A decade after its inception, India’s tech startup ecosystem, home to 31,000 startups, has raised a staggering $70 billion in capital and built a unicorn club of over 90 companies, and is looking towards the next phase of growth driven by deep tech and generative AI.
From almost nothing, the country has become the third largest startup hub after the US and China, creating more than 1.05 million jobs. The addition of nearly 1,000 startups in 2023 alone, including 400 from emerging regions, shows the strength of the ecosystem despite the funding winters of the past few years.
“This surge has established India as the third largest startup ecosystem in the world, with over 950 new tech startups launched in 2023 alone. Key sectors such as enterprise tech, health tech and fintech have been at the forefront of this growth, accounting for over 70 per cent of tech startups in 2023, up from 60 per cent in 2014,” said Kritika Murugesan, director, Nasscom 10,000 Startups initiative.
“One of the most significant developments in India’s technology industry is the 15-fold increase in the number of technology startups, which now stands at over 31,000,” she said.
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This surge has helped India establish itself as the third largest startup ecosystem in the world.
He said the country’s startup ecosystem has also proven resilient, weathering challenges such as the COVID-19 pandemic, global economic uncertainty and a funding slowdown.
The rise of tech startups in India has not only disrupted traditional industries but also sparked a wave of innovation and entrepreneurship. Unicorn success stories worth over $1 billion have emerged in various sectors including e-commerce, fintech, enterprise software, etc. These unicorns have attracted significant investments and cemented India’s position as a global technology hub.
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However, issues such as depth of funding remain a challenge for the startup ecosystem. Though India boasts of a growing number of unicorns, it lags behind the US and China in terms of the number of these highly valuable startups.
Murugesan argues that the focus should not just be on the numbers, but also on the impact these tech startups are making. He noted that 15 tech IPOs have raised more than $2.4 billion on Indian stock exchanges between 2019 and 2023, reflecting continued interest from the investor community.
Asked where the next phase of growth would come from, she said the focus was shifting to deep tech startups that leverage AI and emerging technologies to tackle global challenges.
“With over 3,000 deep tech startups and increasing investments in AI, India is poised to become a leader in this space,” she added.
The next stage of growth
Ashish Agarwal, vice-president and head of public policy at Nasscom, welcomed the move to remove angel tax on investments in startups and appealed to the government to implement the Securities and Exchange Board of India’s 2018 recommendation to allow shares of startups incorporated outside India to be listed on Indian stock exchanges.
“There has been growing interest among Indian startups headquartered overseas to relocate to India. These startups have chosen to incorporate overseas for various reasons including investor obligations, higher acceptance of newer business models overseas, easier compliance and lower capital gains tax,” he said.
“These startups are considering listing in India to raise capital and build the next phase of their growth. This will lead to capital and wealth generation in India and further strengthen India’s capital market infrastructure,” he said, citing the examples of the US and Hong Kong, which have allowed direct listings of foreign companies on domestic stock exchanges.
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M. Srinivasa Rao, CEO of T-Hub, said the growth in women-led startups was a result of the ecosystem. “Women entrepreneurs are also on the rise and women-led startups will increase from 10% in 2017 to 18% by 2022, supported by initiatives such as the fund of funds scheme for startups,” he said.
Despite these achievements, challenges remain, including access to capital, regulatory hurdles and infrastructure gaps, and continued support is needed for sustained growth, he said.
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