India is the 3rd largest startup ecosystem in the world, home to 81, 000 government recognised startups across 656 Indian districts. With 107 unicorns, India minted 19 unicorns in 2022 itself. By 2025, the country is expected to have 250 unicorns. Indian startups are known to have solved problems and disrupted the IT, education, healthcare, agriculture, among other industrial sectors. While stats and numbers demonstrate India’s startup growth story, the current investment and negative economic headwinds cannot be ignored. A time of churning is also about turning adversity into opportunity.
Taking stock of the current environment
Global slowdown coupled with increased interest rates, inflation and dried up investments have left technology startups and companies worldwide scrambling. While India cannot be decoupled from the global economy entirely, it is projected to be doing relatively well. I do not see any drop in enthusiasm in entrepreneurs and investors in the next few years. Though naturally, investors are taking a more cautious stance on funding and supporting startups. This was evident in the Q3 startup funding rounds of 2022, where companies witnessed a slowdown and the cheque size across funding levels was also smaller.
Be that as it may, funding in early-stage startups may be slow, but it will continue to grow. Latest reports show that in November 2022, fintech startups received grants from the International Financial Service Centre Authority. A few Indian health tech startups also managed to raise funds. On the other hand, late-stage startups may have to repurpose, reorganise, reorient their business models and assess their spends to sustain. The funding winter may have affected the momentum, but with fiscal prudence, high innovation and creative problem solving, the sum will definitely be greater than its parts.
India’s Edge: Massive talent pool and an innovation mindset
Startups in India are always looking to solve real world issues. With access to high class technically adept talent, the founder fraternity is betting on building high quality innovative products. India’s startup success story over the last 10-15 years is driving them to take the plunge and establish businesses globally.
India is one of the nations that is equipped to use and build products in English as well as in multiple languages so any product that is made in India can be scaled globally. Indian diaspora is spread across the world, so an Indian startup looking to expand globally can leverage them. India has earned the right to go global through quality and trusted products.
The road ahead
The current geopolitical climate may work in India’s favour. It also helps that the country is becoming the preferred destination in the East for manufacturing, talent and software development. Leveraging the sweet spot, Indian startups should be building and innovating for global markets. This is also because the unit economics of the Indian market is not suited for startups to create scalable and highly profitable businesses that can compete with the global businesses. Therefore, the challenge for India will not be in its ability to produce more unicorns, but for unicorns to sustain and grow those businesses.
However, to execute this, startups will need help from all stakeholders. What is needed is a comprehensive partnership between all stakeholders to foster innovation and incentivize R&D in the country. Bengaluru has seen the highest number of investments in the recent years largely due to supportive policies of the Government of Karnataka that foster innovation. Further support in the form of regulatory sandboxes, tax discounts and partnership between policymakers, academia, and industry will go a long way in writing the next chapter of India’s techade.
Startups will benefit from forging relationships with local companies and hiring talent with diverse backgrounds and awareness about geopolitical issues. Companies should scale gradually by focusing on addressing issues based on what works for them in the short and the long term.
The best startups are run by transparent, accountable leaders, where they assess, reassess, inspire, motivate and course correct in meaningful ways. Such skills encourage teams to collaborate, giving them room to make mistakes, fall forward, rise faster while still working towards achieving their goals. How the businesses respond in the next few years will set apart real leaders from the rest.
Naveen Tewari is the founder and CEO of InMobi Group.