Start-ups are relatively young in India, and they are attempting to survive, and sometimes succeeding, in the Indian ecosystem. The idea of start-ups has appealed to the country's youthful innovators and creators, thanks to government assistance and growing worldwide investors ready to invest in India. However, due to various limitations, the voyage of a start-up is not as straightforward as it looks, particularly in the Indian economic climate. According to a study conducted by IBM Institute for Business Value (IBV) and Oxford Economics, 90% of Indian start-ups fail within the first five years due to a lack of innovation and unique business ideas. Startups and unicorns have been buzzwords for a few years now, and it goes without saying that this decade has undoubtedly been the decade of startups. We've watched the growth and demise of several startups all across the world. The same may be said for India.

In 2021, the Indian startup ecosystem performed admirably. The growing investor confidence in Indian businesses is astonishing, and it can be observed gaining traction at many phases of a startup's growth, including early-stage funding. Early-stage investments in potential businesses are accelerating the entrepreneurial ecosystem and are seen as attractive investment possibilities by a wide range of investor communities, including high net worth people (HNIs) and ultra-high net worth persons (UHNIs).

There are innumerable other startups that failed to exist and had to close shop for every Oyo, Zomato, and Flipkart. However, India has done fairly well and has evolved and built a startup environment for itself. This increase did not happen overnight, and you can read on to know more about how it happened.

Evolution of Startups in India

Before delving into how India grew as a startup hotspot, we should first define a startup. A startup is a venture or a firm that is formed in order to provide solutions to previously unanswered problems or to provide better solutions to those that currently exist.

The term startup is frequently associated with Silicon Valley in the United States, which saw the rise of many renowned firms such as Facebook, Google, and others. However, the dynamics of the world are changing, and they are changing quickly. Startups are now even associated with Shanghai, China, and Bangalore, India.

In fact, India ranks third on the global list of countries with the greatest startup ecosystems, trailing only the United States and the United Kingdom, and it appears that there is no stopping this boom. In 2019, our country added roughly 1300 new firms, with the total number of tech startups estimated to be between 8900 and 9300.

Throughout history, Indians have been involved in business and trading. This is something that may also be found in our history textbooks. However, there have been specific historical touchpoints that have significantly aided in the acceleration of startup growth.

So, if we try to sketch out a general timeline of when this increase began, we can probably argue that a big turning point occurred in the 1980s. This was the time when Rajiv Gandhi, the then Prime Minister, announced Computer Industry Liberalization, and it was also during the 1980s that N.A.S.S.C.O.M. was launched. This accelerated the expansion of India's digital industry.

Another noteworthy touchpoint is the year 2008, which occurred following the Great Recession. This pushed many economies to their knees, and businesses all around the world began laying off workers. Employees all throughout the world were constantly afraid of losing their employment.

This has a significant impact on Indian IT professionals. Many people began seeking for other alternatives, and many people who were laid off opted to start their own businesses. During this time, many well-known firms in India, such as Policy Bazaar and Zomato, were founded.

What led to the start-up boom in India?

In the twenty-first century, start-ups in India have grown dramatically and are now key contributors to economic growth and development. There were a few start-ups in the 2000s, but India was not ready to absorb this idea into its ecosystem at the time due to weak economic policies, little mentoring, and few investors willing to invest. However, in 2014, start-ups began to emerge, primarily in Bangalore, but also in Mumbai and the Delhi-NCR region. The concept of self-employment appeals to India's young brains, and government programmes such as the Make In India campaign are in line with their requirements. This resulted in many policy reforms and act revisions to promote young entrepreneurs, which enhanced the flow of investors into the Indian start-up ecosystem. Furthermore, with the debut of Reliance's telecom venture Jio in 2016, which offered cheap mobile data, the internet reached even the most distant corners of India. Other factors influencing the growth of start-ups include:

Large Indian Market: India's diversity in culture, religion, and language has aided start-ups in developing products that are tailored to the needs of a certain population. This becomes their USP, which in turn entices investors to support the startup.

Fast-paced business environment: In an uncertain and shifting business ecosystem, organizations are constantly under pressure to innovate in order to get a foothold in the market. Other corporations may invest in or purchase start-ups in order to improve their own uniqueness.

According to the Startup India Portal, India has around 50,000 start-ups and is the world's third largest ecosystem. Start-ups are increasingly sprouting up in tier II and tier III cities like Pune, Ahmedabad, and Kochi. Furthermore, investment flows from Chinese, Japanese, and Singapore-based investors are increasing.

India's entrepreneurial ecosystem

India's entrepreneurial ecosystem is the third largest and fastest expanding in the world. Over the last decade, the number of new firms founded has continuously increased, with an extraordinary 10,000 companies formed in 2015 alone. The finance scenario appears to be improving, with Indian companies raising more than US$10 billion in 2015.

The present surge of startup activity and the growing ecosystem have their roots in the country's post-liberalisation economic activity. The Indian economy was liberalised in the early 1990s. International multinational enterprises (MNEs) from a variety of industries establish operations in the country, resulting in increased rivalry and pushing domestic firms to catch up with their foreign competitors. Over time, the Indian subsidiaries of major MNEs, as well as indigenous enterprises, have gradually improved their ability to innovate for the global market. During the same time period, the Indian software services industry experienced a meteoric increase as a result of low-cost highly qualified employees and reliable connections, allowing for remote deployment of software and software-enabled services. Companies like Infosys, Wipro, and TCS became pillars of the new information economy, creating enormous employment, income, and a variety of capabilities.

The recent boom in startup activity builds on this knowledge economy basis, resulting in the formation of several highly valued technology-driven firms. At first look, the ecosystem appears to have all of the necessary components in place, including a vast market, high-quality talent, and access to capital. However, there is circumstantial evidence of various simmering concerns. For example, the rate of entrepreneurial exits in the ecosystem is relatively low, whether through acquisitions or IPOs. Only through a successful exit do entrepreneurs and venture capitalists see a return on their investments. In the absence of exits, resources are trapped, liquidity is scarce, and entrepreneurial recycling that can sustain the next generation of entrepreneurs is stifled. Another concern is India's culture of poor tolerance for failure and its impact on entrepreneurship, which has a high failure rate. This is especially important in a setting where successful exits are few and far between. Another difficulty is the fragmented and cost nature of the Indian market, which casts doubt on its ability to support highly successful enterprises.

Reasons behind India's Entrepreneurship Growth

The Talent Pool - Our country has a talent pool. India's population is dominated by the younger generation. This demonstrates the amount of skill that our country possesses. Every day, millions of people graduate from colleges and business schools. Many of these students use their knowledge and talents to create their own businesses, which has contributed to India's startup explosion. Previously, much of this talent was drawn to only the largest corporations, but this is steadily changing.

The cost of establishing a business is low- India is a labor-intensive rather than a capital-intensive economy. In addition, labour can be hired at very low prices here. As a result, when compared to other countries, the cost of establishing a business here is relatively inexpensive. In fact, this is why many global firms choose to establish facilities and offices in India. This is another factor that the company entrepreneurs took use of.

Government Support - The last decade has seen a significant surge in startup activity in India, and one of the reasons for this might be credited to several government initiatives. StartUp India and StandUp India were two big initiatives to encourage entrepreneurship. By granting subsidies, the government also strives to stimulate ventures in new sectors or in specific rural areas.

Increasing Internet Use - India has the world's second-largest population, and with the arrival of low-cost telecom services such as Reliance Jio, internet usage has skyrocketed. It has now spread throughout the countryside. After China, India has the second-largest internet user base, and businesses and startups can benefit greatly from this simple access to the internet. It can not only be utilised to spread the word about a new firm but it can also be used to obtain fresh information. As a result, communication has gotten considerably simpler. This is also one of the primary drivers of startup growth in India.

The advent of Technology - The introduction of technology has also contributed to the evolution of startups in India. This has resulted in enterprises expanding by leaps and bounds. Technology has made several business procedures very rapid, easy, and efficient. Because of significant advancements in software and hardware systems, data storing and recording has become fairly simple operation. Many new firms are now contemplating these possibilities as a result of the trend around artificial intelligence and blockchain.

Availability of a variety of funding choices - Previously, there were only a few relatively traditional techniques for acquiring funds for a new company model, which included borrowing from a bank or borrowing from family and friends. However, this notion has since evolved. There are countless possibilities and prospects. Startup founders can contact angel investors, venture capitalists, seed funds, and other sources of capital. This availability of options and ease of access has also helped to the expansion of India's startup ecosystem.

The road ahead

We may believe that the current coronavirus outbreak has made the future of entrepreneurs look dismal. However, this is not something to be concerned about. We have seen in the past that the Great Recession caused many people to think outside the box.

This resulted in the development of some fantastic businesses, which have since grown into massive corporations. Whatsapp, Instagram, Zomato, Uber, and other companies were launched during the recession. So, one positive aspect of this pandemic may be that it provided some entrepreneurs with the inspiration to launch the next big enterprise.

Furthermore, many Indians in the United States are currently concerned about their careers as a result of the Donald Trump administration's H-1B visa policy. This is especially true for those in the information technology industry. This may attract talent from other countries to return to India, leading to additional expansion in the Indian entrepreneur economy.

With technology evolving at such a rapid speed, more companies will emerge in the country, and many people may be motivated by the many government efforts. With the availability of innovative talent, potential markets distinguished by favourable government policies, and capital infusion from established corporates, this early-stage cycle of investment in the Entrepreneurial ecosystem has become a profitable prospect for both domestic and worldwide investors. Rising investor interest in India's entrepreneur’s ecosystem is fueling an infusion of new ideas and vice versa, raising the bar for excellence, growth, return, and investment risks. So, for the time being, the road for entrepreneurs appears to be headed in the right direction.