A vibrant start-up ecosystem in the country is primarily led by business-to-consumer (B2C) companies focused on easing public service delivery and driving efficiencies in various sectors, which is reflected in the fact that private funding received by such firms are nearly double of that by those operating in the business-to-business (B2B) space, the Economic Survey said.
While B2B start-ups raised close to $1 billion in funding in 2014, managing to shore it up to about $3.5 billion in 2018, B2C start-ups received close to $8 billion funding last year, a significant rise from over $4 billion it attracted in 2014.
“Ranked third in the world in the start-up ecosystem, a growing number of domestic Indian enterprises are developing solutions aimed at managing and solving urban challenges,” The Survey said. It added that while a majority of these are tech start-ups concerned with e-commerce and consumer products and services, B2C firms in the waste, water and energy space were emerging slowly.
The Survey noted that tier-II and tier-III cities contributed nearly 47% of all such firms. Moreover, 46% of recognised start-ups have at least one woman director. As on March 1, 2019, 16,578 new start-ups were recognised across 499 districts. Maharashtra, followed by Karnataka and Delhi, are among the top ten performers in terms of state-wise distribution of recognised start-ups in India. As per industry-wise distribution of recognised start-ups, IT services accounted for around 15% followed by healthcare and life sciences at around 9% and education at 8%.
The Survey noted that the government has taken several initiatives to boost the start-up economy. Steps have been taken for easing regulations such as exemption from income tax on investments raised by start-ups while 22 regulatory reforms have been implemented to improve ease of doing business.
“Continuing the creation of an ecosystem for private investment, especially in the new economy, is therefore critical to enable the virtuous cycle of investment, demand, exports, growth and jobs,” the Survey said. It pointed out that tax policy and its implementation for start-ups must be rationalised to foster innovative investments in the economy.
Fund-raising by the country’s start-ups touched $7.5 billion in 2018 from $3.5 billion in 2016, according to the survey. Retail sector led fund-raising, having mopped up about $2.09 billion in 2018, followed by food sector ($1.65 billion) and fintech space ($1.4 billion), the survey showed.
Oyo Hotels & Homes, Byju’s, Paytm Mall, Zomato and Swiggy are among the start-ups to have raised most capital last year. While Oyo raised $1 billion in 2018 led by SoftBank and other investors, Swiggy too walked away with $1 billion funding from South Africa-based Naspers and other investors.