India is among the top five countries in the world in terms of number of new companies founded. India has seen tremendous growth towards the creation of innovative start-ups and has become the third fastest growing hub for technology startups in the world.

The introduction of initiatives like GST and Make In India have given a boost to the start-up economy. Indian startups are moving into the top line and are expected to increase in size and number in the coming year. India is measured to be home to around 4,200 startups, creating more than 85,000 job opportunities. With an investment of more than $5 billion in 2015 and three to four new start-ups every day, the number of start-ups in India is projected to rise to more than 11,500 by 2020, and the job creation of these entrepreneurs it will hit 250-300k. The number of investors has also multiplied in recent years.

recent developments

Indian startups have experienced many developments in the second quarter of 2017. From being selected in the Google accelerator program to raising funds from Chinese investors, the startup ecosystem has been quite encouraging. Google selected six Indian startups for the accelerator program in July 2017. Startups using the latest technologies like machine learning and artificial intelligence have been chosen for the same.

restrictions

Despite these promising statistics, only 9% of Start-Ups have female founders/co-founders. Delhi NCR, Bangalore and Mumbai along with Hyderabad, Pune and Chennai account for more than 90% of Start-Ups in India. The focus is largely limited to information technology-enabled products and services, including e-commerce, aggregators, analytics, healthcare technology, and online payments. Amongst all this, the product start-up sector has been largely ignored. A major factor behind India’s growth is software-enabled companies like Flipkart and Ola. Rarely do hardware product companies achieve such success. The reason for this can be attributed to a lack of funds. India’s ecosystem clearly has no shortage in terms of capital. However, only a very small amount of this capital reaches these startups. Additionally, startups in India spend five times more effort to raise funds compared to American startups.

This is where government intervention is required. Through the provision of alternative sources of financing and through a partnership between industry and academia, the government can facilitate and accelerate the rate of growth. Alternative debt financing instruments will help start-ups and other small businesses to overcome the problem of lack of adequate collateral, limited cash flow and high risk involved. While direct support for start-ups and the right skills to start and run a business are important, the ease of doing business in the country is also very important. This includes the ease of starting a business, obtaining the corresponding permits, accessing credit, paying taxes, etc. Labor laws in India are also outdated. Therefore, appropriate government policies are required for the Indian startup ecosystem to reach its true potential.

However, the government and international organizations are investing in innovative ideas. Monetary and infrastructure support is accelerated. Start-ups are also making good use of the available facilities and are showing signs of good times. This certainly cannot be written off as a passing trend and will surely change the way the markets work in India today. Government initiatives are also expected to play a vital role in the bright future of the startup ecosystem. For example, the Indian government’s department of trade and industry plans to organize a meeting of start-ups from the South Asian regions to exchange new ideas and increase interaction between them, thus showing confidence in start-ups.

Therefore, the scenario for the last quarter suggests that investor interest in financing India’s start-ups remains strong. The next quarter is likely to be more attractive due to the economic reforms and their implementation. Startups are now focusing on cutting losses, increasing their overall valuation, and achieving operational excellence. These qualities, coupled with positive investor sentiment and government support, may see India’s startup ecosystem reach new heights in the near future.