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Changing Entrepreneurial Ecosystem In India; Start-Ups Betting High

Umang Srivastava, Joint Managing Director, Bonita India

Aug 21, 2015 11:28

For a long time when Indian economy was modeled on the Soviet model, capitalism was a bad word in India. Things, however, changed in the last decade of the 20th century when liberalisation unleashed a latent force of untapped entrepreneurial potential in the country. With the license raj easing and doing business becoming easier, India set about on a new direction, and there was no looking back. 

Not only did new business emerged, they created jobs, attracted foreign investment, spawned a new middle class and modeled a new generation of confident Indians for whom entrepreneurship was a popular choice. 

Today entrepreneurship has gained a lot of respect, with people from diverse backgrounds breaking into the big picture. What has changed in the last 25 years is the belief that anybody can do business, provided he/she has the right idea. 

Till two decades back, school education was followed by a university degree and then a job with which the person stayed for the rest of his productive life. Businesses were meant only for people belonging to business families who would take forward the merchandise of their forefathers, and diversify it a bit. Today, boosted by the success stories of their peers, more and more people have developed the gut to explore their ideas and take the risk of venturing into a business avenue.

According to NASSCOM India is the 3rd largest base for start-ups in the world at present with over 3,000 startups present in India and over 800 setting up annually. By 2020, India is expected to be a home of 11,500 start-ups employing over 250,000 people. 

Start-ups also push business activity on the levels of mergers and acquisitions, with smart companies attracting formidable international attention. Over 20 M&A’s worth US$ 1 billion have been completed in India in last three years. Driven by a young and diverse entrepreneurial eco-system that is all inclusive of talent, remarkably innovative ventures are making a mark in India.
What has changed is the economic and social fabric of the country revolutionising the entrepreneurial ecosystem in India.

Role of New Age Technology 

In recent time modern versions of entrepreneurship have emerged aided by the transformative power of technology. A bulk of India’s start-ups have been in the domain of new age technology, be it e-commerce, IT-enabled healthcare services, or on-call services in a variety of areas. The rapid progress in the field science and technology has significantly expanded the scope of innovation in production, helping entrepreneurs explore new grounds and launch new ideas.

We have spent years acting as the back offices for many international brand and companies. However, with growth in confidence of Indian youth towards taking the risk of establishing their own companies, powered by the IT revolution of the age, Indians are today standing on their entrepreneurial feet. Take that, some of India’s most successful start-ups that went on to become huge businesses have been in the IT domain, be it Flipkart, Just dial, Bookmyshow, Makemytrip or even

Policy Help 

Liberalisation of the economy sent forth the first generation of entrepreneurs who established such brand names as Infosys, Bharti, Kotak, ICICI, among many others. These ventures opened a whole new scale of job opportunities for India’s educated young. Realising the potential of businesses in creating jobs, successive governments have lent policy support to entrepreneurs as well.  New policies towards encouraging micro or small businesses such as making loans easier for them has changed the face of entrepreneurship in India.

However, the slowing down of reform in recent years means we still need to cover a lot of distance when it comes to making India absolutely business friendly by offering right tax incentives, participation in government contracts, availability of risk capital etc.

Financial Crisis as a Reality Check

The global financial crisis of the last decade which saw many old institutions and markets crumble also saw the rise of new ideas and newer ways of doing things. It also in a way forced companies to do more with less, with reduced access to capital, innovation became the key. The realisation that too much investment in real estate or equity markets is not a good idea enabled newer ideas to emerge in many countries including India. 

With Indian middle class becoming a voracious consumer of digital products, India has become the fourth largest base of technology start-ups in the world. The growth of start-ups could be mainly accounted to the factors like large domestic market, increased M&A activity and access to capital through investor funding. Indian start-ups are also growing following their unique solutions and business model. With young entrepreneurs dominating the market, most of the start-ups have gained foothold following a strong consumer-centric approach and with B2C business model.  

Inflow of Investors

With vibrancy in the entrepreneurial ecosystem, start-ups today have access to multiple sources of funding from venture capitalists (VC), private equities (PE), angel investors, banks and financial institutions as well as incubators. With start-ups betting high on the ecosystem, there is a significant maturity observed in terms of funding. Unlike, a few years ago when financing was debt-oriented, the participation of venture capitalists has grown in India. Today, segments such as travel, matrimonial services, jobs, games, mobile payments, etc., are getting substantial capital infusion.

The relaxed norms and introduction of new reforms by the Indian government has further encouraged the investors to park their money in India. Filling the big lacuna in the entrepreneurial ecosystem in India, which earlier discouraged many budding start-ups, the investors have now gained confidence on Indian caliber and are ready to take the risk. 

While IT-related ventures continue to rule, start-ups in sectors like cleantech and renewable energy, retail, healthcare and education have seen increased funding activity Gone are the days when Indian businesses flourished under the shadow of international brands and names.  

With more mature ecosystem and ample opportunities, Indians today are not only launching their own brands but also marketing them in the international market under own brand names. With owning patents of many products, Indian entrepreneurship set sail to conquer not just the domestic but international market as well.