Startups in India – Facts Behind the Figures
As on 21 November 2018, Government of India has recognized 10,000+ companies as startups. It has also 1,97,967 registered learning and development hubs and 2,79,533 registered Startup India Hubs. In the past few years, it has been seen a huge number of developments in startups in India. This is because of the increased attention of people towards starting a business with a fresh new concept and government’s good initiatives. Government’s Startup India scheme has worked as a booster dose for fresh starters. In this post, we will discuss the startups in India.
What is a startup?
A startup is a newly founded company that is in its beginning phase of development and growth. Startups are generally founded by individual entrepreneurs or small group of partners. This company starts working on a new concept of business which may help directly or indirectly to help the society.
In India, there are few parameters set by the government to identify a company as a startup because there are several benefits provided to the startups. A startup business is defined as:-
- The company has incorporated for 7 years or less,
- Engaged in the development, production or distribution of new products, services or processes,
- An entrepreneurial or smart partnership based venture,
- With a less number of employees, 50 or less,
- Annual turnover less than Rs 25 Crores.
A startup can be an organization or a business based on its capital, funding, and years of existence. If a company is identified as a startup, it may avail several benefits from the government in form of tax exemption, funding, loans etc.
Startups in India
India is amongst the world’s top 5 countries with the number of startups. It comes after the United States in this list. According to the NASSCOM’s report, there are around 1200 startups added in the year 2018. The list in India is growing at a yearly rate of 12-15%. According to this report, there are 8 startups in India which became Unicorns in 2018. A Unicorn is a privately held startup which is valued over 1 Billion US Dollar.
During January-September 2018, startups in India have received 4.3 Billion US Dollar of funding in which the average funding per deal was 9.4 Million US Dollar. It is more than 100% growth in the received funding as compared to the year 2017. According to NASSCOM, more than 70 mergers and acquisitions held in the year 2018 which is an increase 15% from the year 2017. There is a 50% increase in the number of advanced tech startups since 2017. Startups in India have created 40,000 new direct jobs and its 2.5-3 times indirect jobs.
There are several drivers in this growth of startups. India is amongst major economies of the world and it is known as the fastest growing economy. There is an 8.2% of growth rate in the economy in India. There are around 500 million internet users in the country. This number is more than the population of the United States. There is an increase of more than 100% of in the startups funding in the year 2018. These are the very strong factors which boost the growth of startups in India.
Key Trends in Startups
There are several key trends seen in startups. The popular are:-
Use of Advanced Technology: There is an increase of 50% advanced tech startups. These new startups are coming up with the solutions around Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), Blockchain and several other advanced technoloFocus
Focus on B2B Solutions: There is 43% of the market share of B2B startups which was 40% in the year 2017. The driving growth behind B2B startups is the digital transformation of large corporates, SMEs and Financial Services.
Increase in Growth Stage Funding: The funding of startups is almost doubled from it was last year. This increased funding growth has resulted in 8 startups became Unicorns.
Improved Supporting Structure: There are more than 210 incubators and accelerators are active in the year 2018 which 11% more than the last year.
The Government’s Push
There is a big support from government to startups. If a company meets the criteria to be identified as a startup, it can avail several benefits from the government. On 15th August 2015, Prime Minister of India Narendra Modi announced the campaign ‘Startup India’. This scheme for startups is based on the three pillars:-
- Simplification and Handholding,
- Funding supports and Incentives, and
- Industry-Academia Partnership and Incubation
The government has also proposed several relaxations to startups in context to license raj, land permissions, foreign investment proposals, and environmental clearances. The government has also initiated financing schemes to startups such as MUDRA Yojna which provides lower interest rate loans to entrepreneurs. A budget of Rs 200 billion has been allocated by the government as initial capital for this scheme.
Some key highlights of the support from government include:-
- 10,000 startup funding pool.
- Reduction in patent registration fees.
- Improved bankruptcy code.
- Exemption from mystifying inspections for the first 3 years.
- Exemption from tax for the first 3 years.
- Self Certification compliance.
Challenges to Startups
There many companies starting and closing almost daily in India. Some startups are being identified as Unicorns and some could not catch the stream and shuts down. In becoming successful, there are many challenges faced by the startups. Some most important challenges are:-
Funding: As a startup, the biggest challenge is to arrange the fund to run the business.
Team: If the business starts as a partnership, then it is a challenge to keep all the partners together for along term.
Marketing: Many startups face the challenge in sales and marketing of their products. This is because they do not put enough resource into their marketing segment.
Planning: There are many startups shut down every year only because of the lack of planning in the areas like sales, development, staffs, skills etc.
Competitors: If a company starts offering a new product or service then it may face a challenge from a new competitor who starts offering a similar product or service at a lower price.
Poor Management: If the company has the people in its management with less or almost no experience of their role, then it may face a challenge in a very short time.
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