INDIAN STARTUP ECOSYSTEM
Abstract
The word ‘Startup’ has become very common in the age of e-business with new businesses, ideas, innovations and technologies emerging everyday around the world. India is among the top five nations as far the number of startup companies established. Though Indian Startup Ecosystem faced many ups and downs in the past years, with the introduction of GST, Make In India, Digital India and Startup India schemes the nation is witnessing a steady growth and development among the startup companies. This article gives an insight about the current scenario of the Indian startup ecosystem and some of the Indian startup companies which has transformed the business world, economy and our lives.
WHAT IS A ‘STARTUP ECOSYSTEM’?
A startup ecosystem is formed by people, startups at various stages and various physical or virtual organisations in a location such as universities, funding organisations, support organisations, research organisations, service organisations and large corporations interacting as a system to create new startup companies. The elements of a startup ecosystem are Ideas, inventions and researches, Startups at various stages, Entrepreneurs, Start-up team members, Angel investors, Startup mentors and advisors, Organisations with startup activities, Startup incubators and accelerators, Co-working spaces, Consulting, accounting and legal service providers, Event organisers, Startup competitions, Investor networks, Venture capital companies, Crowdfunding portals and Startup blogs and other business media
STARTUP ECOSYSTEM IN INDIA
India currently has more than 49,000+ startups, 1500+ investors, 250+ incubators, and 26 unicorns. The country is among the three largest startup ecosystems in the world in terms of its size, reach, and impact. According to a report released by Startupblink which is a global startup ecosystem map, the Indian startup ecosystem is ranked 37th and the top three cities are Bengaluru, Mumbai and New Delhi with over 65% of the total Indian startups with FinTech, EduTech and HealthTech as emerging verticals. Bengaluru has also been ranked as one of the world’s five fastest growing startup cities.
India is the world’s youngest nation with over 60% of the population aged between 18 – 35 years and as per the youth of the nation survey, there are 7 million college graduates per year and 55% of the youth prefer working in startups than corporates. India is also the second largest consumer internet market in the world with 462 million internet users in 2016 with over 80% mobile based users which also makes it the second largest smartphone market and is expected to rise to 730 million in 2020. The transforming digital and startup landscape in India has triggered key government campaigns promoting economic development, inviting foreign investment and job growth, the latest being ‘Startup India’. Angel investors are on the rise with a 20% increase in the active investors and global investors such as Alibaba Group, Soft Bank, Sequoia and Foxconn have started to invest in Indian startups. Flush with investor funds, the pace of growth is expected to accelerate in the Indian startup community. Although the rapid growth of the startup community does pose some challenges for established businesses, this growth also creates a number of opportunities for established businesses to realise and convert. Corporate companies are realizing the disruptive potential of start-ups and are thus, partnering/investing in them. Few examples are:
• Wipro has setup a $100 million fund to invest in startups
• IBM has partnered with 100 Indian big data and IoT start-ups
• Apple has recently acquired Tuplejump – an AI based startup from Hyderabad
• Barclays has setup a fintech co-working space that looks at getting innovative products at a cost five times cheaper than carrying out internal R&D
The introduction of GST on July 1 2017, has turned the country into a single market with the integration of central taxes – service tax, central excise duty, additional customs duty and state taxes – VAT, CST, state cess and surcharges.
Impact of GST on startups:
• Simple taxation – before GST, a startup spent a lot of time and energy to manage the various taxes at various points. Adhering to different regulations at different States make the process very complex. GST simplified the process by integrating all taxes, making the process of paying tax simpler.
• Ease of registration – Any new business needed VAT registration from sales tax department. A business operating in many states had to face a lot of issues regarding the different procedures and fees in each state. GST introduced a uniformity in process and centralised registration that has made starting business and expanding in different states much simpler.
• Higher Exemption – As per the previous indirect tax structure, any business with a turnover of more than Rs 5 lakh had to get VAT registration and pay VAT. GST has made this limit higher, to upto Rs 10 lakh and further to it, businesses with turnover between Rs 10 and 50 lakh will be taxed at a lower rates.
• Businesses in both sales and services – Previously, businesses like restaurants, which fall under both sales and service taxation, had to calculate the VAT and service tax on both items separately. This makes the calculations process very complex. GST does not distinguish between sales and services, and thus the tax calculation will be done on total.
• Saving in logistics cost and time –Before GST, many transport vehicles got delayed during movement across states due to small border tax and check post issues. Interstate movement has become cheaper and less time consuming, as these taxes are now eliminated.
GAME CHANGING INDIAN STARTUP COMPANIES
In the last few years, many technology based startups have emerged in India which brought a number of services to our doorstep and also changed the landscape of business and economy in our country. These are some of the Indian startup companies that have transformed our lives:
¥ PayTM – e-wallet.
¥ Zomato – Restaurant discovery app
¥ Flipkart – e-commerce website
¥ Freshworks – Software as a Service (SaaS)
¥ Ola – Online Cab Service
¥ Swiggy – Food Delivery App
¥ BookMyShow – Online Ticketing Platform
¥ Flyrobe – Fashion on Rent
¥ Myra – Online Drugstore
¥ Byju’s – The Learning App
¥ Zoho – Cloud software company
¥ Justdial – Local search engine
¥ Urbanclap – App based service marketplace
There are a lot of other Indian startups which are coming up with innovative solutions such as
• Kolkata based O2O startup backed by Microsoft and IIM Calcutta, HyperXchange offers certified and guaranteed refurbished electronics.
• Wishup, a Delhi based startup which provides virtual assistant services has helped bridge the gap between entrepreneurs and people looking to work from home.
• Bengaluru-based caterer aggregator CaterNinja lets customers book hassle-free catering services at the click of a mouse.
• Odisha-based IoT startup Phoenix Robotix has designed Aurassure, an environment monitoring device which is a cloud-connected network of online air pollution monitoring systems for smart cities. Through the network, industries can access high-resolution pollution data ‘through a hardware integrated software platform’.
• Bootstrapped startup, Cloudblocks has a complete home automation range that comes with advanced functions like voice control at affordable rates. Cloudblocks, which is installed in the house and outside, works in Wi-Fi and also has a security kit, which has motion sensor, door sensor and a smart button called ‘Click’ that can control lights, plus act as a panic button in case of an emergency.
• Entrepreneurs Harry Sehrawat and Archit Agarwal, students of textile engineering at IIT-Delhi, developed Sanfe, a pee device that allows women to stand and pee. The ingenuity of the device lies in the fact that it eliminates the need for any physical contact with an unhygienic toilet seat and with it, the risk of infections.
• Bengaluru-based Spektacom Technologies which was founded by former Team India cricketer Anil Kumble, recently partnered with Microsoft to launch an AI-enabled chip that sticks to normal cricket bats and turns them into “power bats”. These bats are able to capture multiple metrics when a shot is played, and throw up meaningful data insights into a batsman’s game. It benefits players, coaches as well as broadcasters who are always on the lookout to make sports coverage more interesting for viewers.
• Niramai, a Bengaluru-based health-tech startup founded by Geetha Manjunatha and Nidhi Mathur in 2016 has developed a cancer-screening software that is safe, non-contact, and radiation-free.
• TrashCon, started by a 23-year-old in Bengaluru, segregates and recycles solid waste after it is collected from homes. The mixed waste filled in plastic bags is cut open by a bag breaking system and then sent into the shredder through a conveyor belt. The shredded plastic is then compacted into cubes on a weekly basis and the plastic is used to manufacture tiles and shutters. Also any kind of furniture made out of plywood could be replaced by this material, because it’s lighter, water resistant and does not bend.
The Indian startup ecosystem witnessed a brief slowdown in 2016-17. But post 2017, investment into startups have increased by over 100% from USD 2.0 billion in 2017 to USD 4.2 billion in 2018. Indian unicorns, i.e., privately held startup companies that are valued over $1 billion in the B2C space are expanding their horizons to other markets and creating a bench mark in the global startup ecosystem.
With the vision build in India, build for the world, India saw more than 400 cross border startups in the year 2018. This has also created 40,000 new direct jobs and 4-5 lakhs indirect jobs.
Global start-ups are entering Indian terrain, offering a collaborative ecosystem for Indian start-ups to nurture and grow their products and solving unique challenges for the world. Government should open itself up as a market for startups and bring predictability in policy creation. Improving the ease of doing business is another important enabling factor for attracting investments. Enabling structured institutional support for early stage startups to tap into global markets and aligning state policies to help create sector hubs will bring focused support for advanced tech start-ups and create higher focus on capacity building than capability building. Bringing out training programs and mentors for start-ups, are some of the areas the industry needs to ponder upon in order to attain higher acceleration for India’s accelerating start-up ecosystem.
Today, India is brimming with new ideas which need the right guidance and funding to be scalable for the market. With a 50% year on year growth, advanced tech startups focused on creating solutions in segments like artificial intelligence, IoT, block chain, augmented/virtual reality and analytics are witnessing a momentous rise in 2018, driven by factors such as increase in internet penetration, better infrastructure for digital transactions, Govt. push on financial inclusion and innovative tech accelerating the pace of payments, lending & digital banking. Indian startups will also benefit from tax breaks, incubation centres, and easier approval and exit processes in the near future. The startup ecosystem plays a critical role in bringing innovation in much-needed areas, creating jobs, and offering technological solutions to all kinds of problems, thereby improving the lives of people.