The 2024 edition of the National Startup Day marks a pivotal moment for Indian tech, after the last decade that saw the initial growth spurt, waves of maturity and corrections
India’s National Startup Day is only two years old, but there is one clear indication of its growing significance for the very businesses it celebrates. While the inaugural edition in 2022 saw plenty of excitement, last year it grew louder, and in 2024, the buzz around the National Startup Day has reached a crescendo.
And this time around there’s a fever pitch of press releases for ‘quotes’ around National Startup Day — the startup PR mill has seemingly found its day.
But there is also a feeling that the 2024 edition of the National Startup Day marks a pivotal moment for Indian tech, at least from our lens.
Having seen this journey up close since the very early days — even before Startup India came into the picture — and being at the centre of it as a watchdog and a voice of support, this is as much a day for Inc42 as it is for startups.
When we began our course in 2014, startups were a novelty term and not part of the mainstream. Ten years later, it’s hard to escape or avoid the influence of tech startups. This year, we too celebrate our tenth anniversary and as such we can’t help but feel a sense of serendipity at our own journey coinciding with that of Indian startups in some ways.
A Decade Of Startups
Incidentally, it is also the beginning of the tenth year of Startup India, which came into being in 2015 and which has since then largely catalysed the tech and startup ecosystem. Startup India kickstarted the entrepreneurial dreams of India’s youth in many ways.
Indeed, we don’t know of many economies that can compare to India in terms of the sheer size that have created legislation and policies purely for startups. For instance, no other country has a high-profile ‘National Startup Day’ like India with events and award shows planned, even though some European countries have tried to adopt it in the past.
While the past decade has been the catalyst for the startup revolution, the next five years will be just as critical as the tech ecosystem matures. “By 2030, India will have close to 250K startups, and their contribution to India’s economy is expected to grow nearly four-fold from $550 Bn today to $2 Tn. We will also see startups employing at least 4 Mn Indians as they scale up and mature,” TV Mohandas Pai, chairman of Aarin Capital Partners, told Inc42.
Over the past decade, startups have matured to become part of casual dinner conversations at millions of homes and changed the social and economic fabric of India in several ways — from UPI apps becoming ubiquitous on street corners to the gig workers fuelling the platform economy. And the tag of a startup founder automatically brings in expectations of riches and glamour.
“Startups have changed the way Indians interact, access services, buy goods over the past decade, accelerating the economic growth and fostering faster innovations. The startup ecosystem has greatly increased the productivity of the Indian workforce,” Pai added.
But this maturity has only come through hardships. Arguably, the past two years have shown us exactly what the hard part looks like — building businesses responsibly, sustainably and with an eye on value creation, not just valuation.
In 2022, we said the National Startup Day is a good starting point, and last year, we called it ‘a day for New India’, but in 2024, we are looking at it as the beginning of the next decade to come. Which many are calling India’s decade — not just for startups but the overall economy.
In many ways, this year represents a major inflection point for tech in general. Globally, most tech business models have huddled around AI and automation in recent months, but in the Indian context, much of this discussion is not just early but also misplaced. That’s because while mature markets have turned to AI, India is still firmly in the middle of its maturity cycle.
The Last Ten Years: ‘Affluent’ India’s Years
We have seen the early green shoots, the mushrooming of tech and digital business in the first five years followed by the aberration of the post-pandemic market, and then the period of stability and correction in the past two years. If anything, 2024 is about showing how far Indian tech has come and its growing resilience.
A recent Goldman Sachs report on ‘The Rise Of Affluent India’ backs the narrative that the best is yet to come. Speaking about the cream (top 4%) of the Indian working age population or ‘Affluent India’, the report claims this cohort of 60 Mn Indians is likely to grow to 100 Mn by 2027 at the current growth rate.
Goldman Sachs says the total number of Indians with an income over $10,000 among the working age population has grown at a CAGR of 12.6% over FY19-FY23, which is much higher than the pace of growth of the overall working age population (1.4%) over the same period.
In other words, the population of Indians that are the biggest consumers and users of digital services is about to nearly double in the next four years. The report uses growth data around consumer spending by the ‘affluent’ cohort, share of spending on premium services and exposure to credit as analogues for the projected growth.
It’s not just private companies that are relying on this growth to mature and evolve into profitable entities, but the rising affluence is also key for newly-listed tech companies that are only now learning the harsh realities of public markets.
“In India’s public market, the demand for profitable tech companies is evident. Wise and clever founders must aim for viable, sustainable models that can fulfil this gap, not just chase a unicorn status. It is a myth that companies can only list once they are a unicorn. Companies can list at INR 1,000-5,000 Cr and grow 20-30% annually for decades,” Blume cofounder and partner Karthik Reddy told Inc42.
He added that the future of Indian tech lies in embracing the market potential where companies look to go public with a low valuation of around INR 2,500 Cr and then growing at 25% for six years to reach INR 10,000 Cr market cap.
Reddy and Blume anticipate 15-20 diverse VC-backed tech IPOs annually, every year from hereon, paving the way for a Nifty Tech 50 by 2030, showcasing India’s tech strength to the world.
“Over the past 15-20 years, India’s startup landscape has transformed significantly, progressing from early stages to a global player. Startups in healthcare, finance, education, enterprise software and ecommerce, influenced by the internet, now play pivotal roles in shaping India’s development. Indian startups, known for their scale and intent, emerge as category leaders, addressing unique challenges through technology. The venture ecosystem, rooted around 2006-07, is evolving, with an increasing proportion of second or third-time founders, signaling market maturity,” added Dev Khare, Partner at Lightspeed.
The Decade To Come: For The Other India
Of course, India is more than the ‘affluent’ population, and while many of the incumbent startups, listed tech companies and ‘high-valuation’ new-age ventures are targeting the cream of the Indian consumer and customer base, there are others realising the opportunity at the grassroots level.
The unfortunate situation is that many of the tech and startup solutions geared at rural, semi-rural or semi-urban India are still trying to find the product-market fit. This is not just about creating products that solve the right problems, but also finding the right market in the first place.
Take agritech, for instance, where most of the startups are solving in rural India. Solutions here are struggling to rise to prominence due to issues in the commercialisation model. Adoption remains sluggish or incentive-driven rather than products organically gaining traction.
Surya Mantha, partner at Capria Ventures which has a deep focus on India and the Global South, believes there is a lot of momentum in the medium-to-long trajectory for economies such as India which are yet to come close to their ceiling.
Capria Ventures, which formerly invested in India as Unitus Ventures, has seen the ecosystem from the very early days. Unitus has been investing in India since 2012 and has backed a number of companies looking to take tech and digital transformation outside metros.
Here Lies The Opportunity
“Besides the young population, India’s focus on “Digital Public Infrastructure” that not only enables hundreds of millions to participate in the country’s economic life but also enables business innovation on top of it is a key strength,” says Capria Ventures’ Surya Mantha
The DPI pillars such as UPI, IndiaStack, DigiLocker, Account Aggregators, ONDC have given new life to tech models that target the urban population, but the next five years will be key to bringing this same transformation outside the large cities and to the underserved segments.
Another advantage for the Indian economy is the largely favourable global environment where the “China + One” sentiment gives India a competitive edge over other developing nations, Mantha added.
Backing this sentiment, the Reserve Bank Of India believes that the Indian economy has shown strong fundamentals to remain an attractive proposition for large investments domestic and foreign, especially against a backdrop of global macroeconomic volatility.
A large part of this stems from India’s growing index of industrial production in manufacturing, power and mining — sectors that have been traditionally driven by rural investments. During April-November FY24, the IIP growth was 6.4%, up from 5.6% in the same period in FY23.
Mantha believes that the global migration to India is a unique opportunity to grow the manufacturing muscle in non-urban regions and create high-paying jobs for the millions entering the workforce. “One has to keep in mind that businesses — globally, but more so in emerging markets — take time to mature. Value unlocking is not a process that can be hastened sustainably,” he added.
Arguably, this is a critical problem for Indian startups to solve in the next ten years or even the next five years. While the cream of India is growing at its organic best — utilising the globalised nature of tech, AI and digital media to their best advantage — the rest of India, fondly called ‘Bharat’, needs more than lip service.
The cities and startup hubs have grown larger than anyone could have imagined in 2014, but somehow many of the smaller towns are stuck in an infrastructural quagmire that seems several decades old. The next five years will need entrepreneurs, family offices, corporate funds, venture capitalists, angel investors and startups to collectively rethink how they approach the ‘non-Affluent India’.
In our humble opinion, that is the real luxury afforded by a day that’s dedicated to Indian startups.
