In modern India, ‘startup’ and ‘entrepreneurship’ have become buzzwords. Earlier, startups were not considered a good career option, but the scenario is changing because of success of startups like Byju’s, Nykaa, etc. On 16th January 2022, India also celebrated its first startup day. In this article, we are going to discuss the startup environment in India. Last year, multiple Indian companies became unicorns (having a valuation of more than $1 Billion). To add on, various initiatives by the government like ‘startup-India’ and the popular TV show ‘Shark Tank India’ has also helped in spreading awareness about startup culture in Indian households.
Startups vs Business
Before moving ahead, it will be beneficial for all if we provide a brief difference between startups and small businesses-
1) Vision and Innovations- Startups tend to be more creative and innovative where they have the vision to create a unique product for the market. On the other hand, small businesses run on traditional business models, where they serve local markets and focus on being profitable.
2) Funding- A startup is usually backed by venture capitalists which provide funds for various operations of the business in return for equity in the startup. While small business depends on sources like bank loans for additional capital requirements
3) Growth Strategy- Growth Strategies are a key differentiator between a business and a startup. Businesses use a steady model where they focus on increasing their profitability first and then expanding, they use a more cautious way to expand their operations. Comparatively, a startup uses a more aggressive growth strategy where the aim is to capture more and more market share to increase their sales
4) Profitability- A startup relies more on ‘increased valuation’ to increase the market price of equity to make returns rather than on profits from operations while a small business focus on increasing profit margin to increase profits
Startup scenario in todays’ India
India is becoming a startup country day by day. We rank third globally in the ranking (in terms of the number of startups). Approximately 13 startups managed to enter the Unicorn Club in 2021. This entry takes the total startup members of Unicorn Club to 55.In 2021, the Indian startup ecosystem hit a new high of $13.7 billion in investments, up 4% from 2017.India will be the second-largest e-commerce hub by the year 2034, the US being the first.To date, India has managed to have registered approximately 38,815 startups with fintech, ed-tech, and health tech sectors being the top categories in the number of deals.
The key sectors in the Indian startup ecosystem are:
E-commerce: Growing at a CAGR of 27% between 2019-2024. Popular startups: Flipkart, Nykaa, Snapdeal, etc.
HealthTech: Year on Year growth rate: 39% Popular startups: Pharmeasy, CureFit, Mfine, etc.
Fintech: Potential to reach $106 billion by 2025. Popular startups: PolicyBazaar, BankBaazar, PhonePe, etc.
EdTech: Potential to reach $30 billion in next 10 years Popular startups: Unacademy, BYJUs, Learning Delight, etc.
TravelTech: Potential to reach $11.11 billion by 2025. Popular startups: Yatra, GoIbibo, OYO, etc.
Logistics: Grow by 10.4% from 2020 to 2024. Popular startups: Delhivery, Blackbuck, etc.
Delhi surpassed Bangalore to become the new start-up capital of India in 2021. Delhi had 10 unicorns having a valuation of more than $1 Billion as compared to 9 in Bangalore.
Major reasons for thriving startup ecosystem in India
1) Increase in Internet users: Due to availability of cheap internet and covid related restrictions, Internet users have increased in manifold numbers. There are more than 600 million internet users in the country today. This has helped the startups especially e-commerce ones to establish an online market for goods and services.
2) Large Domestic market- India has a very huge domestic consumer market due to its large population which has helped startups to gain more and more customers.
3) Availability of talented and skilled labour- India also has a great supply of talented, hardworking and skilled people which are also available at far less cost as compared to western nations making it an efficient place where startups can grow and thrive
4) Government Incentives- Government also provide a lot of incentives to startups in the form of tax exemptions, loans at lower interest rates, less cost on filing patents etc. Startup-India campaign was also launched in Sept-2014 by government to promote entrepreneurship and startups in the country.
Major challenges faced by Startups in India
1) Financial Resources: Access to capital is critical for startups, and obtaining sufficient investments is usually a challenge. According to a recent report, 85 percent of new organisations are underfunded, indicating a high risk of failure.
2) Lack of Mentorship: One of the most serious issues in the Indian startup ecosystem is a lack of competent guidance and mentorship. The majority of entrepreneurs have fantastic ideas and/or products, but they lack industry, business, and market experience.
3) Income Generation: As the organization expands, many businesses fail owing to a lack of revenue generation. The challenge is not to generate enough capital but also to expand and sustain growth.
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