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A Study On The Start-Up Ecosystem in India
A Study On The Start-Up Ecosystem in India
ISSN No:-2456-2165
Abstract:- Startups in India have gained immense boasts of having 43 unicorn start-ups only in 2021 adding to
attention in the recent period especially since the Covid- a total of 79 with the latest one being Pristyn Care. Not only
19 pandemic hit the country. Today, India proudly ranks this, unicorn companies have also gone public this year with
3rd in the global start-up ecosystem worldwide which Paytm leading as the country’s largest IPO ever with an
only looked as a far-fetched dream a few years back. issue size of 18,300 crores followed by companies like
Innovation in India has been at its peak yielding Zomato, Nykaa, Policy Bazaar, PharmEasy, etc.
unicorns one after the other. Startups have got the much
needed government support and mentoring which has A. Definition of “Start-up”
given way to economic development, job creation, open According to the notification that the Government of
innovation, easy availability of finance, changing India issued (19 February 2019, originally issued on 11
perception towards entrepreneurs and penetration of April 2018), when an enterprise meets the following
technology. The main aim of this paper is to analyze the conditions, it will treat it as a start-up:
current framework of startup ecosystem in India and
also emphasize on the drivers of growth, challenges, and It has been incorporated/registered for not more than 10
the kind of support available to promote the startup years (previously seven years, except in the biotechnology
culture. Sectors that require attention for the further sector according to the notification dated 11 April 2018) in
growth of startup ecosystem in India have also been any of the following forms:
identified. The role of the Government of India as an A private limited company under the Companies Act,
enabler in promoting startups has been emphasized in 2013 (including one-person companies);
this paper. The data included in the paper are all A partnership firm under the Partnership Act, 1932;
secondary in nature gathered from Government A Limited Liability Partnership (LLP) under the LLP
websites, renowned websites and journals among others. Act, 2008.
Relevant reviews of literature that support the reasons Its turnover has not exceeded INR 100 crore (previously
for growth of startups and discuss the challenges on the INR 25 crores) for any of the financial years since
way have also been included. incorporation/registration.
It is working toward the innovation, development, or
Keywords:- India, startup, startup ecosystem, innovation, improvement of products or processes or services or it is a
growth, unicorn start-ups. scalable business model with high potential for
employment generation and wealth creation.
I. INTRODUCTION
B. Elements of the Start-up Ecosystem
A start-up ecosystem can be described as a set of Ideally the start-up ecosystem of any country comprises
internal and external entrepreneurial factors, entrepreneurial of the following elements:
organizations (such as firms, banks, venture capitalists, Ideas and innovation
business angels etc.), institution including universities, Entrepreneurs
financial institutions, public sector agencies and incubation Team members
centers and entrepreneurial processes that govern the local
Angel investors
entrepreneurial environment. The Indian start-up ecosystem
has evolved over the last two decades. In the 2000s, the Start-up mentors
ecosystem was still immature lacking active investors and Start-up advisors
support from Government. The last 10 years has seen a Office space and infrastructure
significant rise in the start-ups with support available from
C. Stages of a Start-Up
all dimensions. In India, Bangalore emerged as the hub for
Typically, the lifecycle of a start-up can be divided into 6
start-up followed by Mumbai and the National Capital
Region (NCR) among other cities. B2B has been dominating stages as discussed below:
the share of start-ups with a steady increase in the number of Stage 1: Idea or opportunity
B2C start-ups indicating signs of maturity of the start-up This is the stage where the entrepreneur discovers an
ecosystem in India. idea or opportunity that he/ she wants to build into a
India’s start-up ecosystem is churning one after another start-up. This stage can last up to 6 months and involve
talented entrepreneurs while constantly contributing to the conducting interviews regarding the viability of the
availability of digital skills in India. One can address 2021 product, team building, looking for finance from
as a remarkable year for the start-up ecosystem in India family and friends and bring mentors and advisors on
surpassing all projections be it in terms of the number of board who can help in carrying on the further stages
successful entrepreneurs or the funds raised. In fact, India effectively.
c) Make in India Program (SC/ST) and female entrepreneurs with bank loans
The Government of India launched “Make in India” from INR1 lakh to INR 1 crore for setting up a
program in 2014 with the main objectives as: start-up which was known as greenfield enterprise.
Inspire a sense of confidence in India capabilities This Standup India scheme followed by the Start-
and reflect it among citizens, the Indian business up India and Make in India initiative boosted the
community and potential partners abroad. start-up ecosystem in India.
Provide a framework for technical information on
25 industry sectors. d) Digital India Program
Reach out to a vast local and global audience The Digital India program is an umbrella program
through social media and keeping them updated launched by the Government of India in 2015
with opportunities, reforms, etc. involving various ministries and departments of the
Government. This program aimed at realising the
The Department for Promotion of Industry potential of digitalization in all spheres of life. The
and Internal Trade (DPIIT) is a pivotal point to run Ministry of Electronics and Information Technology
this program. A dedicated investor facilitation cell coordinates this program. Start-ups are seen to have a
(IFC) assists investors in seeking regulatory natural home in the digital sector and therefore this
approval and provide support and services initiative has been successful in complementing the
throughout the pre-investment stage, execution and start-up revolution. Nine growth areas have been
after-care support. This program has positively recognized by this program including:
impacted the perception of foreign investors which Universal Access to Mobile Connectivity
has been clearly reflected through the Ease of Broadband Highways
Doing Business index over the years. The Public Internet Access Program
government launched the Standup India scheme Reforming Government through Technology
with the objective of supporting disadvantaged
groups particularly the scheduled castes/tribes
Source: Doingbusiness.org
G. Gender Bias in the Start-up Ecosystem A major problem faced by women start-up founders is
Women in India occupy nearly 30% of the senior finance. If we talk about support from the family and
management positions which is significantly higher than the society, male entrepreneurs are encouraged more while
global average of 24%. But when we talk about women women are held back from starting a new venture. Women
entrepreneurs there are only 14% which is even lower in entrepreneurs are as effective and efficient as male
terms of start-ups i.e. nearly 10%. Women entrepreneurship entrepreneurs. It is the society’s ideology that lacks
is seen as an essential ingredient to improve the national confidence in women. Entrepreneurial ventures of women
GDP. Clearly, India is seen as a male-dominated society should be encouraged as much as men to help the society
where women are considered suitable for managing the accept women as “entrepreneurs”. The Government has also
household but incapable of undertaking business activities introduced schemes and incentives to help in the promotion
involving risk. This mentality has been the reason for and development of start-up ideas among citizens. There is a
hindrance in the growth of women entrepreneurs in India. need for initiatives that support women entrepreneurs until
Even in a team working on a business project, women have there is no more need to differentiate between entrepreneurs
to prove their capabilities time and again for men to accept on the basis of gender. State governments have introduced
them as equals in the team. Family’s responsibilities and some schemes such as MSMEs and Trade Related
managing household chores are imposed on women which is Entrepreneurship Assistance and Development (TREAD) to
why many women with potential give up on the dream to provide women with training, information and counselling
become entrepreneurs. with grants on entrepreneurship.
V. STATE OF THE INDIAN STARTUP embark on their journey as start-up founders. The data from
ECOSYSTEM post SAP in India is very encouraging and speaks for itself.
India is the third largest start-up ecosystem worldwide. A
The progress of the start-up ecosystem has self-explanatory table showing the data of start-ups
undoubtedly been remarkable after the launch of Start-up recognized by Department for Promotion of Industry and
Action Plan by the Government of India. Entrepreneurs have Internal Trade between 2016 and 2021 is given below:
received the much needed support and encouragement to
States with Start-up Policy 2016 2017 2018 2019 2020 2021
Andaman and Nicobar 0 1 2 5 12 16
Andhra Pradesh 4 103 162 140 478 717
Assam 10 35 68 57 197 324
Bihar 1 48 149 15 374 693
Chhattisgarh 11 57 121 143 377 528
Goa 2 20 44 32 113 184
Gujarat 29 298 452 518 1555 2586
Haryana 28 271 487 591 1635 2475
Himachal Pradesh 0 9 17 25 64 104
Jharkhand 2 35 88 80 235 407
Karnataka 67 886 1,213 1,374 4206 5979
Kerala 24 172 332 563 1292 2040
Madhya Pradesh 7 107 297 272 815 1258
Maharashtra 93 1,104 1,661 1,778 5477 8327
Manipur 0 4 7 4 19 41
Nagaland 1 4 2 2 10 16
Odisha 4 115 168 142 520 810
Punjab 7 31 70 81 223 390
Rajasthan 14 140 246 300 823 1314
Tamil Nadu 54 271 459 489 1509 2329
Telangana 20 328 511 492 1609 2456
Uttar Pradesh 29 413 791 709 2342 3857
Uttarakhand 4 45 69 84 231 353
West Bengal 8 181 275 255 839 1344
Table 4: Comparison of State-Wise Number of Start-ups Recognized by DPIIT 2016-2021
Source: DPIIT
Start-up India is a flagship initiative of the Government The vision of “Start-up India” can be achieved together
of India launched on 16th January 2016. The initiative aims by the efforts of all stakeholders’ including start-ups,
at fostering entrepreneurship and promoting innovation by investors and the Government. The RBI Committee on
creating an ecosystem that is conducive to growth MSMEs found that the reason for start-ups migrating to
of start-ups. A total of 44,534 start-ups have been other countries is better enabling environment, tax
recognized by DPIIT as on 24th February 2021 from the concessions, exit policy, ease of doing business and well-
launch of Start-up India initiative. developed infrastructure.