The emergence of Start-Up wave in India is a relatively new phenomenon. India is today undergoing a
fundamental shift with entrepreneurship & innovation being primary catalysts in job creation and solving
everyday problems. A decade ago, there used to be only a handful of Indian Start-Up success stories
such as MakeMyTrip.com and Naukri.com. But now, with successes such as Flipkart, Quickr, Practo,
Zomato, and Inmobi, the Indian Start-Up Ecosystem has indeed come a long way.
A Revolution Unfolding in the Economy?
During 2014-15, more than 98,000 new companies were incorporated in India.2 According to a recent
study by Nasscom, India ranks third among global startup ecosystems with more than 4,200 startups
that employ close to 85,000 employees. With over $5 billion worth of investment in 2015 and three to
four startups emerging every day,3
it is projected that the number of Start-Ups in India will increase to
more than 11,500 by 2020, with job creation from these entrepreneurs reaching 250-300k by
2020.4 The number of Investors has also risen multi-fold in the past few years. At the same time, the
number of funds investing in India grew by 40% between 2013-14 and half of those funds were
investing in India for the first time.
Is it all Inclusive?
However, despite such promising statistics, only a small segment of the country’s population presently
falls under the ambit of the ecosystem. Only 9% of the Start-Ups have female founders/ co-
founders. 6Most of the startups as well as their backers and financiers are located in Delhi NCR,
Bangalore, and Mumbai. In fact these three cities along with Hyderabad, Pune and Chennai account
for more than 90% of the Start-Ups in India. Furthermore, majority of these are B2C ventures with
their focus largely limited to information technology enabled products and services including e-
commerce, aggregators, analytics, Internet of things , health-tech, and online payments.
All is not Well with this Start-up Movement in India!
Amongst all this, the product start-up sector has been largely ignored. In fact, India’s startup
successes are mostly about software enabled firms such as Flipkart and Ola , and rarely about
hardware product companies. The reason for this can be attributed to the lack of funds. Products
have to evolve from being a concept to a physical prototype and undergo various iterations before
they can hit the market. But unlike software ideas where even simplistic ones that can find ready
backers, products have to climb a steep arc to prove their worth in a market not known for its
manufacturing prowess. Without initial investment, product stat-ups would find it extremely difficult to
Likewise, India-based investors prefer to make a few relatively large investments of around Rs. 3
crores to Rs. 5 crores rather than spreading smaller investments across a large number of firms.
Startups looking for funding of less than Rs. 50 lakh therefore often struggle to access investors. In
fact, startups in India spend five times the amount of effort to raise funds as compared to US startups.