All You Need to Know About The Indian Tech Startup Ecosystem
Startups are one of the most important sources of job creation, innovation, and sustainable economic development in different societies. So, it is not difficult to realize why different countries have paid particular attention to creating a thriving entrepreneurial ecosystem in recent years. Today, we are here to learn about the Indian tech startup ecosystem. India has not lagged behind other countries as a country that has progressed economically over the past few decades. For several years now, the Indian tech startup ecosystem has been able to grow and thrive in the best possible way.
India has a strategic position. It is among the key markets in China, the Middle East, and Asia. It has a young and educated workforce. Fifty-one percent of people’s internet use and government support for startups and more are the reasons why there is a great potential in this country for the growth of startups. So, there is no surprise that it is becoming an entrepreneurship hub in the region.
What statistics say about the Indian tech startup ecosystem?
There is a huge potential for entrepreneurship in India. To give you a general idea of the Indian tech startup ecosystem, you might want to take a look at these statistics:
- India is the 5th largest economy in the world and the 3rd largest in Asia, with about $ 2935 billion in GDP.
- Nearly 65 percent of the country’s population is under 35. In 2020, the average age of an Indian citizen is anticipated to be 29 years old. Compared to 38 years for China and 48 for Japan, India will have an ideal startup future. This means that, additionally to having a young and skilled workforce, a large population can be early adopters startup products and services. They also communicate efficiently with technology.
- Six hundred eighty million of the country’s population use the Internet.
- The mobile industry is growing exponentially, and nearly 40 percent of the country’s population uses smartphones.
- There are 335 incubators and acceleration centers in this country.
To get acquainted with the startup ecosystem of India, it is necessary to know the different components of this ecosystem and understand the effect of each of these components on the growth and formation of this ecosystem.
The Government and its plans to support the Indian tech startup ecosystem
Government agencies play an integral role in the Indian tech startup ecosystem. The Indian Government is not only well aware of the importance of startups in the growth and development of its country, but over the years, Government agencies have taken forward steps to influence the Indian tech startup ecosystem. These organizations have set up Various support programs for Indian entrepreneurs, which encourage young entrepreneurs and facilitate the work of startups.
Startup Ecosystem facilitated through different government departments & programs. More than 4100 Startups have benefitted in the last year through various programs of the Central Government. Also, Government has enabled 960 Cr of funding to Startups through several schemes. And it dedicated 828 Cr authorized funds for infrastructure. Besides, the Government is taking various initiatives to expand investment opportunities in startups. For instance:
‘Make in India” program that was launched in September 2014 soon after the Modi government was installed; it followed up with a series of similar initiatives.
A national program, the Make in India initiative, aims to transform India into a global manufacturing hub. It contains a raft of suggestions designed to interest investments from both local and foreign organizations in 25 major areas it has recognized, especially Information Technology.
It has set up an Investment Facilitation Cell to help foreign startups locate partners and sites. Meanwhile, a course of action has been taken for domestic businesses, unveiled after Modi introduced the “Stand Up India” initiative in his Independence Day back in 2015.
The Stand Up India initiative aimed at supporting entrepreneurship and job creation at the grassroots movement. In general, the objectives are to provide the following:
- Financial aid is preparing a plan to facilitate the process of benefiting bank loans between Rs 10 lakh and Rs 1 crore.
- Technical skill instruction and one woman borrower per bank branch to set up greenfield projects in the mass-producing, service, or the trade area.
The initiative encloses several plans to provide financial aid. These involve dedicating a Rs 10,000 crore fund as venture capital for all of the micro, small, and medium enterprises (MSME) sector. Besides, the Mudra bank plans to handle crore small businesses, and units that find it hard to gain credit from the conventional banking system, through a credit guarantee fund of Rs 3000 crore. This bank aims to preserve the interest of costumers and support them through different levels of growth and development. These have been named Shishu (infant), Kishor (adolescence), and Tarun (youth), and follow financing activities that prevent borrowers from indebtedness.
The “Startup India” campaign quickly followed up with the Stand Up India initiative, presented in 2016. The platform aims to boost bank financing for startup ventures to enhance entrepreneurship, support job creation, and control the role of states in the policy zone.
The program also has arranged mechanisms such as a startup learning program, online recognition of startups, patent filing facilitation, incubator, and accelerator support, innovation programs for students, funding support, and tax benefits.
The Government also will present a mobile app to provide on-the-go approachability for:
- Registering startups
- Tracing the status of the registration application
- Obtaining information on different approvals and registrations
- Cooperating with startup ecosystem partners such as venture funds, incubators, academia, and mentors
- Registering for multiple schemes started under the Startup India Action Plan.
The Startup India program has set up a knowledge exchange hub and seven research parks. Also, it has suggested innovation centers across national institutes. This is in synchronization with the Atal Innovation Mission (AIM) known as the AIM Platform. AIM presents an innovation boosting program, including academicians and using national and international experiences to promote a culture of innovation, research, and development. The 2015 budget set aside Rs 150 crore for the AIM Platform.
The AIM platform’s principal focus is to promote world-class innovation hubs, startup companies, and other freelance programs. Its other missions include:
- Establishing brand new programs and policies for boosting innovation in various economic sectors
- Offering cooperation opportunities for every stakeholder
- Making an umbrella structure to supervise the innovation ecosystem in the country
- Supporting and mentoring innovators to become prosperous entrepreneurs
- Fostering innovations
The Government introduced the “Support to Training and Employment Program“ (STEP) for women who have poor access to proper skill-training services, particularly in rural areas.
This new platform is reaching out to all Indian women above 16. It provides skills in multiple areas such as food processing, agriculture, traditional crafts, travel and tourism, hospitality, last but not least, computer and IT services.
Introducing the National Skill Development Mission (NSDM) July 2015 was also a critical step in building self-reliance. The program aims to create synergies in professional industries and initiatives and make decisions without striking a balance between quality or speed.
Risky investments in the Indian tech startup ecosystem
Although the Indian tech startup ecosystem is relatively young, its growth rate has been significant. Besides, more important investments have been made in Indian startups in recent years. The total risky investment in the ecosystem is $ 1.3 billion.
To discover how much the Indian startup ecosystem has a chance to raise capital for startups, it’s a good idea to take a look at these numbers:
- Reputable angel investors in this country: 1052
- Reputable foreign angel investors: 5036
- Business active angel networks: 30
- Venture capital firms in the early stages: 350
Another interesting point is that the number of startups working in the field of modern technologies in this country is growing, and investors are showing a particular interest in this group of startups. For example, last year, the FinTech domain was able to account for a large share of investments.
The next thing that is worth mentioning is that after the first wave of Internet-based startups, successful companies in India grew. Afterward, not only domestic investors but also international investors got very interested in startups and entrepreneurial environment in India, such as:
- eBay, Microsoft, and Accel Partners from the United States
- Temasek Holdings from Singapore
- Tencent Holdings from China
- Naspers from South Africa
- SoftBank Group from Japan
Angel investors and Startup Networks at Indian tech startup ecosystem
Investment is not the only thing a startup needs. Startups need mentors, professionals, a set of skills, and a network. These are the things that angel investors can provide. India has good tax incentives for angel investors, which has led to a large number of angel investors networks operating in India, most of which are based in Mumbai, Bangalore, and Delhi.
For example, the Indian Angel Network is a unique concept launched in April 2006. This startup network brings together outstandingly successful entrepreneurs and CEOs from India and all over the world who are interested in investing in startups and first stage ventures.
Startup incubators and accelerators are a growing trend and a high thrust to support first-time entrepreneurs in India. Numerous accelerators and growth centers are active in India, usually initiated inside universities and technology parks.
Accelerators accelerate the speed of a startup. The programs are most intense. They help you sharpen your idea and develop it. While incubators engage longer than an accelerator, they incubate your fresh raw idea, giving wings to them, and finally produce a product. For now, you can start with this fundamental definition, and we will suffice to introduce two of them.
Tlabs: It is an accelerator that invests Rs 10 Lakhs for 10% equity. The program includes mentorship from renowned entrepreneurs and angel investors, along with office space for the team. The whole program is about 13 weeks.
Veddis: This startup incubator provides immediate office environments, including office space, technology infrastructure, and critical support services. Investments range from $250,000 to $10M. Veddis has both investment and incubated companies in its profile.
Until a few years ago, just a few small e-commerce startups (usually a copy of successful Western startups) were active in the country. But over the past decade, some startups have sprung up in the Indian tech startup ecosystem that is creating value in a variety of areas.
It is worthwhile to mention that 47 percent of the launched startups in India are Technology-based ones, which gives us 4,300 startups in this area. Besides, there are 800 new tech startups annually.
In conclusion, experts strongly believe that India’s economic future lies in supporting startups, which will bring dynamism, innovation, and create jobs for the Indian economy.