Abstract
As a start-up, as India’s economy grows, so will the contribution of private equity and venture capital to the overall economy. It is also a fair acknowledgment of the unique requirements that these kinds of businesses need in order to maintain their business operations, which require innovation and size. Furthermore, adding that some of the outstanding start-up countries like India are adopting technology to transform areas such as healthcare and wellness, education, agriculture and allied sectors, clean energy, security, financial inclusion and exclusion and water management. The spirit of start-ups boosts the next generation of economies and serves as a one-stop solution to the fortunes of people in rural India and the thieving economy. The Start-up and Stand-up missions can help the youth in upgrading their skills to become entrepreneurs. With gig work gaining ground, deserving candidates can get lucrative offers for their services. The article addresses the issues and problems that start-ups in India confront. The startup eco system is closely watching the Indian business climate and critically assessing how much help is required from the Indian government with their new Digital India initiatives.
Introduction
An entrepreneur is someone who starts with a big dream but not necessarily with large resources. This mismatch is not an issue, but rather an inspiration, a catalyst for innovation. Our entrepreneurs have to brave emotional, mental and physical challenges as they work towards new ideas, but they have shown the determination to succeed. Upskilling technology to provide affordable education has reaped rich dividends during the pandemic period. Since 2016, Startup India has been a strong ecosystem for nurturing innovation and startups (Anand, 2016, February 16). The opportunities that concern the startup system at an early stage so that they can help startups write their new destiny. The horizons of innovation through inventions, through their collaborations and creating opportunities in newer sectors will help India truly achieve the state of being a self-reliant nation, that is, ‘Atmanirbhar Bharat’. There has been a transformational shift in confidence in the ecosystem. Entrepreneurs, in the face of very significant disruptions to their business, migrated entirely to have and then executed with residence, ingenuity and creativity. A company’s success depends on the integration of people, processes and technology. The startup must adopt a process that can be continually deconstructed, re-designed and deployed in response to disruptions. As a result of the epidemic, new standards have been set. Many companies that have been in existence for some time now need to find ways to test and verify their current processes against basic principles. It is necessary for them to reflect on how a 1.3-billion-person economy can continue to create products and services, have secure incomes and be celebrated for their contributions to society, all while going through hard times. The kinds of start-ups that concentrate on innovation may help older companies to innovate by opening up new process avenues (Anand, 2016, April 30; Anand, 2016, December 21).
Indians constitute one of the three biggest startup ecosystems in the world. India, as a burgeoning startup ecosystem, needs a push in the direction of ubiquitous incubators to foster substantial networks for mentoring and infrastructure to support emerging businesses. While India has emerged as the world’s third largest startup ecosystem, with 50 firms valued at over US$1 billion, or ‘unicorns’, the sheer entrepreneurial acumen and worthwhile struggles of individuals have created enormous success. This can be done through startup incubation and institutional support. Incubation is undoubtedly necessary and merits resources and funds. The NASSCOM figures indicate that till 2016, India has gained a total of 1,400 new companies, bringing the number to over 4,750. Inefficiencies in logistics, healthcare, education and financial services start-ups in India are being solved using machine learning and artificial intelligence. Start-up technology companies are considered crucial in regards to invention, production, growth and employment, with their introduction aiding a country’s competition. Looking into phenomenal growth witnessed by the startup India movement; even though, a massive digital disruption in India to enable technology to leapfrog in the post covid-19 era. However, the initial public offer (IPO) success of Zomato and Nykaa will boost the confidence of other startups in encouraging venture capitalist and private equity investors to back more domestic startups.
Stated the Start-ups Added from 2013 to 2017.
The Investment in Startups by Rounds During 2014 to 2018.
Trend of the Start-ups Added from 2013 to 2017.
Proactive institutional behaviour is unlocked when new technological breakthroughs in emerging technologies like big data, artificial intelligence, machine learning and cloud computing spawn startups. Ratan Tata backed retail tech start-up Snapbizz has partnered with HDFC Bank and ICICI Bank to launch new digital solutions for 300,000 kirana stores (micro grocery shop). Snapbizz said that its solutions allow kirana stores to carry out store operations efficiently. It provides store owners with their very own consumer app to acquire new customers and serve existing customers better. Its solutions integrate kirana stores via the cloud with FMCG brands, distributors, wholesalers, financial service players and e-commerce firms (B2B and B2C). Since its inception in 2013, the Bengaluru based start-up has transformed 13,000 kirana stores across 110 cities into ‘virtual supermarkets’ with its Android-/Windows-based cloud platform solutions.
Top 10 Startup Investors in India During 2018.
Fund-raising by Angel/Seed Capitalist Start-ups.
Fund Raising by Venture Capital (all senses).
India still has one of the youngest populations in the world, putting it in a unique sweet spot wherein the working-age population is more than the non-working age. Leveraging the demographic dividend and adoption of digital technologies has put us in a prime position to embark on a journey of rapid growth. Start-up activity in the country has been severely impacted because of the Pandemic/lockdown of the COVID-19 pandemic. Startup India is a remarkable player as they are a very young start-up, launched just five years ago in January 2016. Its success is an outstanding representation of the magic we can create with the trifecta of mission-driven policy-making, impactful implementation and partnership with the people. Startup India functions as and embodies the ethos of an impact-driven, high-growth start-up and has made start-ups central to both the people and the government. This can be witnessed in its unprecedented success in the last 60 months, which made India the third-biggest start-up ecosystem in the world today. Further, the number of start-ups has grown from just 4,000 registered start-ups in 2016 to 50,000 today (80,000 as per market estimates). Four new start-ups join their ranks every hour, a statistic that is unparalleled globally. They rank third globally in the number of unicorns, which are also among the largest and fastest-growing in the world. Despite the pandemic and lockdowns, one unicorn was created every month in India during 2020–2021.
A great deal of investment is desirable in start-up enterprises in India, and the government has begun the evaluation process for the Indian Start-ups Programme. Further, start-ups are assisted by the government-backed Small Industries Development Bank of India fund, which offers US$100 billion in seed funding (SIDBI). Start-up companies are not directly funded by the fund de funds; rather, funds are provided through alternative investment funds (daughter funds) known as registered AIFs (AIFs registered with the SEBI). Department for Promotion of Industry and Internal Trade (DDPIIT) has registered 28,979 startups as of 1 March 2020, as a result of the Startup India activities that were launched on 16 January 2016 (Suneja, 2020). The Securities and Exchange Board of India (SEBI) eased the eligibility and listing criteria for the so called Innovators Growth Platform (IGP) a separate exchange venue for new age start-ups.
Fund Raising by Venture Capital (all senses).
Government of India’s Start-up Policy
Days Recount for Starting a New Business in India.
Ranking of India in “Doing Business” from 2017–2018 to 2018–2019.
The International Monetary Fund projects that, despite COVID-19, India will regain its position as the fastest-growing major economy. Indeed, the pandemic became an opportunity for Indians to capitalise on their frugality and adaptability. Our reputation for frugal innovation, creating with morsels, was not lost during this time as start-ups, MSMEs and large companies joined hands to meet the needs of the hour. Start-ups have become the lens through which India views its future as a leading global economy. They represent a society that is increasingly self-confident and self-empowered. Firms are necessarily required to apply for recognition with the Department of Promotion of Industry and Internal Trade (DPIIT) to avail themselves of benefits such as self- certification, reduced compliance requirements under environmental and labour laws, fast-tracking of patent applications along with IPR protections, easier winding up and public procurement norms, etc. Start-up recognition by the DPIIT is based on specified criteria such as date of incorporation, turnover and business activities. Additionally, to receive income tax benefits, DPIIT-recognised start-ups must obtain a certificate from the Inter-Ministerial Board (IMB) of DPIIT. A traditional partnership firm recognised as a start-up can avail itself of benefits provided by the Indian Government under the Startup India programme. DPIIT grants start-up recognition to traditional partnership firms as well, if they meet the required criteria. However, the income tax holiday for start-ups and the deferral of tax on ESOPs are available only upon obtaining a specific certificate from the IMB, which is granted to startups incorporated as private limited companies or LLP. Nevertheless, a recognised start-up housed as a traditional partnership firm can get an exemption from angel tax, subject to specific conditions of the DPIIT. A start-up incorporated abroad—an entity incorporated outside India—is not eligible for benefits under the Startup India programme. Start-up recognition is granted by the DPIIT only to those entities which are incorporated in India as a company or registered in India as a traditional partnership firm or LLP. A Start-up set up abroad cannot avail itself of benefits given to Indian start-ups, even if it has major operations in India. However, such foreign start-ups can register on the Startup India Hub to interact and exchange information with other start-ups.
Fund-raising by India’s Startups (IPO) Route .
Indian innovators are also deftly navigating the cutting-edge and increasingly crowded start-up ecosystem in the country. They have successfully identified disruptive sectors and created products that add genuine value to a consumer’s experience. From a hotel aggregator to an e-marketplace for fashion products, from a ride-hailing company to a digital payments one, each new start-up has been a game-changer in the lives of millions of Indians and how they interact with the internet each day. This is a most remarkable achievement given that the internet is still very young in the country and people’s relationship with it is still in a very nascent stage. Another remarkable aspect of the story of start-ups in India is that many of them—45% of all start-ups, in fact—are run by female leaders. They are leveraging technology to capture previously untouched sectors such as fashion, beauty, animation and inventory management. Female leaders are also helming some of the largest start-ups in finance, e-commerce, and travel. These start-ups are championing gender equality and greater workforce diversity. This is a significant positive impact on the Indian start-up ecosystem and is sure to have a lasting impact on Indian society and the economy.
Digital Payment Startups in India.
Digital Payment Startups in India.
India capitalises on ‘Demographic Shift’. Thus, India has a large percentage of the population under 30. It means all companies, whether farm, automotive, FMCG or any other sector, will focus on markets like India. A further important need for raising productivity levels is growing investments in human capital. This is enhancing the momentum of startups. Mobile-first solutions and ramification technologies are the future of education. Imparters are also for teachers. Ed-Tech start-ups are creating mobile first with a technological breakthrough. Driving tech transformation at the scale of India requires a deep understanding of the challenges of scale and complexity that come with India’s linguistic diversity, literacy gaps, socio-economic barriers, and finding a sustainable model with the right unit economics. With improved connectivity, lower data costs and more affordable access to personal computing devices through smartphones, India has laid the foundation to deliver the benefits of the internet to a very large section of the population. Further, witnessing is a country in transition. There is a huge momentum in the adoption of the internet and its different offerings. The flourishing start-up ecosystem that is building new-age businesses to cater to this growing online population, as well as legacy industries that are starting on their digital transformation journeys.
Problems and Challenges of Start-ups in India
The Agriculture Startups in India.
The Startups in India.
The right amount of skilled human resources in digital transformation is the key to ensuring substantial and measurable success. The demand for people skilled in digital technologies has increased tremendously over the last decade, as has the demand for those with consulting skills. It is pertinent to take into account that not only with business leaders, but also with government officials, decision-makers, institutions and influencers, to make plans about where to direct funds, which industries to invest in, and how to best train workforce for emerging technologies. Traditional roles and solutions are being disrupted by changing needs, new digital technologies and novel business models. India has the unique opportunity to leverage advanced digitalisation and smart infrastructure technologies to create an extraordinary competitive advantage. While some large firms in India have been quick to embrace the digital world, the bulk of small and medium businesses (SMEs) in the manufacturing sector have yet to adopt such technology. Only when the SME sector engages with improved technology and skills can manufacturing expand sustainably. SMES can improve efficiency through digitalisation to combat scale, lower production costs, decrease manufacturing errors and cut production time.
With Atmanirbhar Bharat aiming to create scale and capacity for Indian companies, reforms are a must to make India’s enterprises globally competitive. The body ‘National Lending Corporation’ should have three board mandates; (a) Defining guidelines for identification of individuals and businesses who are truly financially underserved; (b) Standard lending and collection processes; and (c) improving the financial literacy of borrowers. It is estimated that the credit demand from MSMEs and consumer would be more than US$1 trillion by 2023, with a third of itlikely to be lent digitally Girotra (2021). In the Revival package of post-COVID measures, the Finance Ministry had announced several measures, such as (a) US$200 billion subordinate Debt; (b) US$3 trillion collateral-free automatic loans or Emergency Credit Line Guarantee Scheme; (c) US$500 billion equity invision through MSME fund of funds; (d) a new revised criteria for classification of MSMEs; (e) a new registration of MSMEs through ‘Udyam Registration’ for ease of doing businesses; and (f) no global tenders for procurement up to US$2 billion
Layoff of Start-ups from 25 March 2020 to 1 June 2020.
One of the biggest challenges for e-commerce startups is finding a way to have their products delivered to their customers’ homes. The most rapid growth of the start-up sectors in China and Israel are the biggest threats to India due to a lack of ‘ease of doing business’. Furthermore, as per the NASSCOM—Zinov report for 2016, Bengaluru, NCR and Mumbai accounted to 70% of the total share of start-ups (Basu & Pramanik, 2016). India’s leading ecommerce firm, Flipkart, is now in the hands of US-based ecommerce giant, Wal-Mart. Paytm is in an expensive mode. It is expected to start its much-awaited payments bank and will also launch a market place called ‘app paytm mall’. The vast majority of Indian startup businesses have problems with corporate governance, mishandling of finances and gender discrimination. As StayZilla’s co-founder, Yogendra Vasupal, has been arrested, it became insolvent owing to unpaid vendor fees (Tanwar & Sharma, 2017).
In the long run, the Indian start-up ecosystem has the potential to be the country’s development engine. The US$90-billion consumer internet industry in India will reach US$800 billion in gross merchandise value by 2030, according to Redseer Consulting. The public sector, on the other hand, plays a critical role in establishing appropriate safeguards to guarantee that developing technologies maximise their beneficial effects while avoiding any possible dangers. The perception of start-ups as a danger to incumbents must be altered, and a culture of collaboration and synergy must emerge. Moving away from the notion of a zero-sum game, a multi-stakeholder approach is critical. Stakeholders working with corporations, start-ups, universities and venture capitalists get insight into new and future product and service development, revealing opportunities to be explored further in collaboration with start-ups. Strong ecosystem-level shifts are allowing new business models to emerge, which bodes well for the unicorns of the future (Khan, 2016, 2017).
Conclusion
The world is going through a disruptive COVID-19 pandemic. The start-up ecosystem in India is emblematic of these changes. It paints a picture of a future that is yet more prosperous for India and, indeed, the world. A start-up is a new business centred around innovation or aggregation or both. Start-up, as a business, has caught the attention of young generation bubbling with enthusiasm and ideas but with little or no resources. Startup India, Standup India, an initiative to promote start-up formation in the nation, was started five years ago with the goal of motivating a movement to promote start-up development in order to help drive economic growth. India has now risen to third place in the global start-up economy. Encouraging start-up development in India is being aided by a supportive ecosystem of incubators and venture capitalists that has brought in over US$70 billion in total investment over the last three years. Inc42 Plus, by using time series forecasting, predicts that companies will raise about US$13.4 billion in equity in 1,000 transactions in 2021. The spirit of start-ups have required different techniques to evaluate the value of entrepreneurial company initiatives that focus on introducing new goods or services utilising unique ideas or technology.
Footnotes
Declaration of Conflicting Interests
Funding
The authors received no financial support for the research, authorship and/or publication of this article.