India is one of the fastest emerging startup ecosystem. The Indian technological landscape has seen a tremendous growth towards creation of innovative startups which has lead it to become the 3rdfastest growing hub for technology startups in the country. The current article analyses the India’s position as a global startup hub that is becoming attractive for investors startup, and corporates.
From having just a handful of tech companies to couple dozens and now thousands of innovative new ventures, India’s startup ecosystem has grown immensely from the past decade. India now has 55,000 startups with more than 3200 startups raising $63 Billion in funding in the last five and half years alone.
The internet has helped paved the way for thousands of startups to rise over the past decade, address unique problems, transform entire industries and create new segments. With deep data insights to influence strategic decision making in governance, investments, growth, and other core aspects driving the Indian startup ecosystem
Indian Startup Funding
Over the years the growth of startups has brought in more international investors and boosted their confidence towards India. Fundraising reported by SEBI registered ventured capital funds grew from Rs.326 Crore in 2014 to over Rs. 2,703 Crore in 2019 showing the increase which is up to 8 times more now. The share of actual capital raised to commitments in 2014 was 35% compared to 61% in 2019, indicating the growing investor interest towards investments opportunities in India.
The most beneficiary sectors are EdTech, fintech, online gaming and OTT, ecommerce and enterprise tech. But because of the covid 19 scenario in 2020, the total capital inflow in Indian startups expected to dip in 202 by as much as 36.2% compared to 2019 to reach $8.1 billion. The total capital inflow in Indian startups for the year 2020 is expected to be the lowest since 2017.
Indian’s Unicorn and Soonicorns
India only a single unicorn in 2012, but in 2016 the number increased 10. It is now the home to 34 well known Unicorns with a combined valuation of $115.5 billion, 52 Soonicorns with the potential to become unicorns by 2022. With an overall funding skyrocketing to $63 Billion from 2014 to 2020. In the past decade, India has shown a great appetite for technology, data and the internet.
Excluding that India has 53 startups in India that have the potential to achieve $1 billion pus valuation by the end of 2022. Out of these numbers the fintech sector has 19 unicorn which is different from the unicorns where enterprise tech startups which have 7 unicorns
Infrastructure and Resources that help the startups in India.
India now has an estimated 100 plus startup incubators across the country, mostly housed in academic institutions; this number is likely to cross 300 by 2020. This means that there will be a startup incubator in every state, city and town in the country are enabling entrepreneurs to access resources and solve problems in their local areas. Next, we have Co- working spaces that are growing at an exponential rate and this helps entrepreneurs to have office spaces in their neighborhood.
Government and Regulatory landscape
Many states are coming up with policies in 2020, as the government at the central and state level have recognized the potential of startup as a driver for job creation and are hence enabling a better regulatory environment for starting up. The startup culture in India and other policies are looking at addressing the problems of B2C entrepreneur level.
NITI Aayog is in the process of making the necessary infrastructure and resources available through the Atal Innovation Mission (AIM). AIM is adopting a more B2B approach by supporting in the scale up of the existing incubators such as NSRCEL, C-CAMP etc.
The main hubs of Indian startups
In 2020, Bengaluru the silicon valley of India is still the startup capital of the country with a total funding amount of $28 Billion across 1,876 deals 2014 to 2020. In addition to that the other top hubs are Delhi and Mumbai, while the emerging hubs are Pune and Hyderabad as they have recorded an annual growth rate of 45% and 37% respectively.
In the tier segment Jaipur and Goa have outperformed cities like Hyderabad and have earned their spot in top 10 startup hubs as of 2020 based on the number of funding deals.
The Indian Investor Landscape
From just a handful of investors and a few startups to over 49 thousand startups and over 2,000 Indian and International investors, the startup ecosystem have come a long way in past five years. The International investors now routinely come to India to invest in the burgeoning tech ecosystem. The frequency of participation by the existing investor is on the rise.
Many corporations have played a major role in the funding trends, according to Datalabs by Inc42 analysis, 2019 was not one of the good year for venture capitalist. In 2020 however, there are approximately 4,640 active investors in India. Among these 59% (2,751) are angel investors and about 18.3% (849) are venture capital firms. Overall there is a downward trend in terms of unique investor’s participation similar to what has been observed in 2019.
The fintech sector continues to grow at rapid speed. Paytm can easily be called a pioneer in fintech as at gave the power of choice and how to spend to people who never had wallets or bank accounts. Following the success of Paytm, many other wallet companies have shown promise. We believe this sector will continue to attract investors’ interest in 2019 as the business ideas in fintech.
The growth of innovation in India
The interim budget conveyed the message that India youth should constantly innovate to drive the country growth. Towards this end, the government has pushed for the use of digital technologies through initiatives such as the National Program on Artificial Intelligence (AI) and the establishment of nine centers of technological excellence.
While the first decade of 21st century was all about bringing India’s cities and metros online, the past ten years have been about using the internet to create businesses and startups and take the digital torch to rural India. India is today the home to world’s largest working population and startups are expected to take full advantage of this in the next five years.
The country has more than 500 million internet users. Which is why we can expect an active implementation of block chain, AI, IoT and data analytics across multiple technology sectors. For example the IoT in India has reached $15 billion by 2020. It will account for approximately 5% of the total global market. On the other hand, AI is predicted to become as big as $ 15.6 trillion by 2030.
Nevertheless, 2025, the number of startups in India is expected to cross 100K, creating more than 3.25 Million jobs in the process. At the same time, the total funding in Indian startups is likely to increase to over $150 Billion and with the total value creation exceeding $500 Bn. Once the medium and long-term pandemic impact subsides, there’s no stopping Indian startups.