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“You shouldn’t focus on why you can’t do something, which is what most people do. You should focus on why perhaps you can, and be one of the exceptions” says Steve Case, the co-founder of AOL. This probably defines the mindset of Indian start-up entrepreneurs; they are treading into areas which apparently would look unconventional and complicated. Indian start-ups are everywhere today, from space to health to e-commerce to education. 

As the name implies Indian start-ups began small each with specific goals and with defined working mechanisms. Backed by the growing tech power and the ambition to succeed, the Indian startup ecosystem has grown to become a global power today.

If one goes back to the history, one would find that way back in the 1980s Indian startup ecosystem began humbly with just a few pioneering IT service companies such as TCS, Infosys and Wipro. With their innovative enterprises and technical supremacy they have turned global leaders today and have placed India firmly on the world technology map. These companies invested in technology and leveraged the country’s young, tech-trained workforce to provide cost-effective technology services to clients across the globe. The result is the emergence of a booming technology industry that currently employs about five and a half million people and generates an estimated $ 250 billion in revenues

With a growing young technology talent base, India has diversified its startup ecosystem to vast areas of innovative businesses. According to Nasscom's report ‘Technology Sector in India 2023: Strategic Review’ Indian technology sector employed approximately 5.4 million in 2023. The rise of Software-as-a-Service (SaaS) companies, GCCs, cloud solutions, and emerging technologies such as DeepTech, Gen AI, robotics, and SpaceTech are expected to drive new requirements for talent. The industry is investing in new talent hiring and skilling as well as partnering with the government and academia. Developing talent and enhancing the talent pool in the new tech areas would be one of the key success factors for the technology-based sector including startups.

What is a startup?

First, what is a startup? As the name suggests, a startup is a starter, a beginner in the world of business. In simple words, a startup refers to a company in the first stage of operations. It’s a newly established enterprise with a small team of founders and limited resources, mostly collected by promoters, focused on developing and bringing a unique product, service, or business model to market to resolve real-life problems.

A startup is a young entrepreneurial, scalable business model built on technology and innovation wherein the founders develop a product or service for which they foresee demand through disruption of existing business or by creating entirely new markets. Startups are basically ideas which manifest into innovative and unique commercial ventures.

As the startup’s basic platform is innovative mindset, it aims to remedy deficiencies of existing products and or create entirely new goods or services to replace existing products, disrupt the ways of thinking and doing business. That’s why many startups are known within their respective industries as “disruptors.”

Startups are different from other existing companies in their growth appetite and marketing techniques to speed up networks. They seem to be in a hurry to build on ideas and implement them lest they are left behind by competitors. They often do this through a process, called iteration, in which they continuously improve products through feedback and usage of data generated.

Realising the scope and far-reaching impact of startup ventures in the economy, the government launched 'Startup India' initiative in 2016 for creating a conducive environment for startups in India. It has defined startup as a business entity incorporated as a private limited company or registered as a partnership firm or a limited liability partnership. Its turnover should be less than Rs 100 crore in any of the previous financial years of its incorporation. An entity shall be considered as a startup up to 10 years from the date of its incorporation.

India’s growing startup ecosystem

“Startup” has become a household name, especially since the flagship ‘Startup India’ initiative was launched by the government in 2016. India has the third largest startup ecosystem in the world and is home to more than 100 unicorn companies. The idea of startups as frontrunners of innovation, capable of propelling the country into a higher growth trajectory is etched in the popular psyche. Startup founders are also often seen as job-creators who can help reduce the educated unemployment, enabling India to take advantage of its demographic dividend. 

Since the larger part of the startup units are tech-driven and India has a vast pool of tech hands, the startup ecosystem has grown steadily over the past years. India's technology industry has emerged as a vibrant force driving the nation's employment opportunities, and contributing to overall economic growth. India being one of the largest off-shoring destinations for different IT companies across the world, the business process management (IT-BPM) sector has been contributing significantly to the country’s GDP. The sector contributed more than 7% to Indian GDP in each of the last four years according to Statista, a German online platform that specializes in data gathering and visualization. To add to it, Statista has recently projected that about a tenth of India’s GDP would be accounted for by its IT-BPM companies in 2025.The IT-BPM industries' revenue was estimated at $ 245 billion in FY 2023 -- up 8.5% from $ 226 billion in FY 2022. Looking ahead, the industry is on course to achieve the $ 500 billion milestone by 2030, as per the Nasscom report. India’s technology sector has steadily increased its footprints in the world market and thus, despite global geo-political tension leading to a more cautious approach for investments and delayed decision making, the technology industry’s revenue reached $254 billion in FY24 – up 3.8% over the previous year, an addition of over $9 billion over last year. Exports were estimated at $200 billion growing by 3.3% over the previous year and the domestic sector revenue was estimated at $54 billion increasing by about 6% compared with FY23. The US remains the prime export destination of India’s software products with over 50% share in total exports. The United Kingdom with about 14% share is India’s second biggest export market.      

Backed by the growing technology talent pool, India continues to grow and remains one of the most preferred destinations globally for technology and knowledge services, as well as global capability centres (GCCs). India has consistently improved its rank in the Global Innovation Index. The country has continued to improve its ranking in the Global Innovation Index prepared annually by the World Intellectual Property Organisation, headquartered at Geneva – up from 81st in 2015 to 40th in 2023. Rapid urbanisation, a younger demographic in the country along with an increase in venture capital in recent years have boosted the growth of the sector.

According to the World Intellectual Property Organisation, India saw the highest growth (31.6%) in patent filings in 2022 among the top 20 countries of origin. The Patent Office granted nearly one lakh patents in FY24. The number of granted patents increased seventeen-fold from 5,978 in 2014-15 to 1,03,057 in 2023-24. Startups filed more than 12,000 patent applications from 2016 to March 2024

India has emerged as the third largest startup ecosystem globally with over one lakh DPIIT-recognised start-ups across 763 districts of the country. Since the launch of Startup India initiative in 2016, DPIIT has recognised 1,40,803 entities as startups as on June 30, 2024.

Significantly, the Startup India Initiative has successfully highlighted the geographical diversity with more than 50% of startups emerging from tier 2 and 3 cities (till December 2023). This decentralization underscores the inclusive nature of the startup ecosystem.                

 Much of India’s success owes its origin to the sector’s constant efforts to innovate new products and passion to open new possibilities. India has retained its second rank in innovation quality in 2023 with top position in the quality of scientific publications and the quality of universities among the emerging economies. The innovation is not just limited to specific sectors but spread over diverse areas. The country has recognised start-ups solving problems of 56 diverse industrial sectors with 13% from IT services, 9% healthcare, 7% education and 5% each in agriculture and food and beverages.

As of May 2023, the Indian Generative AI landscape had more than 60 startups dedicated to offering solutions and services to their customers spread across various industry verticals. More than $590 million in funding has already flown into this space, with 2022 being the year with the heaviest funding inflow. The report ‘Generative AI Startup Landscape in India – A 2023 Perspective’ reflects Nasscom’s perspective on this evolving space. The study outlines the market composition, funding environment, technological environment, value creation across use cases, and revenue trends/expectations reported by the Gen AI startups in India. Also included are Nasscom’s recommendations to various ecosystem players on what they can do to create a favourable environment that facilitates large-scale Generative AI potential unlock and promotes market growth.

India is home to the third highest unicorns globally

If the number of startups has been growing exponentially over the years, their success rate has failed to match the growth. And thus, the success of the startup ecosystem is now measured by the number of unicorns as they are proven successes. Unicorn is a terminology in the venture capital industry to describe a startup company that is valued at $ 1 billion or more. 

Indeed, India’s startup ecosystem is not just growing horizontally but is also growing vertically suggesting the success of existing units. This is reflected in the increasing number of unicorns. Indian unicorns are flourishing in the fast-paced and dynamic economy that has begun recovering after witnessing rapid deceleration following the coronavirus pandemic.

From producing its first unicorn in the form of InMobi that deals with AI and consumer-first technology to provide amazing experiences and the joy of discovery on your smartphone way back in 2011 to hitting the century of unicorns by 2022 has been a long and eventful journey for the Indian startup ecosystem. The country is witnessing an unprecedented surge in VC investment and tech entrepreneurship, and the Startup India initiative has played an important role in it.

India achieved the milestone shortly after a wild funding year which saw Indian startups raising $42 billion in 2021 and giving birth to 21 unicorns in the process. India ended 2021 with 87 unicorn startups, and at a striking distance from scoring a century of unicorns.

While 2021 was the year of record-breaking funding, 2022 has seen India achieve a historic landmark in the first few months with 22 startups entering the unicorn club. The focus should now be on the sustainability of these unicorns and helping a new set of Indian startups to turn unicorns.

The unicorn club, however, witnessed a sharp deceleration in new entrants in 2023 when only two new unicorns were born. In 2024, India has seen 6 new unicorn startups (as of 22 October taking the total tally to 116.            

Geographically, the centre of India's high-tech industry, Bengaluru is India’s unicorn capital with the largest number of unicorn headquarters followed by Delhi (NCR) and Mumbai. Traditional sectors such as E-commerce, Fin-tech, E-commerce, Supply Chain & Logistics, Internet Software & Services do dominate the arena but a strong wave of unconventional sectors such as Content, Gaming, Hospitality, Data management & analytics, etc are making their place on the list. 

Recognising the importance of the startup the government launched the ‘Startup India’ program way back in 2016 with a stated objective to build a strong ecosystem for nurturing innovation and startups in the country that would drive sustainable economic growth and generate large scale employment opportunities.

The government claims that recognised startups have reported to have generated more than 15.5 lakh direct jobs to date, as it detailed various initiatives taken by ministries and departments to help create even more jobs and nurture young entrepreneurs in years to come.

Post script

Every year, countless startups are launched, but only a very small percentage of them actually survive to become profitable. Studies show that only 20% of startups are able to survive for more than 5 years and only 8% manage to survive beyond 10 years. Clearly the odds are stacked against a new startup founder.

There must be many reasons but what founders need to have is a great team to execute on the vision and deliver products as quickly and reliably as possible. A good co-founder can prove critical. Hiring the right people with the right complementary skills to deliver the business objectives has to be done deliberately and purposefully.