Editorial

Start-ups on the move

| Updated on January 15, 2021 Published on January 15, 2021

India has moved from B2C start-ups to deep tech ones, with higher socio-economic spin-offs

As per a National Association of Software and Services Companies (Nasscom) report on the country’s tech start-up ecosystem, India is advancing fast towards becoming a global hub for innovation. India has added 1,600 new tech start-ups and a record 12 unicorns (market value of over $1 billion) in 2020. Despite being a pandemic year, 2020 did better than 2019 when just seven unicorns were added. Overall, the Indian tech start-up base is witnessing steady annual growth at a scale of 8-10 per cent. But the biggest shift in the start-up space is the emergence of deep-tech ventures. Over 19 per cent of all start-ups are now leveraging deep-tech, against just 8 per cent in 2014.

There are three key reasons why India needs these deep-tech start-ups to grow, not only in numbers but also in terms of size and valuation. First, solutions based on deep tech solve real-life problems in areas like healthcare, fintech, agriculture, and water management. India also has its share of challenges when it comes to food, energy, water and national security. Second, deep-tech companies can offer alternative job opportunities to our engineers who were sought after by multinational tech companies but are now finding it difficult to move to research labs located out of the country due to tough visa norms. Finally, Indian deep-tech companies will help secure the country’s data sovereignty.

The other significant data point from the Nasscom report is that 58 per cent of new unicorns in 2020 are B2B focused. This is a significant change from the initial rush of young entrepreneurs who were merely replicating successful business models from Silicon Valley, primarily aimed at retail consumers. While these businesses have made life easier, the reality is that Indian start-ups are way behind in terms of creating products. This could be a thing of the past soon with more Indian start-ups now focussing on creating solutions using deep-tech such as artificial intelligence, analytics, augmented reality/virtual reality, blockchain and internet of things, among others. The deep tech start-up pool is expanding at a five-year compounded annual growth rate of 41 per cent, faster than the overall ecosystem growth rate. What is also encouraging is that 50-55 per cent founders believe profitability should be given weightage alongside valuation. This will ensure that these entities will scale up with a sustainable business model. The Centre should smoothen the process of getting funds from the ₹10,000 crore start-up fund set up in 2016. Corporates and established entrepreneurs should step in to provide mentorship and guidance. The new generation start-ups could transform India’s public services and propel it upwards in the software value chain.

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Published on January 15, 2021
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