Nurturing start-ups: Policymakers must adopt an ecosystem approach

| Updated on November 11, 2019

The big issue with the current approach of policymakers and investors is that mostly focusses on funding but not on scaling up

The trends emerging from the National Association of Software and Services Companies (NASSCOM) report on the country’s tech start-up ecosystem indicate that India is on the right track to becoming a global hub for innovation and emerging entrepreneurs. Specifically, there are two big shifts in the start-up space that are encouraging. One is the increasing focus on the business-to-business (B2B) space. The second, and more important shift, is the rapid growth in the number of deep-tech start-ups as well as start-ups focussing on the underserved markets. Over 18 per cent of all start-ups are now leveraging deep-tech, which means there are over 1,600 such companies in India engaged in high-end engineering. Only 8 per cent of all start-ups were involved in deep-tech in 2014. These are significant changes from the initial rush of young entrepreneurs who were merely replicating successful business models from the Silicon Valley primarily aimed at retail consumers. While these businesses have made services such as booking a cab or a hotel room more affordable and convenient, the reality is that Indian start-ups are way behind in terms of creating products like Google and Microsoft do. This could be a thing of the past soon with more number of Indian start-ups now focussing on creating solutions using deep-tech such as artificial intelligence, analytics, augmented reality/virtual reality, blockchain and the Internet of Things, among others. India desperately needs these deep-tech start-ups in order to take digital transformation to the next level. Current digital technologies such as mobile and cloud help enterprises in their digital transformation journey. However, solutions based on deep-tech add another layer on this transformation to solve real-life problems in areas like health care, fintech, agriculture and water management. The big worry though is that the current approach by policymakers and investors mostly focusses on funding but not on scaling up. As a result, the number of unicorns that are engaged in deep-tech is still minuscule.

This is where the Start-up India mission needs to focus more on providing an ecosystem that enables start-ups to grow. For example, there are still some niggling issues on exemption given to start-ups on Angel Tax. Once the exemption from ‘Angel Tax’ is given, the end-use restrictions will disallow a start-up from acquiring a smaller company to expand its business or from giving advances to their employees. Rather than micro-managing how start-ups operate, the government should promote entrepreneurship. Corporates and established entrepreneurs should also step in to provide mentorship and guidance to promising start-ups.

India has its share of challenges when it comes to food, energy, water and national security. It badly needs many large companies to develop platforms to address these issues at every nook and corner of the country at a low cost. These solutions will also be useful to address similar problems globally. Start-ups focussing on using deep-tech to provide solutions to such problems should be given all the support needed if India wants to have the next big technology company emerging from its shores.

Published on November 11, 2019

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