‘With Covid interruption, sustainability of Indian startup ecosystem will be the focus in coming year’
September 28, 2020 11:53 AM
India has transitioned to a 'Purpose-driven' entrepreneurship from 'Necessity-driven' entrepreneurship as depicted by the latest ranking of the country in three out of four parameters introduced by Global Entrepreneurship Monitor (GEM) consortium.
The SCO Start-up Forum will facilitate sharing of best practices and knowledge, foster engagement of corporates and investors from member states.
By Dr. Satya Ranjan Acharya
The World Intellectual Property Organization’s (WIPO) annual Global Innovation Index 2020 have brought some cheer to the sombre socio-economic landscape of the country. For the first time, India is placed in the list of top 50 innovative countries in the world. It has effectively climbed four spots to finally make its mark as one of the next innovation destinations. It is no small feat considering its relatively late entry to the innovation and start-up milieu. However, the ongoing pandemic has thrown a spanner in India’s growth impacting all major sectors, including innovation. Is it possible to overcome this? Yes, and in fact, the pandemic has granted us with a propitious opportunity to shrug off apprehensions and work towards creating an even more conducive innovation eco-system. And creating avenues for entrepreneurship in every sector and strata of society is one way to go about it.
Such rankings are not just recognition, but a realistic assessment of where a country stands in terms of creating avenues for new ideas to grow and flourish. And for a country with a demographic dividend at its disposal, it is important to consistently improve its innovation quotient. The jump in the global innovation index rankings is a result of India’s work in the field of building knowledge capital, vibrant startup ecosystem, and research work by public and private organizations. It is time to do more such research and groundwork to seize the innovation momentum.
In the past decade, the start-up ecosystem in India has witnessed growth at a sustained pace. As per the State of Indian Startup Ecosystem Report 2020, more than 55,000 startups have been launched in India till date, out of which more than 3,200 startups have raised $63 Bn in funding in the last five and half years alone. With 34 unicorns, India is the world’s second-largest startup ecosystem. Government policies and initiatives have helped to make start-up and enterprise creation mainstream more than ever.
However, owing to the pandemic there is a trend of decline in investment in start-ups in 2020 according to the State of Indian Startup Ecosystem Report 2020. To spur innovation, government and corporates now need to focus on being prominent stakeholders in the system. They can effectively take on the role of venture capitalists and provide market access, funding, and guidance to early-stage start-up. Further, corporates can establish accelerators and play mentor to the MSME and mid-stage start-up sector. This phenomenon is still at a very nascent stage in India and needs to be encouraged.
In creating a robust start-up ecosystem, apart from the central Government, various states have also provided the impetus through their nuanced policies and initiatives. The state of Gujarat has a well-structured startup ecosystem with a specific focus on incubation, regulatory support and awareness as well as outreach initiatives. The government launched the state’s startup policy in 2015 under the Industries and Mines Department. The policy offers benefits and incentives across various areas of intervention to startups. Gujarat is one of the few states in the country to outline sector-specific startup policies such as Electronics & Information Technology (IT) Policy and Student Startup and Innovation Policy (SSIP).
The state has many prominent startup incubators and accelerators which have contributed to the strong growth of the startup ecosystem. As per DPIIT’s State Startup Ranking 2019, Gujarat has again emerged as the best performer in developing the startup ecosystem for budding entrepreneurs. Gujarat has a well-developed ecosystem of incubators, accelerators and co-working spaces. Ahmedabad, Vadodara and Surat have come up as start-up hubs as many of the universities in these cities provide student innovators with incubator facilities. The efforts of this startup enabler community along with the state government’s emphasis on entrepreneurship and innovation has resulted in many startups thriving in the state. The Government of Gujarat has worked on the policies, created a pipeline, and built a platform for enablers to facilitate new enterprise creation.
While the Indian start-up scene has diversified from tech to B2B sectors, there are still many sectors that remain untapped. To build a robust research-backed entrepreneurial ecosystem is the need of the hour. In the past 4-5 years, there has been a spur in business incubators at universities and academic institutes that are not only helping in creating a new batch of entrepreneurs but also providing valuable insights on country’s entrepreneurship quotient. India has transitioned to a ‘Purpose-driven’ entrepreneurship from ‘Necessity-driven’ entrepreneurship as depicted by the latest ranking of the country in three out of four parameters introduced by Global Entrepreneurship Monitor (GEM) consortium. GEM Consortium, which studies entrepreneurship ecosystem in 50 countries every year, has incorporated four parameters in 2019-20 Adult Population Survey (APS) to fully reflect the nuances in motivations for founding contemporary start-ups.
India now ranks first among 50 economies with around 87 per cent of the total early-stage entrepreneurs agreeing ‘to make a difference in the world’ as their motive to start their business. In other two parameters ‘to build great wealth or very high income’ and ‘to continue a family tradition’; the country ranks third and second respectively with 87 per cent and 80 per cent agreeing for above as their motive. In the fourth parameter ‘to earn a living because jobs are scarce’; the country ranks tenth. This shows that supportive government policies, positive perception of the society towards start-ups and availability of funds from the financial community have given much confidence to entrepreneurs for opting to start a business with a specific ‘purpose’ in mind.
With the interruption created due to the pandemic, the sustainability of the start-up ecosystem in India will be the focus in the coming year. However, there are still some positive hues to look forward to. The market condition in India remains untapped with rising domestic demand. New enterprises and start-ups should reassess their business proposition and work towards a solution-oriented model in the medium and long term. More industries should participate in the process as this will foster “Atma-nirbharata” or “Self-reliance” that the Indian economy is eyeing for. With all these at hand, it is time for India to strive hard to jump at least 10 places in next year’s Global Innovation Index rankings.
Dr Satya Ranjan Acharya is the Associate Professor & Incharge Department of Entrepreneurship Education of Entrepreneurship Development Institute of India (EDII). Views expressed are the author’s own.