-service providers and manage the program on their behalf. Strategic fit is the key selection criterion, i.e., supporting a particular startup should be relevant to the established company and contribute to achieving its strategic goals. Some select startups that can become future suppliers or customers or revenue-sharing models, help the established company generate leads or additional revenue. As a future exploration tool, other corporate incubators and accelerators can help the established company monitor and help know that market activity and evaluate new technologies.
Investors do not simply waste time. Over the years, the distance between the entrepreneur and the investor has reduced drastically. Many have also said that the investors do not encourage random startup aspirers to visit them. As time passes by, financial losses do turn out bad for the investor, and the loss of trust can be a reason for such measures (9). That’s why investors do not accept ideas any day unless the prototype and the idea are settled for good. Crowdfunding is also another option that is circulating across startup circles in India. Approaching people like relatives and spreading out info through banner and board take a huge chunk of the capital, but it certainly helps. That’s where Investors see your work and plan out to help you.
Startups: Failure vs. Success
As long as one lives and dreams in a realistic world, there is a guaranteed report to say whether the startup is a failure or a success. While in recent years, the number of angel and venture invested capital in Indian startups has grown exponentially, resources are still lacking in the ecosystem. In particular, since investors tend to finance rather mature startups, more money is needed. Startups hope that governmental authorities can encourage angel investments by, for example, abolishing the angel tax or giving other types of tax benefits to bridge the gap from imagination to the next step. Besides, government approaches to setting up a seed fund and providing grants to startups are effective initiatives. Furthermore, it was pointed out that large, established companies should acquire more startups. Besides, the phenomenon of successful entrepreneurs promoting promising younger startups, which is prevalent in mature startup ecosystems, needs to continue to gain pace.
Lack of funds is the biggest reason for the failure of startups in India. The inability to reach the mark within the stipulated time is what man entrepreneurs have to face every time. Many startups have failed as a reason for this. Sometimes, the ideal model may not meet the consumer age, another such reason for failure. Ideas can be tricky and impossible to put to scale and also require hefty funding indirectly. These red marks do turn awry for the entrepreneur. The failure of building a homogenous system and engaging their personnel with the consumer at an early stage also could turn fatal. Disputes over brand and frauds that entangle the system is also a major roadblock for the success of any startup (9).
Being optimistic and preparing yourself mentally is the key to any successful startup. The abstract can turn reality into measured opportunities. Coping to adapt to failure is the key to being positive. Startup investors often look at the individual’s behavior and how they react to negativity and many more hurdles. They often take their time to observe more than influence. There is no such thing as a successful startup in today’s diverse economy. Anyday, a successful startup could eventually plunge into the deep soil. Being consistent with your vision and measuring and respecting all startup elements is what keeps any engine running smoothly. Eventually, even failed startups that may be feasible at the current market trend to rise again.
The future of Startups in India
India isn’t a random nation that has startups. It is the world’s third-leading hub of startups. Over sixty thousand startups have been launched in India; only forty thousand are currently active and running. Thirty thousand plus DPIIT registered startups. Over 400 startups have shut down due to various reasons. Indian startups have raised more than 63 billion dollars as a sector. This itself encourages new startups into the industry due to ongoing success as a whole. More than 3000 funded startups have developed, as well. The Indian market offers startups many prospects, and in turn, startups have great hopes of promoting growth and creating jobs (10).
More startups have emerged in India over the last two decades, and the associated ecosystem has developed dynamically. Consequently, support has increased in many dimensions: office space and infrastructure, mentoring and networking business support, and financial capital availability. The optimism that the environment will continue to mature is palpable. Indian startups, however, face significant challenges. It will require all stakeholders’ efforts, i.e., ecosystem actors, government authorities, and startups themselves, to overcome such obstacles. Moreover, changes in the wider cultural environment would encourage people to take risks and, possibly, develop impactful solutions.