India is set to get a new government by today evening, whichever way you look at it, as the results of the 2024 General Elections are announced. And if you ask Indian startups, no matter who is in power by June 4, 2024, there is a need to set the right vision for the next five years.
Many believe that the next five years will be the defining years for Indian startups, with some of the biggest startups set to go for public listings and AI changing the product and market dynamics. As such the results of the 2024 Indian elections could well decide the future of Indian startups.
Founders that have been celebrated for years will be put to pre-IPO litmus tests and the fate of some giants hangs in the balance. The government has set 2030 as a target for many key milestones particularly in relation to electric mobility and sustainability, so the next five years will be just as critical as the past ten years, which have been celebrated as the golden age of startups.
So what can the startup ecosystem expect from the next five years? And what should be the new government’s vision which would hold Indian startups in good stead till 2030 and the decade that will come after that
Through conversations with some veterans of the startup ecosystem and venture capitalists that have seen India mature over the years, we are able to bring some clarity to those questions — although there are no definitive answers yet.
Startup Founders In Election Games
A few days ago on May 20, 2024, right in the thick of the 2024 General Elections, a curious development involving some of the biggest Indian startups caught our attention.
Zomato’s Deepinder Goyal, Urban Company’s Abhiraj Bahl, Honasa’s Varun Alagh, EaseMyTrip’s Rikant Pittie, MapmyIndia’s Rohan Verma, Peak XV Partners’ MD Rajan Anandan among others gathered in Delhi, but it was not a tech conference.
Instead, it was a night where these CEOs, venture capitalists and drivers of the tech economy mingled with the leadership of the current ruling party, the Bharatiya Janata Party (BJP), and spoke glowingly about the past ten years for Indian startups
To be fair to the entrepreneurs and CEOs, this was not an endorsement of the current ruling party, but meant to be a celebration of how far the Indian startup ecosystem has come in the past ten years. But the subliminal message was clear, given the timing of the evening, and reportedly some of the founders even endorsed the current government for another term.
With the members of parliament elected by the day’s end and a new government soon to be in place, perhaps this is the right time to understand where startups fall in the political machinery today. And also answer why many entrepreneurs found themselves in the middle of electoral campaigns.
This is not the first startup event that has the government’s support. The Startup Mahakumbh in March, for instance, was bigger and even saw Prime Minister Narendra Modi meet some of the startups on the ground. And the National Startup Day, introduced in 2022, is another example of how the government has directly engaged with startups.
The Indian government’s policies for startups and engagement with the stakeholders is perhaps unique among the large economies of the world. The Startup India programme launched in 2015 and formalised in 2016 is all set to complete a decade. Indeed, Startup India was one of the flagship programmes for the current government during the 2014-2019 tenure, and was given some more impetus in the past five years.
“I have seen the tech industry of the early 2000s and the government did not necessarily promote technology, but rather focussed on traditional economic growth engines. By 2013-14, tech was firmly a growth engine and the last two governments had to capitalise on this movement. This is why we saw the policies that enabled tech such as Startup India and Digital India,” a senior tech founder and investor told Inc42.
The next government will also have a big focus on digital products and services. “They are the future. Every industry will go through the tech transformation so there needs to be an automatic focus on tech policies, especially with AI coming up,” the founder and CEO added.
Indian Startups In The Election Debates
When it comes to the 2024 General Elections campaigns by various parties, that May evening in Delhi was the biggest showcase for startups and how far the tech ecosystem has come. Naturally, given that this happened right in the midst of polls, not everyone was so happy about this subtle endorsement of the BJP by entrepreneurs.
Many on X (Twitter) and social media pointed out that entrepreneurs ought to be neutral in their public stance on elections and focus on the business. The fact that many present on the night — Zomato’s Goyal, EaseMyTrip’s Pitti, MapmyIndia’s Verma and Honasa’s Alagh — run public companies and have a larger responsibility towards neutrality was another point raised by some.
Of course, those on the opposing side to the BJP were not happy that many of the founders did not engage with non-BJP parties on manifesto points, seemingly out of fear, even though founders put forth certain points such as angel tax as being problem areas.
When it comes to the vision for the next five years, there is some indication that the two major parties (and their allies) have some specific plans for the tech and startup ecosystem.
For instance, the manifesto of the Indian National Congress (INC) states that the party, if elected, would abolish angel tax. “We will eliminate “Angel tax” and all other exploitative tax schemes that inhibit investment in new micro, small companies and innovative start-ups,” the INC’s poll manifesto states.
The INC also talks about job-creation push in laggard states. “Congress will restructure the Fund of Funds Scheme for start-ups and allocate 50 per cent of the available fund, as far as possible equally among all districts, for providing funds to youth below 40 years of age to start their own businesses and generate employment.”
The Congress also spells out some measures it would potentially implement to improve ease of doing business such as ensuring adequate sharing of resources needed by entrepreneurs. “We will remove the current environment of distrust and fear, and create a healthy ecosystem where private enterprises, regulatory authorities, tax authorities and government will work in a spirit of mutual cooperation and respect.”
The opposition alliance party also says it would focus heavily on green energy and deeptech sectors for future growth. “The challenges of the future include the changes in the global economy, advanced technology such as artificial intelligence, robotics and machine learning, and climate change. The future of our energy is Green Energy. We will mobilise the massive capital required for our green energy transition,” the Congress pre-poll manifesto added.
Now, let’s take a look at what the BJP says about startups in its manifesto.
Given the fact that the previous BJP-led government brought in Startup India, it’s no surprise that the startup ecosystem features on the BJP manifesto for 2024 too. It spoke about four points — Expanding the Startup Ecosystem, Expanding Funding for Startups, Providing Mentorship to Startups, Encouraging Startups in Government Procurement.
“We will expand the existing Startup India Seed Fund Scheme and Startup Credit Guarantee Scheme to ensure adequate funds,” the BJP manifesto says.
The manifesto talks about the impact of the various enablement programmes for startups and how they will be expanded under the next government, if the BJP is reelected to power. The party also says it would encourage new startups in Tier 2 and Tier 3 cities. Besides this, the BJP states that it would promote startups in the sports sector and those building forest-based enterprises.
When it comes to future growth, the BJP manifesto focussed heavily on the space sector and areas such as quantum computing, geospatial data and more. There’s also prominent mention of supporting the electronics and component ecosystem by promoting semiconductor design and manufacturing.
“We will develop a comprehensive ecosystem under the IndiaAI mission, driving AI innovation through collaborative strategic programs and partnerships to position Bharat as a global leader in AI innovation and build domestic capacities to ensure tech sovereignty,” ruling party BJP says in the manifesto.
It must be remembered that election manifestos don’t always materialise. But the fact is that both the major parties have looked to focus on startups, technology and emerging industries when it comes to job creation and economic growth.
One could argue that the BJP is more direct about the areas it wants to target, and indeed, startups have been a more clear focus of the BJP-led governments of the past two terms. However, there’s little in the manifestos beyond continuing that vision, nothing that talks about what Indian startups need in 2024.
“It can be said that neither of the manifestos focus on specifics on enabling the next phase of growth for Indian startups. The vision is there, broadly speaking, but specific action points are missing. Many founders might prefer the current government because of the track record of supporting startups,” says a Delhi-based partner of a noted VC firm.
Focus On The New Era For Indian Startups
Of course, the fact that the Indian startup ecosystem has flourished in the past eight to nine years is a testament to the entrepreneurial spirit of Indians, even though a lot of credit is due to the startup-specific policies brought in since 2015, and frameworks that have eased new venture creation.
We have written extensively about how Startup India has fuelled entrepreneurship and encouraged investments into Indian startups, but others believes that this is a pivotal time for Indian startups and tech. One could argue that just focussing on how things have improved might be missing the point a bit.
Action is also needed on several other fronts from whoever wins the 2024 General Elections. There’s a need to remove the fear of regulations in key startup sectors, the need to secure the future of Indian businesses and people with climate resilience action, the need to boost semiconductor manufacturing, the need to build IPs in AI, next-gen software development, robotics, and a lot more, with specific policy that will attract the big investments for Indian startups.
“No one can argue that startups have grown, but the new government needs to focus on new areas and look at incubators and accelerators for domain-specific growth. If we are serious about AI, semiconductors and robotics then we need to show this through action and dedicated projects. Space tech is a good example of how to make this happen,” the managing director of a marquee VC fund pointed out.
The government made a bridge between spacetech startups and government-backed organisations such as ISRO. A similar backing was seen for fintech applications with the RBI sandbox and digital public goods.
The future of Indian tech is ultimately not going to be determined by government or policies of the past or simply sticking to what worked. The maturing and profitable business models of Zomato, Honasa, Urban Company and others in the past year show that past government action has resulted in the right outcomes. Now it’s time to enable different kinds of startups.
“When it comes to AI, data protection, semiconductors and deeptech, a more firm course of action is needed. India has a rich history of R&D in science, biotech, pharma and all areas that will be changed by technology and AI in the next few years, but this is lost because we cannot compete when it comes to commercialisation like the West. This needs to change,” said a managing partner of a Mumbai-based VC firm.
It’s true that government support has created the right conditions for some of these startups to thrive in the past eight years, but that was an India which was waiting for the consumer base, where internet access was limited and where startups were a fairly new idea.
Now the focus needs to turn on the gaps that do exist, and here simply, relying on past laurels may not be enough.
Startup India was a tech policy for the 2015 era, but this is a new generation of tech. Time for the next central government to look at what Indian tech and startups need for 2024 and beyond.
