Whither Start-Ups in India?

This article seeks to focus on the genesis, growth and future of Start-Ups in India and the government's efforts to promote this sector.

Created On: Dec 31, 2015 13:09 ISTModified On: Jan 7, 2016 16:45 IST

India is home to 1.2 billion population. With fast growing middle class and private consumption expenditure it has become the fastest growing ans 3rd largest start-up ecosystem in the world. As per an estimate there will be 11500 startups by 2020 from around 3100 startups in 2014 which is certainly a revolution. And it’s going to change the way the markets are working today in India.

Growth of start ups

The Indian startup ecosystem is growing rapidly driven by extremely young and diverse entrepreneurs. Other important factors supporting them are funding, consolidation activities, evolving technology and a burgeoning domestic market. A lot of start-ups have entered the industry either entirely through the new market or through gaps in existing markets or product lines.


Between 2010 and 2014, the infusion of VC and PE increased from 13 million dollars to 1818 million dollars. Angel investment too has multiplied almost 8 times from 4.2 million dollars to 32.2 million dollars. For example housing.com in 2014 raised a sum of 90 million dollars from SoftBank, the Japanese telecom and internet giant. Ola, in April 2015, announced raising 400 million dollars led by DST Global .

Along with this Through “Ola Pragati” in partnership with the State Bank of India, drivers can now avail of a daily loan repayment facility and a lower down payment to buy a car of their choice.

Further foreign investors like New York based TGM, Russia based DST global, and Japan’s Softbank etc have infused much needed capital in India. It is mainly attributed to consumer growth backed by mobile revolution.

When it comes to the cities where the startups that got funded were based, Bangalore led the charts followed by delhi and Mumbai.

Consolidation Activities

Technology acquisition, market consolidation, and customer acquisition are the main drivers for increase in M&A of Indian start-ups. Over 20 M&A’s worth 1 billion dollars in last 3 years has taken place.

In 2014, 43 start-ups were acquired. In 2015 the number has been 41. Examples are Housing.com acquired Realty BI, Practo, Asia’s largest doctor search engine acquired Fitho (digital fitness solution), Snapdeal acquired FreeCharge to build the most impactful digital commerce ecosystem in India.

In early 2015, Twitter acquired ZipDial, a “missed call marketing platform. In a country like India where internet penetration is still very low compared to western counterparts, Twitter is planning to deliver content to a large number of non-internet users through SMS.

Domestic market

With increasing number of online users becoming active consumers of ecommerce services, various start-ups have come to fulfil the rising demand. For examples paytm Boasting 80 million mobile wallets and more than 15 million orders per month, has revolutionized mobile commerce in India. Other example could be redbus now acquired by ibibo group has given consumers the comfort of booking bus tickets online.

Government efforts

•    As envisaged in the Budget 2015-16, Union Government announced the launch of India Aspiration Fund (IAF) with an initial corpus of 2000 crore rupees under SIDBI in order to boost srartup ecosystem in the country.

•    A new scheme called SIDBI Make in India Loan for Small Enterprises (SMILE) with an allocation of 10000 crore rupees has also been launched. The loan scheme’s focus will be on 25 sectors under Union Government’s ‘Make in India’ programme with an emphasis on financing smaller enterprises within the MSME sec

•    A new initiative called “Start-up India, Stand Up India” was announced by the Prime Minister Narendra Modi in the 2015 Independence Day address. It aims to make stratups as a vehicle of growth for the manufacturing sector, employment opportunities and the overall economy. With this initiative Startups may get tax breaks, incubation centres and easier approval to boost India's entrepreneurial spirit.

•     Further market regulator SEBI has announced an ‘Alternate Capital Raising Platform’, which will allow such firms to raise funding from institutions and high net worth individuals from the capital market. As per SEBI 15 billion dollars came into the country in 2014 as venture capital and private equity and in the year 2013, the figure was 13 billion dollars.

•    NASSCOM has come up with an ambitious initiative called “10000 Startups”, aiming to scale up the startup ecosystem in India by 10x. The program is supported by Microsoft, Google, Intel, Verisign, and Kotak. 10000 Startups aims to enable incubation, funding and support for 10000 startups in India over the next ten years.

Future of start-ups

Indian startup ecosystem has come a long way today. India’s youth population which represent the future of the country dominate the startup landscape with over 73% of founders in the age group of less than 36 years. This has provided huge employement opportunities to millions of people.

Also women entrepreneurs are becoming more active and prominent in the innovation economy. Investors in India as well as abroad have shown confidence in the Indian startup ecosystem. However certain issues like funding, supportive government policies on ease of doing business, tax incentives etc still act as a hinderence for the success of startup ecosystem.

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