Ankur Mittal

Co founder ,Inflection Point Ventures

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Startups Driving Economic Growth

With improving digital infrastructure, rural startups are emerging fast. It is important to note that as more rural startups are launched and funded, it will help in improving the lives in remote rural areas and empower more entrepreneurs waiting in the wings to take off

India aims to become a $5 trillion economy by 2024, an ambitious goal but not completely impossible. However, it can only be achieved through the combined efforts of both the government and the private sector, and startups will play a very important role too. 

A startup is essentially a company with a business model that encourages innovation. Successful startup companies can be described as disruptive, innovative, scalable, and fast-growing. For over a decade now, we have seen Indian startups continuously raising the bar with new technologies being heralded to solve real life problems, tap into different market gaps across industries, leveraging tech to help many old economy business transform into a more new age high impact business models. This has not only benefitted the end users and startups but it has created multifold benefits for the economy, tech adoption and even in generating employment.  

According to several industry reports, as of 2022, there are 59k+ startups in India, out of which, around 5.4k startups are funded with a total funding of $135 billion and 108 startups have attained the status of unicorn. Further, India currently ranks 3rd in the unicorn race globally. With more than 60,000 registered startups in India, the ecosystem has the potential to contribute 4-5% to the country’s gross domestic product (GDP) over the next three to five years. 

With improving digital infrastructure, rural startups are emerging fast. It is important to note that as more rural startups are launched and funded, it will help in improving the lives in remote rural areas and empower more entrepreneurs waiting in the wings to take off. Another important thing to note is that rural startups don't require large cheques as they don't necessarily burn too much given the initial scale but deliver high impact services to their users.  

The space is not limited to any one sector. We are seeing rural startups in education, healthcare and even fintech where they are rolling out solutions that can bridge the gap between Bharat and a more digital savvy India both physically and socially. The impact has already been seen in terms of empowerment and awareness of rural consumers of such startups. 

The Government is also actively working with the industry to support startups coming from tier 3 and 4 cities through their Fund of Funds structure. Close to Rs 8000 crore have already been committed to AIF funds to enable startups’ access to domestic capital. The Govt has also launched MAARG portal with an aim to be a one stop shop for first time founders who can connect with establishing mentors and industry leaders for seeking guidance on how to scale, raise funds and grow their businesses.  

As India has a massive, diverse population with many talented individuals in search of work, it is essential to develop state ecosystems by establishing a startup policy, startup portal, and helpline within every state. Creating incubation centres, co-working spaces, entrepreneurial cells, and instilling an entrepreneurial spirit in every student at a young age is even more necessary. 

In this context, last year, to encourage startups and entrepreneurship at an early stage, BITS Pilani allowed its students a year off to build startups. The Institute recently came up with the “BITS innovation and startup policy of 2022” that would be a guide in setting resource plans to achieve entrepreneurship goals. Elsewhere, many leading educational institutions now have incubation centers and often have different schemes that provide funding the startups (both dilutive and non-dilutive in form of grants etc) 

There are a lot of ecosystem enablers which work at grass root level to build and enhance the ecosystem. In the Indian startup ecosystem, traditional VC (venture capital) funding has been on a tear for almost a decade. But with several new companies entering the ecosystem every year and macro disrupters like the pandemic and a funding winter impacting the world of business, the VC segment has also seen significant changes. The rise of micro VCs, who are aggressively focusing on pre-seed and seed funding stage startups, is giving the right impetus to early-stage ecosystem growth and maturity. Investors are active in the early stages, investing in India’s strong and deep pool of founders and talent. Early-stage investments offer more ‘bang for the buck’ in this ecosystem, allowing for longer bets with less pressure on immediate returns. Furthermore, the capital efficiency of Indian early-stage startups has helped them remain attractive to both domestic and foreign investors. Critical role is also being played by angel investors who are now viewing startup investing as a viable investment alternative. Investment platforms are also harnessing the collective knowledge of their member base to not only fund startups and help them become successful, which will in turn contribute to the success of the country.  

While the majority of the current unicorns are focused on India’s consumer play, a significant number of Enterprise SaaS companies have gone global and are poised to become go-to for growth-stage investors in the upcoming years. Irrespective of any sector in which a startup is into, the investors focus shifts to profitability and unit economics for higher valuation rounds, mentoring-led investment models at an early stage can bring in a paradigm shift in the way seed startups evolve and scale. 

Some unique sectors that are emerging / gaining traction in the coming years are- cleantech / sustainability with a focus on reducing carbon footprints of businesses and end users, drone technology with unmanned aerial vehicles (UAV) are gaining popularity, Electric vehicles will be a growing trend in the transportation industry. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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