Manya Rathore
Research expert covering India
Startups in India - statistics & facts
Propelled by a growing digital infrastructure, access to capital, skilled workers, a conducive business environment, and government support, India has emerged as one of the leading startup ecosystems in the world. The Indian government defines a startup as an entity less than ten years old with an annual turnover under one billion Indian rupees and headquartered in India. The Startup India initiative intends to catalyze and incentivize the startup culture in the country through tax exemptions, funding, and support for incubators and accelerators.
Clusters are usually associated with startup activity worldwide. In India, what started as a software-intensive hub has now expanded across industries and services branching out of the e-commerce tree. The largest root of that tree lies in Bangalore, India’s leading startup hub, followed by Delhi, Mumbai, and Chennai. However, the Tier-II and Tier-III cities are increasingly claiming the spotlight from their metropolitan counterparts, becoming the favored investment destinations in India.
Funding winter continues
The funding decline in 2022 was attributed to dampened investor confidence as a result of geopolitical tensions due to Russia’s war on Ukraine, rising interest rates, and a fear of global recession. Even the most valued startups recorded mass layoffs. Virtual learning, a pandemic winner, was one of the hardest-hit sectors as the world transitioned away from the pandemic economy. As the funding winter continued in 2023, startups looked to cut costs and reduce hiring. The year witnessed a historic dip in both funding and the launch of new startups. The acquisition spree of Indian startups that began in 2021 and continued in 2022, also witnessed a major fall last year, with only 112 mergers and acquisitions (M&As) recorded in the period. Women-led startups also witnessed an almost 80 percent drop in funding in the year.The bright spots
E-commerce, enterprise tech, and fintech remained the top-performing sectors in 2023. However, all these sectors saw a significant drop in funding compared to the previous year. The bright spot in the year was deeptech which received increased investor interest with more funding deals than the preceding year. The sector has significantly matured over the last decade with government initiatives such as the National Research Fund and DeepTech Startup Policy bolstering its growth. It was also a pivotal year for the cleantech segment which is supposed to play a key role in achieving the government’s net-zero emissions target by 2070. The sector received around 861 million U.S. dollars in funding in 2023. However, government loans, subsidies, and initiatives are needed to bridge the funding gap in the sector. The Indian startup ecosystem is expected to rebound in 2024, translating into increased funding, public listings, and profitability. The promise for the year lies in technologies such as artificial intelligence, biotech, space tech, and clean energy due to their potential to transform industries.
