Hindustan Times

Sustainable funding and the Indian start-up ecosystem

India saw a staggering jump of 15,400% in the number of start-ups in just six years, going from 471 in 2016 to 72,993 in 2022. With more than 100 unicorns, the Indian start-up ecosystem is still expanding. Despite the advancements made, India’s businesses still face enormous obstacles that must be overcome if India is to become the world’s leading start-up destination.

People beginning their start-up journeys frequently face challenging decisions, such as leaving their familiar environment and venturing into uncharted waters. An enterprise cannot be launched with just an idea and passion for success. A high degree of leadership ability, a clear understanding of the market, excellent communication skills, and maturity to see things from the right perspective, along with the capacity for calculated risk-taking, is required on the part of the entrepreneur. But the founders still face a lot of difficulties.

The firing of employees by major tech companies like Meta and Twitter has shocked the entire world, but bad news has also hit the Indian start-up scene. A growing number of top tech unicorns, valued at over $1 billion each, are laying off staff to save money and concentrate on profitability amid this year’s funding winter. As the world prepares for yet another recession, Indian start-ups are currently having trouble raising money. According to a recent report, venture capital funding in India fell to a 21-month low in the July-September quarter, with just $2.8 billion raised in 387 deals, as opposed to $9.8 billion raised in 525 deals during the same period last year.

Incubators, science and technology parks and business development centres are just a few of the support systems that are essential to the success of start-ups. Failure risk increases when these support systems are unavailable. India currently has issues with an unorganised and fragmented market in most sectors. The economy can grow faster if the infrastructure is built properly and with the start-up ecosystem in mind.

One of the biggest issues in the Indian start-up ecosystem is a lack of appropriate mentoring and guidance. The majority of start-ups have fantastic concepts and products, but they lack the market, business, or industry experience to bring their goods to consumers. The growth of the startup ecosystem has largely concentrated in large Tier 1 cities and states with a strong economy, particularly in IT-enabled industries like e-commerce, transportation, and finance. Beyond the metro areas, small businesses are not fully informed of or included in programmes that offer incentives and tax breaks.

Through its flagship Start-up India initiative, which came into effect in 2016, the government, for its part, is fostering an environment that is favourable to entrepreneurs. The government of India is working to establish ICT infrastructure and offer policy support for improved e-governance, investments, and technology innovation through research and higher education to support entrepreneurship and promote economic growth. India is working to become a knowledge-based and digital economy with the aid of tech-enabled startups. However, a lot of work still needs to be done to improve the ease of doing business and to make India the top choice for fostering small businesses.

The start-up ecosystem needs to create solutions that help companies in the infrastructure, manufacturing, health care, and education sectors achieve important national objectives. Even though it may be difficult for the time being, a funding winter can be beneficial for India’s start-ups. It might put an end to the recent irrational overvaluation of emerging companies and frenetic over-investing that has been going on. In addition, the nation’s start-ups will have a more ethical, effective, and sustainable funding process and system with lower hyped valuations than in the past when the funding winter ends, which may take some time.

The growth of the start-up ecosystem will depend on proactive measures like improving physical infrastructure, enabling technology adoption for blended learning/skilling, speeding up policy implementation, and streamlining the skilling ecosystem. While much has been accomplished, there is a need to put more emphasis on business accessibility so that entrepreneurs can concentrate on their core businesses rather than the bureaucracy that surrounds them. There is also a need for enhancing the use of VCs, banks, and other domestic financial institutions. Last but not the least, allowing domestic companies to list abroad, lowering the burden of compliance with domestic tax, labour laws and corporate laws will help the start-up ecosystem flourish.

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