By Amitabha Bandyopadhyay
India’s start-up ecosystem has seen rapid growth over the last decade. From just 452 start-ups in 2016 to 84,012 in 2022, surging to over 1,12,718 start-ups as per October 2023 figures! This exponential growth is a testament to the entrepreneurial zeal that is firing up the start-up ecosystem in New India. As the start-up landscape matures with an increasing focus on sustainable growth and real-world solutions, India is set to soar with the intervention of unlimited technological disruptions in a product driven market.
During the COVID-19 pandemic, as the country was fighting with its back to the wall, the Indian startups developed and commercialised diagnostics, PPE kits, ventilators, oxygen concentrators, N-95 grade masks at a ferocious pace. Without a doubt, this would not have been possible without the startup ecosystem that was created and nurtured by the Governments in the decade preceding the pandemic. Government agencies like the Biotechnology Industry Research Assistance Council (BIRAC), National Science & Technology Entrepreneurship Development Board (NSTEDB), and Department of Scientific and Industrial Research (DSIR), along with ‘Start-up India’ and ‘Make in India’ initiatives have played pivotal roles in providing a fertile ground for start-ups to flourish. India’s response to COVID pandemic also demonstrated that India has the necessary technical expertise to rapidly develop high-quality products.
Today, India’s start-up ecosystem is home to diverse sectors. While technology-led start-ups, e-commerce giants, and fintech firms have garnered more visibility, there has also been a significant rise in manufacturing-tech, health-tech, ed-tech, and sustainability-focused ventures. These include over 10,000 deep-tech start-ups that are driving the transformation from a service-based economy to one driven by products, knowledge and innovation.
Another highlight is the breaking out of the ecosystem from the confines of metro cities like Bangalore, Mumbai and Delhi to reach Tier-2 and Tier-3 cities. This is due to a growing recognition of their potential with a large pool of untapped talent and lower operating costs. At present, nearly 50% of start-ups in India originate from smaller cities.
The Government is not cutting any corners when it comes to supporting entrepreneurs including those from smaller towns. The ‘Action Plan’ for Start-ups, unveiled last August, covers key areas that include simplification and handholding, funding support and incentives, and industry-academia partnership and incubation. Over 50 regulatory reforms have enhanced ease of doing business and raising capital with reduced compliance burden. A National Deep Tech Start-up Policy (NDTSP) is being brought in to address the unique challenges and requirements of the deep tech start-up ecosystem.
Academic institutions like the IITs are also playing a major role in fostering a culture of indigenous product innovation and catalysing start-ups with campus programs that encourage entrepreneurship, incubation centres, mentorship programs, and industry-academia partnerships. They act as the bridge between concept and market, taking research advances to commercial scale-up and leveraging innovative ideas into business opportunities.
Most of the startups that developed high-quality products needed for fighting the pandemic are profitable ventures today. Two critical factors led to their commercial success. Firstly, the massive demand in the marketplace. Second, rapid approval for commercialization. While the ecosystem may not be able to do much to influence the first factor, it is critical to ensure rapid approval of product commercialization and a transparent process for the same. The recent roll out of MedTech Mitra by ICMR and National Single Window System (NSWS) Portal by CDSCO are steps in the right direction.
2024, however, is the time to face some ground reality of doing business. Start-ups with unsustainable business models driven by a ‘growth at all costs’ mentality have found themselves floundering in the recent past. Their failures highlight the risk of prioritizing rapid expansion over financial viability with a high capital burn rate. This has been the case in many of the so-called hi-tech start-ups which were unable to establish a path to profitability. A domino effect led to vulnerability to market fluctuations and weak investor sentiment with many start-ups forced to shut down in 2023.
Start-ups now need to move towards a more mature phase of growth, prioritizing sustainable growth and profitability over rapid scaling up, emphasizing financial prudence, long-term viability, and a commitment to solving real-world problems over short-term gains. With the spotlight on sustainability and social impact, start-up founders are also moving towards more responsible entrepreneurship.
The Indian start-up ecosystem is poised for a transformative journey ahead. While emerging technologies like artificial intelligence are getting more attention, the importance of manufacturing must remain paramount, creating the backbone of a strong economy driving growth and employment. Market experts such as EY India chief Mr. Rajiv Memani are bullish on India’s manufacturing sector.
En route becoming a manufacturing nation, we must focus on infrastructure building in the academic TBIs, build competence in product design, roll out tough but transparent, efficient and user-friendly compliance regime. While the process of digital transformation must be integrated into manufacturing to enhance capabilities, the focus for start-ups must remain firmly on core strength in manufacturing to make a comprehensive and lasting tangible impact to the economy and society. According to the latest financial data, the number of affluent Indians is increasing rapidly. This is a call to action for our bright startups. We must innovate in multiple ways to ensure that the consumerism resulting from this prosperity is channelized in a manner that is sustainable for India and the world.
The Indian startup ecosystem will be flooded with opportunities. The Government is solidly backing them. Startups need to focus on IP-driven innovations, profit oriented enterprises and good corporate governance. I am confident that this ecosystem will deliver for India and the world.
In order to achieve all of the above and face success, the start-up ecosystem must focus on IP-driven innovations, funding opportunities for scaling up hardware manufacturing, enhanced product design. Barriers must be eased for small players with advanced quality checks for the entire production industry.
The author is the professor at the Department of Biological Sciences and Bioengineering at IIT Kanpur and co-professor In-Charge, Startup Incubation and Innovation Centre (SIIC) at IIT Kanpur.