Building economic competitiveness and achieving sustained growth is the primary objective of economies worldwide. One of the key drivers of economic development, particularly after the Global Financial Crisis, has been the role of startups. India, too, pegged its future growth story through building a vibrant startup ecosystem. 9 years into the launch of the Startup India Program, India is now home to over 157,000 startups from 400 startups in 2014, creating employment for over 1.7 million Indians. One out of every two startups is from Tier 2 and Tier 3 towns and the funding for startups has jumped manifold from USD 8 billion in 2016 to USD 155 billion in 2024. Consequently, the number of unicorns during this period increased from 8 to 118. Particularly in the digital economy, we now have over 31,000 tech startups. With this staggering growth of the startup ecosystem, India is now home to the world’s third-largest startup ecosystem. This is an outstanding feat by any standard and a case study for the world. While it is not uncommon to delve into the numbers, as a second-time entrepreneur, I have seen this journey unfold with entrepreneurship and startups at the center of this gigantic transformation. Given the rarity of the achievement, there is merit in unpacking the three waves of interventions by the Government that created this ecosystem and what lies ahead in this journey.
The first wave of reforms started with the launch of the Startup India initiative in 2016 and lasted till 2019. This wave focused on lowering the barriers to becoming an entrepreneur and launching startups. The Startup India Action Plan constituted 19 action items focused on process simplification, funding support, and industry-academia partnerships. The sector greatly benefited from the tax exemptions and the revision of the definition of startups in India. The Atal Innovation Mission democratized entrepreneurship and innovation and mainstreamed the idea of starting your venture, building a business from scratch, and contributing to national priorities. During this phase, the Government’s twin focus on undertaking structural reforms such as the corporate tax rationalization, revised definition of startups and MSMEs, Insolvency and Bankruptcy Code, and building digital infrastructure through JAM (Jan Dhan, Aadhaar and Mobile) trinity and creation of critical digital public infrastructure (DPI) such as the United Payment Interface unlocked growth through digitisation and technology penetration to the masses. In pioneering digital payments, enabling new business models, and unlocking value, UPI is nothing short of the 8th wonder of the world. Similar to how traditional infrastructure was critical to creating businesses in the past, these new reforms and digital infrastructure formed the foundation based on which new and innovative tech startups in India were built at a breakneck speed. The Government early on realized the need for capital requirements and, therefore, launched the Fund of Fund for Startups (FFS) to meet this demand. WinZO, too is built on the foundation of this first wave of reforms leveraging the JAM trinity and the Government’s support for startups.
The second wave of reform on startups started in 2020 and lasted till 2023. This was also the time of Covid-driven growth of the digital economy as India and global economies swiftly pivoted towards the new realities. The India stack of open APIs and DPI laid the foundation for innovations in new and scalable business models and reduced compliance burden. The Performance Linked Incentive (PLI) scheme launched in April 2020, across sectors, particularly mobile manufacturing, had a ripple effect for startups in the digital economy. The number of startups and startups that attracted venture capital funding rose dramatically since the new-age businesses were built on strong fundamentals. India became the center of the global FDI movement and an important actor in the Global Value Chains (GVCs). The Startup India Seed Fund Scheme (SISFS) provided the capital for Indian startups to quickly move into the execution phase. Online gaming in India rapidly scaled in India during this period. As Indians accessed gaming content, often in Indian languages, over cost-effective devices and mobile data, the Indian gaming market’s success became a case study. India accounted for close to 20% of the global gaming user base and gaming app downloads. In 2021 alone, the sector received USD 1.7 bn in FDI. The structural and aspirational reforms focusing on startups in the two waves created intended and unintended success stories. This also coincided with India’s first gaming IPO by Nazara Tech in 2021, inspiring many other entrepreneurs in the sector.
From 2024 onwards, we have entered into the ongoing third wave of interventions on startups. By now, the growth of startups had become widely democratized and most states had a vibrant startup ecosystem. The number of Indian startups going to public markets has created a new record in 2024. This is creating value for their international institutional and domestic investors. The abolishment of the angel tax reflects India’s aspirations to drive the success of startups in India. In the world of the digital economy, the new national missions on Quantum Computing, Artificial intelligence, Semiconductor, and the India R&D Fund will pave the way for further growth of startups. After achieving scale in the domestic market, the Indian startups are now consolidating their foray into the international markets.
The new advancements in critical and emerging technologies like Generative AI and quantum computing, alongside strengthened intellectual property rights and the burgeoning middle class in India, signal a wave of both groundbreaking opportunities and complex hurdles as the era of surplus liquidity fades behind us. India will have to continue reimagining the role of startups in the economy and provide new and bolder interventions. The Indian startups will have to step outside their comfort zone to compete in the global markets and have to fight stronger for global capital. They will have to pursue the highest standard of corporate governance, undertake innovation, and create jobs as a moral imperative. There will be new and subsequent waves of growth of startups in India. However, for now, it is safe to say that India has become a case study for the world in creating an enviable startup nation.
Paavan Nanda, Co-founder, WinZO Games; Previously Co-founder Zostel, ZO Rooms.
