SUMMARY
Startups have created a good name for themselves, a very high level of credibility and I am fairly confident that going forward there will be more and more changes: Goyal
Startups these days do window shopping as to who to take funds from . Earlier, startups used to chase capital: Goyal
India has over 61,000 recognised startups spread across 55 industries, with 45% of them from tier-2 and tier-3 cities
Union Minister Piyush Goyal has said that the Centre is committed to supporting startups from smaller cities and towns via better incubation centres.
Goyal made the comments while speaking at a virtual event organised by IIT-Madras. He also said that, “By and large, the startups have created a good name for themselves, a very high level of credibility and I am fairly confident that going forward there will be more and more changes.”
Goyal further said that there was more money on the table for startups, adding that, “I am told, in many cases the startups do window shopping whose money they are going to take… that was not something we saw a few years ago when the startups were chasing capital.”
Lauding the Indian startup ecosystem, the Union Minister said, “Our Startups are making India proud and it is with this spirit that the Government is also working in the Advisory Council continuously with new ideas.”
“The quality of technology and innovation is now, in many ways, world class and we are second to none in the world. That itself is a big evolution from the past”, added Goyal.
One of the biggest highlights of his speech was the need to create better incubation centres in smaller cities and towns to better lift Indian startups.
To put things in perspective, India has over 61,000 recognised startups spread across 55 industries, with 45% of them from tier-II and tier-III cities.
Push For Entrepreneurship
This is part of Centre’s larger push to spur entrepreneurship in the country. government-run or state-backed incubation centres have changed the fortunes of the sector. A case in point has been Telangana’s T-Hub.
Launched in 2015 under the public-private model, T-Hub has helped put Telangana on India’s startup map and has created a slew of entrepreneurial success stories. Its website states that it has incubated over 120 startups, raising a sum total of INR 1800 Cr funding along the way.
There have been other success stories like this. Technology Innovation Zone in Kerala’s Kochi touts itself as ‘South Asia’s Largest Startup Hub’ and has so far incubated over 500 startups.
Not the one to leave behind, the Centre too has been toying with the idea of incubators for a long time.Under the Atal Innovation Mission, Centre has set up Atal Incubation Centres (AICs) that nurture innovative startups and promote entrepreneurship in the country.
Centre also provides incubation support to the states as part of Startup India initiative. Under this programme, state governments collaborate with local premiere institutes like IITs and IIMs to establish incubators.
In addition to this, incubation programmes are also run by NGOs or private firms, with support extended by the government.
While these schemes sound wonderful on paper, something seems definitely amiss. While incubators are important, the entire ecosystem runs on mutually leveraging either pillars of strength that include innovation, R&D and foremost of all, venture capital.
The Big City Advantage
Metro cities like Bengaluru, Delhi NCR and Mumbai continue to be the hub of startups. These cities offer unmatched services, better talent pool and easy access to VC funds to help materialise a ‘Unicorn.’
An Inc42 analysis found that startups based out of Bengaluru, Delhi NCR And Mumbai snapped up 93% of the total capital invested last year. These three cities continue to be top funded startup hubs in the country.
In contrast, other startup-friendly cities like Pune, Hyderabad and Chennai continue to lag far behind its metro peers. Mumbai, which is the third highest funded startup hub, raised more than double the investment compared to the next 7 hubs.
Besides the top three hubs, Pune, Hyderabad and Chennai are the next few hubs which recorded more than $500 Mn in funding in 2021.
The deal count too seems to be skewed heavily in favour of metro hubs. A case in point being Bengaluru which had a record 551 deals last year versus Pune which had barely 56 deals in 2021.
This has been attributed to what is called the ‘tyranny of distance.’ Away from the circle of VC and PE firms, startups in these small times find it difficult to scale up and at times, fail due to scarcity of funds.
But, startups from small town and cities continue to make a mark.
Making A Mark
The overture from the Centre comes amidst strong performance by Indian startups in 2021. The country saw as many 1.436 startups being launched last year, with as many as 108 startups recording deals upwards of $100 Mn and above, in the same period. Fintech startups led the market with maximum funding deals in 2021.
Automobile classifieds platform CarDekho in October last year raised $250 Mn, entering the much-coveted unicorn club with a valuation of $1.2 Bn. With this, the startup became the first unicorn headquartered in Jaipur
Other small-town startups too stood out like Jaipur based Finova Capital that raised $55 Mn, Odisha based-Milk Mantra that raised $10 Mn and Indore-based Pushp Spices that raised $16.3 million led by A91 Partners.
Entrepreneurs can help create jobs and the government releases the potential of this. Centre has been rolling out the red carpet for startups and rightly so. In response, homegrown startups have proven their mettle by excelling in innovation and product development.
