India is now home to as many as 75,000 startups, Union Minister Piyush Goyal announced on August 3.
Out of the total startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), around 12 per cent cater to IT services, 9 per cent to health care and life sciences, 7 per cent to education, 5 per cent to professional and commercial services and 5 per cent to agriculture.
Around 7.46 lakh jobs have been created by the Indian startup ecosystem so far.
What is a startup?
The definition of startups was modified in 2019 with a view to include more entrepreneurs in its ambit.
An entity shall be considered as a startup:
• If it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (under Section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
• Up to ten years from the date of its incorporation/registration.
• If its turnover for any of the financial years since incorporation/registration has not exceeded Rs 100 crore.
• If it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.
Startup ecosystem in India
• Startups in India are now spread across the length and breath of the entire country. The shift in global focus is on promoting women entrepreneurs and fostering an inclusive and innovative environment.
• Efforts are also being made by diverse stakeholders in the Indian startup ecosystem to elevate domestic policies in concurrence with global trends.
• Two decades ago, there were only a few active investors and a limited number of support organisations, such as incubators and accelerators. However, in the past decade. There has been a significant increase in both investment activity and infrastructure facilities to provide the much-needed impetus to the expansion of the Unicorn tribe.
As on June 29, as many as 103 unicorns have been established in India, with a total valuation of approximately $336 billion. A Unicorn is a term used to indicate a privately held startup company with a valuation of over $1 billion.
• Nearly 49 per cent of the startups are from tier-2 and tier-3 cities and 45 per cent of them are represented by women entrepreneurs.
• Startup ecosystem expansion is driven by rapid growth of startup hubs in tier-2 and tier-3 cities such as Ahmedabad, Jaipur, Kolkata, Kochi, Kanpur Chandigarh and Coimbatore.
• The role of the state government becomes very important in developing the necessary infrastructure and support to foster the startup ecosystem. Due to the given constraints of infrastructure and supporting services, India needs to build upon low-cost and high-impact solutions.
• Although there has been an increase in angel and venture capital funding, the amount invested must be augmented. It is crucial that the ecosystem is well integrated to connect startups to fund houses and other stakeholders.
• Startups do not thrive in isolation. While innovative business ideas are key to the success of a startup, support from various other organisations speed up the growth journey of a startup.
• The essential players that provide support to startups are Incubators, Accelerators, Mentors, Research Institutes, Local and Global Markets, and Funding Organisations.
Incubators: Incubators are facilitators that help startups grow their businesses, especially in the early stages. An Incubator is like a college for startups. Their focus is to provide support to startups in the form of providing financial assistance, workspace, training, networking, mentoring, marketing, and business management opportunities. Incubators can be state-funded or private, and within various Higher Education Institutions (HEIs).
Accelerators: Startup accelerators provide support to startups in their growth stages. This is usually done through a cohort-based program, providing support through education, mentorship, and funding. Acceleration programs usually culminate in a graduation or demo day. These programs are organized by corporates, incubators, state and central governments, and even HEIs. There are numerous accelerators in India, more than 150 of which are registered on Startup India Hub.
Mentors: Mentors guide startups throughout their growth journey by sharing knowledge and experiences with young entrepreneurs. They also provide networking opportunities for startups founders. Mentorship is provided by a wide range of experts, including corporate leaders, government officials, academic researchers, and various business leaders. Mentors can also register themselves on Startup India Hub and provide support to startup founders. HEIs also have dedicated mentorship programs for budding entrepreneurs.
Research Institutes: Research institutes provide knowledge support to startups to improve their products and services. In India, IITs have taken the lead and established centres to provide research support to the startup ecosystem.
Local and Global Markets: Access to markets is key to the growth journey of startups. Three major market resources for startups are corporates, government, and foreign markets. The government has been a proactive player in providing market access support to startups by simplifying public procurement rules and giving startups access to the Government e-marketplace (GeM) portal. Startup India has collaborated with various international stakeholders to promote startups in the international market. This initiative has enabled Startup India to support over 150 corporate and government departments in scouting startups and providing dedicated support and benefits worth Rs 25 crore. The government, corporations and investors support startups with initiatives such as soft-landing programs, which help in the launch of products and services in new markets in a controlled manner.
Funding: Funding refers to the money required to start and run a business. It is a financial investment in a company for product development, manufacturing, expansion, sales and marketing, office spaces, and inventory. There are multiple sources of funding available for startups. However, the source of funding should typically match the stage of operations of the startups. Raising funds from external sources is a time-consuming process and could take over six months to convert. The type of funding can be in the form of equity, debt, or grants.