Indian tech startup ecosystem world’s 3rd largest

The Indian technology startup industry has retained its position as the world’s third-largest, as per the findings of a recent Nasscom report, “Indian Tech Startup Ecosystem: Leading Tech In The 20s.” Despite an economic slowdown, Indian technology startups attracted investments worth around US$4.4 billion during the first nine months of 2019, cementing confidence in the nation’s technological ingenuity and skilled workforce. India built more than 1,300 new technology startups in 2019, taking the total count of technology startup additions to as many as 9,300 in the last six years, which now form a key part of the national economy. During the year, India also added seven new unicorns, or startups with valuations of more than US$1 billion, taking the total number of active unicorns in the nation to 24. Big success in this space has been driven by rising capabilities in new-gen technologies. 

The improving ability of the Indian startup industry has created an environment conducive for continued innovation and investment. This is evident in the number of active institutional investors that crossed 390 in 2019, from around 310 in the previous year. Meanwhile, more than 335 startup incubators and accelerators are currently operational in the country, up from around 320 in 2018. Rising activity in the startup space has created 60,000 new direct jobs and up to 180,000 new indirect jobs that have formed a vital part of new job creation in India. A number of factors have contributed towards this achievement, including active Government support in terms of favourable policies as well as investment in building infrastructure and capacity, along with participation from large private companies. The Indian startup space coming out of this has attained a valuation of over US$55 billion.

More than 335 startup incubators and accelerators are currently operational in the country, creating 60,000 new direct jobs and up to 180,000 new indirect jobs

The top 10 strengths that have emerged in the Indian startup space, as per the Nasscom report, are:

1. New startup hubs – 27 per cent of all Indian startups are based in emerging and new startup hubs while 15 per cent of startups funded startups are based in emerging and new startup hubs.
2. Rising capabilities – Indian startups are active in over 20 sectors like energy, agritech, automotive, among others. Around 57 per cent of unicorns added in 2019 are from new, emerging sectors.
3. Diffusion of deep-tech – 18 per cent of Indian startups are now leveraging deep-tech, up from 8 per cent in 2014. The deep-tech startup club has been growing at 40 per cent CAGR since 2014.
4. Building on Digital India – India Stack has significantly expanded the total addressable market in India, currently, startups are leveraging stack to build innovative solutions and growing quickly. 
5. Serving the underserved – 31 per cent of startups are serving small/medium businesses (25 per cent in 2014), 47 per cent of startups are serving low/middle-income set (43 per cent in 2014).
6. Built in India, Branded Global – 21 per cent of Indian startups are focused on international markets, there has been a 14 per cent increase in global startups building products from India.
7. Strengthening pipeline of potential unicorns – Over 50 startups have more than US$50 million in cumulative funding, there has also been a 3X growth in the number of new startups in 2019.
8. 2nd Innings – Over 55 startup founders (min. 3 investments) are actively investing in India, while more than 150 startups have been founded by serial entrepreneurs, asserting confidence.
9. Evolving Investor Landscape – More than 390 active institutional investors are currently active in India, up from 310 in 2018, also marking a 1.5X increase in private equity investors from 2018. 
10. Intensifying corporate participation – Over 140 unique corporates were active in the startup scene in 2019, up 12-15% from 2018. Over 50 corporates have an active innovation program; up 12-15%.

A big reason behind the success of Indian technology startup space has been its rising capabilities in deep technology. Around 18 per of Indian startups are utilising deep-tech in their products and services that have opened up rich and sustainable opportunities. Indian startups are actively employing tools backed by next-gen technologies such as Artificial intelligence (AI), Internet of Things (IoT), big data and analytics, automation, blockchain, and AR/VR. This has led to Indian startups increasingly coming up with offerings around 3D printing, robotics, and drone technology. Indian technology startups have also successfully expanded their clientele amid businesses, representing more than 20 different industries, and individual consumers. This has further helped in building investor confidence. Going forward, improved access to foreign markets can help Indian tech startups grow even more rapidly. 

The industry has seen sustained growth of 12-15 per cent over the past decade with Indian startups gaining market internationally, apart from creating new demand in India’s untapped regions. Today, 44 per cent of Indian startups have markets internationally, while 21% are focusing primarily overseas. This expansion has been facilitated by both grassroots investment and acquisitions. Driven by favourable metrics, the Indian technology startup space is anticipated to expand four times over the next five years with the total number of unicorns reaching as many as 105. The tech startup industry, which currently has a cumulative valuation of around US$100 billion, will likely grow to US$390 billion. Startups in India currently provides direct and direct employment to around 430,000 and 1.6 million people, and this is expected to rise to 1.3 million and 4.4 million, respectively, boosting job creation.