How India became a start-up nation

Not a day passes now without news of start-ups raising funds, sometimes at mult-million dollar valuations. It is “cool” to be an entrepreneur now, so much so that even schools have started offering subjects in entrepreneurship at the Plus Two level. Premier engineering and management institutes are now the cradles of start-ups in the country, a far cry from the early 1990s, when most preferred to travel abroad for higher studies and jobs.

The ecosystem has changed. If in the early 1990s, you said you wanted to become an entrepreneur, your family would try to dissuade you from doing so. The ecosystem – seed and angel funding, venture capital and private equity firms – was not mature enough to fund your venture.

Consider the facts: in 2000, the total VC and PE investment in the country was just $0.7 billion, in 130 deals; in 2018, this jumped to $33.5 billion in 731 deals. The first Unicorn – a start-up that achieves $1 billion in valuation – happened in 2011, when InMobi achieved that status.

There were barely one or two unicorns a year in the subsequent years, but there was a quantum jump in 2018, when eight ventures – BillDesk, Freshwork, Udaan, Oyo Rooms, PolicyBazaar, Swiggy, Paytm Mall and Byju's – scaled that pinnacle. Of course, everything has not been hunky dory. There have been blips, brought about by both global and domestic issues.

The golden age

But there is no better time to be an entrepreneur than now. Capital is readily available, though for every venture that raises multi-million dollar rounds, there are at least nine others that are struggling to raise funds. Apart from the large number of overseas investors that came in early seeing the huge opportunity, there are quite a few domestic venture capital companies that are investing in and backing strong founders. Investors have realised that it takes longer to build a successful, scalable and sustainable business in India than in markets such as the US or China, and are tweaking their strategy accordingly.

The early entrepreneurs were ones who had some work experience and spotted a business opportunity and decided they would give up their comfortable corporate career and do something on their own. Some failed and went back to a corporate life, others persevered and made a success of their venture. Then, ventures were all about making money from the dismantling of government regulations and liberalisation of markets. Then came the growth of the internet and the dotcom era, when e-commerce ventures were set up. There were many ventures that built a product or a service out of India for the global market, mainly the US, taking advantage of the lower cost of labour. But the real surge in entrepreneurship happened over the last decade when entrepreneurs realised that India, with a billion-plus population, was a market waiting to be tapped.

The age profile and the psyche of the entrepreneurs too changed. A large number of them turned entrepreneurs right out of college; failure was not a word that found a place in their lexicon. Quite a few had studied at IITs and IIMs, gone to the US, studied and worked there, and came back to build products and services for India. All of them realised that the opportunities are immense in India; it is just that the initial years in fulfilling regulatory obligations may be more cumbersome than elsewhere. Faculty in the IITs too were transferring their academic knowledge and expertise into ventures. The present-day entrepreneur has it all: incubators, accelerators, mentors, seed funding, angel networks, VC capital firms, PE funds. All they need to do is to build a sustainable business model that adopts the latest in technology and be prepared to run a marathon, instead of wanting to sprint to success.

The ecosystem

The type of ventures coming up are varied. There are those that use technology to solve healthcare issues and make healthcare affordable; there are start-ups that are hyper-local, solving last-mile issues; there are those that are ensuring that the majority of the population that is out of the formal banking system is financially included; there are many that use deep tech to build products that find a global market; there are companies that employ technology to solve problems plaguing agriculture; and, there are hundreds of ventures that cater purely to the bottom of the pyramid, making a business model out of providing education, healthcare, electricity, financial services and what not. Traditional and mainstream venture capital firms too have started investing in social ventures.

Failure is no longer frowned upon. Wealthy Indians have started investing in start-ups and family offices are investing in start-ups either on their own or through venture capital firms. All told, there is no time like now to be an entrepreneur. As was famously said, 80 per cent of success is in showing up.

COMMENT NOW