Startups and Unicorns have been the buzz words for a couple of years now and needless to

say, this decade has clearly been the decade for startups. All around the globe, the rise as well
as the fall of various startups can be seen. Same is the story for India as well. 

For every Oyo, Zomato, and Flipkart, there are countless other startups that were not able to
survive and had to shut shop. However, India has been doing quite well and has really grown
and built an ecosystem of startups for itself. This growth was not achieved in a day, and you
can continue reading to know more about how this was achieved.

Evolution of Startups in India

Before diving into how India evolved as a hub for startups, we should first know what a
startup actually is. A startup is a venture or a company that is started in order to provide
solutions to certain problems that have never been answered before or to provide better
solutions to the ones that are already existing.

The word startup is often related to Silicon Valley in the U.S., which saw the rise of so many
great startups like Facebook, Google, etc. However, now the dynamics around the world are
changing and that too very rapidly. Startups are now even related to Shanghai in China and
Bangalore in India. 

In fact, India ranks third in the global list of countries with the largest startup ecosystems,
right after the U.S. and U.K., and it seems like there is no stopping this growth. India
recorded additions of approximately 1300 new startups in the year 2019, with the figure for
the number of tech startups reaching to around 8900-9300. 

Business and trading is something that has been in the blood of Indians throughout. This is
something that can be seen in the history textbooks as well. However, there are certain
touchpoints in history that really helped in accelerating the startup growth.

There was a major turning point in the 1980s.This was the time when Rajiv Gandhi, the
current Prime Minister, introduced the Liberalisation of the Computer Industry, and it was
during the 1980s that N.A.S.S.C.O.M. was also launched. This really led to a growth of the
digital industry in India.

Another touchpoint to notice would be the year 2008, that is after The Great Recession. This
brought many economies to their knees, and companies all over the world started laying off
their employees. There was a constant fear among employees all over the world of losing
their jobs. 

This had a major impact on I.T. professionals in India. Many started looking for newer
alternatives, and many who were fired from their jobs decided to take a step forward in the
startup direction. Many famous startups in India like PolicyBazaar, Zomato, etc. were
founded during this period.

After this, there has been no stopping for startups in India. It has continued to grow at a large
rate. However, it is also important to know the reason why these startups have been growing
at such a rapid pace in our country. 

Reasons for Startup growth in India

The startup growth in India was something that was gradual in nature, and there are quite a
few reasons why India became such a sustainable environment for startups to thrive in. Some
of the major reasons are:

The pool of Talent - India has a pool of talent. India has a population that has a majority of
the younger generation. This shows the amount of potential that India has in terms of talent.
There are millions of students graduating from colleges and b-schools every day. Many of
these students use their knowledge and skills to begin their own ventures, and that has
contributed to the startup growth in India. In the past, much of this talent was attracted to
only the big companies, but now that is slowly changing. 

The cost of setting up businesses is low - India is a labor-intensive country rather than being
capital intensive. Also, the labour here can be hired at very cheap rates. So, compared to
some other countries, the cost of setting up a business here is comparatively low. In fact, this
is the reason why many multinational corporations as well, decide to set up their plants and
offices in India. This is one factor that was really capitalised by the startup owners as well.

Government Boost - This past decade has seen a massive startup growth in India and one of
the reasons for this could be attributed to the various schemes launched by the Government.
Some of the major schemes that were introduced to boost entrepreneurship were StartUp
India and StandUp India. The Government also tries to encourage ventures in new sectors or
in certain rural areas by providing subsidies to them. 

Increasing use of the Internet - India has the world’s second-highest population, and after
the introduction of affordable telecom services like Reliance Jio, the usage of internet has
really increased. It has even penetrated to the rural areas now. India has the second-largest
internet user base after China, and companies and startups can really leverage on this easy
access to the internet. Not only can it be used to spread the message about a new business, but
it can also be used to gather new information as well. So, communication has become much
easier. This is also one of the major reasons for the startup growth in India. 

The advent of Technology - The evolution of startups in India has also been due to the
advent of technology. This has led to businesses growing by leaps and bounds. Technology
has made the various processes of business very quick, simple and efficient. There have been
major developments in software and hardware systems due to which data storage and
recording has become a very easy task. Now because of the trend around artificial
intelligence and black-chain, many new startups are considering these options as well.

Variety of funding options available - Earlier there were only some very traditional
methods available for acquiring funds for a new business model, which included borrowing
from the bank or borrowing from family and friends. However, this concept has now
changed. There are numerous options and opportunities available. Startup owners can
approach angel investors, venture capitalists, seed funding, etc. This availability of options
and easy accessibility has also contributed to the growth of the startup ecosystem in India.

Startup Ecosystem in India

In 2014, there were approximately 29,000 startups in India. However, these numbers slowly
and gradually started rising. This number reached around 55,000 in 2020. Every day around
3-5 startups, new startups are born. In order to analyze the ecosystem that exists in India, we
can first look at the different industries in which these startups exist. 

Different sectors where startups exist

With the importance and encouragement given to digitalization and the Government’s
campaign of Digital India, the startup trend saw a  significant rise in the technology sector. In
2019, the number of tech startups in India grew to from 8900 to 9300 with around 1300
startups being added in the year 2019 itself. 

So, the startups sectors in India can be broadly divided into two segments- tech-based
startups and non-tech based startups. The tech-based segment includes sectors like Fintech,
E-Commerce, Edtech and Healthtech, whereas, the non-tech based segment includes Agri-
products, Construction, Textiles, etc. 

While sectors like e-commerce have become mature and seen a lot of growth, industries like
Fintech, Edtech and Healthtech have really been in the limelight recently. Let’s take a look at
some of these industries in detail.

Fintech Sector 

With the advent of technology, finance has grown from what it used to be traditional. Now,
technology is very much integrated in it, and it is growing rapidly. Robo Advisory, Insurtech
Digital Payments, etc. are all developing. 

This is definitely one of the up and coming sectors in the ecosystem of startups in India. It is
still in the beginning phase, but there is a lot of growth potential. With India moving towards
a cashless economy and digital payments gaining trend, Fintech is a booming industry. 

Also, India is one of the fastest-growing fintech markets in the world with its adoption rate
being ranked the highest, along with China. 

A good example of a company from this sector in India is,

Paytm, which was founded in 2010, by Vijay Shekhar Sharma. The company started off as a
prepaid mobile platform and a recharge platform. It created the Paytm Wallet for enabling
digital payments and also started e-commerce services on its website and mobile application.
Recently, it also started stockbroking services. Paytm is also a Unicorn, currently valued at
about $10 billion. It also has a lot of investment from foreign investors which include Alibaba
Group, Softbank, etc. 

EdTech Sector

This sector is also growing very rapidly, especially now during the coronavirus. Schools and
colleges have not been able to function properly, and many had to go online and embrace the
world of tech with the virtual mode. Due to this, the demand for online modes of learning has
also grown tremendously. 
Further now, with the New Education Policy that has been introduced recently, more
emphasis will be given to technology-driven education systems, with an introduction to
coding as well. 

According to a report, India’s edTech market might reach a value of $3.5 billion by the year
2022. This includes the estimation that Class 1-12 will create a valuation of about $1.7
billion, and post-class 12 will create a valuation of about $1.8 billion.

In the Edtech sector, one startup that has been doing really well is,

BYJU’S, which has enjoyed a significant growth potential in the past few years. The
lockdown attracted a lot of new customers to their website. During April, the company earned
a revenue of around Rs. 350 crore. Recently, taking advantage of the New Education policy,
Byju’s also acquired another ed-tech company called WhiteHat Jr. which provides coding
classes to school students.

This clearly shows how there is so much scope for growth in the education sector and how
technology can play a key role in the coming years and how new startups can leverage it.

HealthTech Sector

After IndiaStack, the next goal is the National Health Stack, which aims to do the same job as
IndiaStack and transform the way data storage works. This might help build the infrastructure
in the health care sector. The APIs for the National Health Stack also recently began with its
testing phase. If it works out well, then it might be a step in the right direction, which will
help make the hopes of health tech a reality. However, for that, it must be safe and reliable
for its users. 

In the midst of the Coronavirus Pandemic, India has been struggling in this war. However, in
order to fight this situation, Niti Aayog has even approached startups to come up with new
innovations that can boost the healthcare infrastructure of our country and also result in
solutions like telemedicine, conference solutions, etc.

Healthplix is a startup that provides software for clinical purposes to doctors. It provides the
service of Electronic Medical Record software (EMR) to doctors and also provides them with
the service of Clinical Decision Support (CDS) and enables the doctors to generate e-
prescriptions within seconds. Recently, the startup was able to raise funds to the tune of $6
million, which brings its total funding amount to around $10 million

Startup Geography

With India being a startup hub, it is also important to identify the major areas or cities, which
have seen tremendous growth in startups. Seeing the geography of India, it can be seen that
most of the startups operate in Tier-1 cities. The top 3 cities for startups in India are
Bangalore, Mumbai and NCR, which account for over 65% of the total startups that operate
in India. It is also important to know the reasons why these cities are so popular among
startup owners. 

The major hub for startups in India is Bangalore that holds around 27% of the total number of
startups in India. The reason for this is a large number of multinational corporations and IT
industries that have opened up in this city. This makes it a city which has a high corporate
culture, and for this reason, it is really conducive for the growth of startups as accessing
resources and raising funds becomes easier. 

Bangalore is ranked as one of the five fastest-growing startup cities of the world and was also
present in the list of the world’s 20 leading startup cities in the 2015 Startup Genome Project.

Delhi/NCR and Mumbai are also growing in terms of the number of startups. Delhi/NCR
accounts for 24% of the total startups in India, while Mumbai accounts for 17%. Mumbai is
also the finance capital of India, so it houses a lot of fintech startups, and Delhi/NCR also has
many startups. However, some believe that Delhi and the area around is not that safe for
women in general, and that is why the flexibility is less.

The ecosystem for startups is also developing in the Tier 2 cities. Cities like Pune,
Hyderabad, Kolkata and Ahmedabad are considered to be the emerging cities for startups.
Even Kerala, Chandigarh and Jaipur are emerging as startup hubs.

The road ahead

We may think that the future for startups has now become bleak due to the current
coronavirus pandemic. However, this is something that should not be worried about. We have
seen in the past as well, that it was the Great Recession that made many people think outside
the box. 

This led to the emergence of some very great startups that have now transformed into huge
companies. Whatsapp, Instagram, Zomato, Uber, etc. all were founded during the period of
recession. So one good thing about this pandemic could also be that it may have given an
entrepreneur just the right idea to start the next big thing. 

Also, many Indians in the U.S. right now are fearing for their jobs because of the H-1B visa
situation introduced by the Donald Trump Government. This is especially the case with those
working in the I.T. Industry. This might encourage the talent abroad to move back to India,
and this could further lead to some growth in the Indian startup industry. 

With technology emerging at a very fast pace, it would further lead to the growth of more
startups in the country, and with the different government initiatives, many people might be
encouraged. So, for now, the road for startups seems to be heading in the right direction. 

India is well on its way to achieving some great heights in the startup ecosystem. The
pandemic may impact the growth of startups, but this has also led to a huge demand for
various other services under different startup sectors in India, like ed tech and health tech. 

Other than that during the lockdown, many people had really started focusing on their health
and fitness, which has also led to the growth of some innovative startups relating to
mindfulness and fitness. Looking at these positive impacts, we can say that the growth of the
startup ecosystem in India will not be deterred.