The Evolution of the Indian Startup Ecosystem
As India has evolved and become a more mature market over the last decade, it’s been adopting a new execution-based mindset, in collaboration with the Government. Implementing policies that foster growth within the startup community. The proper support channels are in place to help entrepreneurs through each stage of business and encourage more people to enter this space.
If your business is considering an expansion and you want to become more familiar with what India has to offer, in terms of thriving sectors and other emerging industries, this information will come in handy for your strategy going forward.
Main contributors to India’s startup success:
Number of skilled workers
Population size of India
Overall less expensive to do business
India’s Path to the Startup Ecosystem
Both the business and trade cultures have existed for many centuries in India. Trading activities, for example, evolved and flourished during the Kushan period in the 1st century when the introduction of the 'silk route' opened way for international trade. Later, post-independence, the lack of financial and government support dampened the growth of entrepreneurship. Coming back on the scene in the mid-80's, the Indian startup culture saw a resurgence following the commencement of NASSCOM.
People, however, were more inclined towards carrying out their family businesses – and those whose families didn't own businesses relied on stable 9 to 5 options. The significant growth seen in the entrepreneurial space has only increased over the last decade. College graduates could feel more confident in leaving their comfort zones – taking the courageous step of leaving high-paid multinational corporation (MNC) jobs and launch start-ups. This has spread across the nation, and programs such as Start-up India, Making in India, Digital India have further encouraged the development of a strong entrepreneurial landscape. With that, India has become the second-largest startup ecosystem – touting a prediction of 10-12% growth every year.
India’s Ecosystem Today
The growth of the startup ecosystem is attributed to the government’s intervention in terms of economic reforms and development beginning in the 1990s. India boasts a population of 1.3 billion and has a lot of room for growth in many different sectors. Even the most niche products or services have the potential of earning a great deal of newfound market share.
6 Government Benefits for India Startups
1) Streamlined Registration Process
The Government of India wants to simplify the previously tedious process of registering a startup. The Department for Promotion and Internal Trade launched an initiative called Startup India that helps startups secure funding, receive tax benefits, build networks and access to free resources and programs. On their website, you are able to complete the entire registration process online through a simple form and start receiving the benefits immediately.
2) Reduced Costs of Patents and Trademarks
To encourage the increase of file patents and trademark applications, the government decided to absorb the cost of all the facilitator fees, leaving only statutory fees for the startup to pay for. The rebate for trademarks is 50 percent and 80 percent for patent filing. Since, 2016 there have been 450 applications and only 42 were refused for undisclosed reasons. The patent process has the potential to take up to 4 to 7 years to complete, but India has taken steps to reduce that time down to as little as 18 months.
3) Funding Access
The Government sets aside 10,000 crore rupees for startup venture capital (Fund of Funds for Startups) and influenced the banks to provide venture capital as well by guaranteeing the funds. The industries that are focused on by the government for this startup fund are cybersecurity, drones, clean energy, water and waste management, and healthcare.
4) Tax Exemptions
Under section 80 IAC of the Income Tax Act, startups may be eligible for a three-year tax holiday to promote innovation and job creation. In order to receive this tax exemption, the business has to have a scalable business model, as well as high employment and revenue generation. After this criterium is assessed, it is the startup’s responsibility to apply for a certification from the inter-ministerial board before you will be granted the tax holiday.
5) Research and Development
R&D facilities are becoming more prevalent in India to help companies develop new products and services or to make their existing products better. It is important to let innovators focus on scaling their business ideas and turning a profit and opens up the potential for public and private organizations to partner. India has various tax incentives for businesses and organizations who carry out R&D as long as there is revenue generated from initial investment.
6) Investors are Tax Exempted
The government has venture funds allocated to the startup ecosystem and uses that to attract investors inside and outside of India. India ensures these investors that they will not be taxed on their capital gains which helps expedite the investment flow for startups.
The Emergence of Incubators/Accelerators
As the economy continues to grow, India is attracting investors from several different countries. The most common countries who are actively involved are Israel, Australia, The Netherlands, Japan, England, France and Germany – to name a few. Through this international collaboration, over 14 startup exchange missions were created giving entrepreneurs access to incubators/accelerators in order to grow their business. Currently, there are over 250 accelerators, incubators and co-working space within India.
Many incubators are operated by:
Privately owned and operated within India
Private collaboration with partners outside the country
Corporate accelerators (created by multinational companies)
India Youth Launching Startups
According to the Youth of Nation Survey, consisting of 150K young Indians, the median age of start-up founders in India is 31 years old. The majority, 55%, of Indian youth prefer to work for start-ups over established corporations. India’s youth are the main driver when it comes to startups and have shaped the country to be the second-largest startup ecosystem globally.
The Government of India’s main prerogative is to empower youth and improve social development for the country. The main goals to achieve this are by focusing on gender equality, digital connectivity, universal health care, access to financial support, education, and housing for every citizen of India.
India's startup ecosystem is robust and promising, full of opportunities and prosperity for those able to conquer it. Its structure and processes are continually evolving and merging with emerging technologies, bringing a variety of innovations. India, as a country, has the right mixture of all the sectors for a healthy ecosystem. Not only are the youths enthusiastic about the prospect of business ownership, but even the government and investors are encouraging of startups. There's no doubt that India will have a large and impactful presence in the entrepreneurship scene for many years to come.
Have any questions about how the startup ecosystem could help your business grow? Reach out for more information. CIAP helps entrepreneurs, just like you, establish their businesses in India – all it takes is the right connections, hard work, and mentorship.