Sailing the Entrepreneurial Boat : India's Growing Startup Sector
BY VANSHITA KALRA/ AUGUST 11, 2024
DESIGNED BY RATAN MUKHERJEE
Entrepreneurship in India has been booming lately, making way for innovations and opportunities in the economy. Although this rise has been positive, it makes one wonder about the socio-economic factors that must have led to this.
ndia’s high rates of economic growth over the past two decades has not translated into the creation of sufficient quality jobs. Persistent unemployment has hindered the development of Indian society. The International Labour Organisation’s latest ‘India Employment Report 2024’ published in partnership with the non-profit Institute of Human Development (IHD) depicts a grim scenario – nearly 83% of India’syouth are unemployed, despite being innovative, educated, and skilled. However, amidst this adversity lies a beacon of hope: entrepreneurship.
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Considering the Indian scenario, where the traditional job market faces several constraints and uncertainties such as limited job security, gender disparity, and economic fluctuations leading to layoffs or hiring freezes, entrepreneurship emerges as a smart solution. It offers avenues for individual prosperity and fosters economic resilience on a national scale. India’s youth has been quick to grab onto this solution and execute it. There is an abundance of drive, motivation, discipline, and dedication among the youth regarding their careers, and the rise of entrepreneurship stands as a testament to this.
There is an abundance of drive, motivation, discipline, and dedication among the youth regarding their careers, and the rise of entrepreneurship stands as a testament to this.
When an investor funds a startup or venture, it enables the entrepreneurs to expand their staff, scaling the business and creating new opportunities for growth and employment in the economy. Unlike some large corporations that prioritise hiring from prestigious colleges or selecting candidates solely based on qualifications, entrepreneurs are open to hiring individuals based on their skills, regardless of formal education or degrees. For instance, Bhavish Aggarwal, the co-founder and CEO of Ola, is known for his approach to hiring people based on their skills and passion rather than their prior experience. Aggarwal has often been vocal about the importance of relentless dedication to achieving goals and building for the nation (Sen, 2023).
Over the past two decades, India’s entrepreneurial landscape has experienced exponential growth, significantly transforming the trajectory of the Indian economy. According to Forbes, as of 2024, India is home to over 63 million enterprises that contribute to more than 30% of its GDP and employ a significant portion of the population from bustling metro cities to rural hinterlands.
This growth wasn’t sudden or magical. The innovation of new technology and the introduction of supportive government policies and schemes have empowered individuals to confidently enter the entrepreneurial arena. Schemes like the Atal Innovation Mission aimed at fostering a culture of innovation and entrepreneurship through new policies and platforms like the Atal Tinkering Labs and the Atal Community Innovation Centres. Similarly, The Start-Up India Seed Fund Scheme focused on providing financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialisation has been instrumental in this transition.
Pictured: Illustration by David Bonazzi via Pinterest
The ever-evolving economic landscape of India also holds a significant influence on the entrepreneurial surge. To begin with, the increased availability of credit owing to banking sector reforms, selective government schemes, the bullish nature of investors, and mainly digitisation of banks, encouraged the budding entrepreneurs to take the necessary leap. This newfound financial accessibility solves the major challenge of raising the initial funds.
There also has been a shift in the traditional way of funding, wherein startups now look at exercising alternatives such as crowdfunding, revenue-based financing, venture debt, bank loans, etc. Crowdfunding, which allows fundraisers to raise funds via online platforms, is ideal for startups offering innovative products or services that resonate with society, as well as for startups that are new to the market and struggling to find investors. Revenue-based funding is suitable for enterprises with a stable stream of revenue as it provides capital without debt obligations that feel burdening. In return, recipients repay that principal plus a financing fee over a 6-24 month term through fixed periodic instalments. Entrepreneurs that don’t have any proven track record of revenue often choose venture debt as it provides them with funding mostly in the form of a loan, without dilution of ownership. However, this type of financing is often riskier for investors and it comes with higher interest rates and shorter repayment periods. One of the comparatively safer and simpler options remain bank loans for businesses that have an established revenue and credit history. With access to these aforementioned ways of funding, entrepreneurs are very calculative and careful with their funding decisions.
According to Invest India, as of 2024 India boasts over 114 unicorn startups. Around 45 of these emerged in 2021 , 22 in 2022, 2 in 2023, while the remaining were pre-existing.
Since the onset of COVID-19, an unconventional trend observed is the new entries to the unicorn club (startups that reach a billion dollar valuation or more) without any huge investment. Although the pandemic was truly tragic for the society and the economy, it gave entrepreneurs the time and reason to come up with ideas and strategies to help save the economy while contributing towards relief. According to Invest India, as of 2024, India boasts over 114 unicorn startups. Around 45 of these emerged in 2021, 22 in 2022, 2 in 2023, while the remaining were pre-existing. Some of these startups, like Zerodha, which has been bootstrapping since inception, are changing the unicorn funding norms and promoting independence and revenue generation since the early stages. Following the same pattern other Unicorns have also avoided large investments and have instead focused on independence and profit generation.
Additionally, the abundant availability of cheap labour in India supported by the growing population and continuous job market demands acts as an impetus for business growth. The nominal annual wage of developed countries like the USA, UK, and Canada are 15,353 USD, 20,918 USD, and 20,552 USD respectively, whereas for a country like ours that is still on the path of development, the annual wage is 674 USD. Having access to affordable workers enhances the practicality and scalability of ventures.
Source: Marcus, L. (2023). 2023 Monthly minimum wage of 65 countries. [Map]. Ghana Education.
Furthermore, the digital revolution has simplified the research and establishment process, lifting up the barrier of initial set-up. Entrepreneurs now make it a priority to study their respective industries and competitors to provide the best services and products. Market research is crucial for understanding customer needs and preferences, enabling businesses to adopt a customer-centric approach that enhances profitability. It identifies growth opportunities such as reaching untapped market segments, forming strategic partnerships, and improving products. Market research also guides informed decision-making across various business aspects, ensuring actions are data-driven rather than based on assumptions. The times of economic uncertainties are also a disguised opportunity for innovative business ventures designed to solve a problem related to the ever transforming consumer behaviour and mitigate possible risks.
With increased rags to riches success stories that have provided the general public with role models to look up to, and also the will to succeed at new businesses and learn from the mistakes has led to people choosing the path of entrepreneurship. The youth has a natural inclination towards creativity, individualism and problem-solving which motivates them to pursue career paths that give them the liberty to experiment. This has been complemented by a society that embraces creativity and innovation amongst the youth and encourages them to take risks and invest in their ideas rather than following mainstream business models. Let’s take a look at an example. Altor, a startup featured on Shark Tank India, provides an intelligent helmet that can immediately inform emergency contacts upon the rider meeting with an accident. In 2023, an estimated 1.6 lakh Indians were killed in road accidents. It is well established that about 50% of road crash deaths can be averted if victims receive definitive medical care within the first hour. India suffers a high burden of road accidents, but the medical emergency system is disorganised and lacks equipment and trained staff (Randhawa & Hashmi, 2024). Today, by tapping into this field where the presence of ventures are highly demanded, Altor’s net worth stands at INR 4.32 Crores after the investments from the Sharks (Tracxn, 2024).
Moreover, with increased awareness about diversity, underrepresented social/regional groups are keen on starting ventures that represent their values and importance. One such enterprise is Bodasa Farms. Started by Tenzing Bodosa, a rural entrepreneur from Assam, it is the only provider of elephant friendly tea farms in the world. With promising revenue and increased employment opportunities through these farms, Tenzing has created a motivational entrepreneurialatmosphere for the tribal community (Roy, n.d.). His unconventional interests as a young educated individual in farming related activities has provided society with proof that farming is a reliant, fulfilling, and exceptional form of entrepreneurialactivity.
Pictured: Illustration by Israt Jahan via pinterest
Big corporations are known for overworking and under compensating their employees. Business Standard mentions that up to 89% of Indians want to quit their jobs to be entrepreneurs. The aforementioned exploratory culture has also been a driving factor for people to shift from jobs to entrepreneurship. This allows them to have a balance which includes focusing on health, relations, and work equally. Aman Gupta, co-founder of Boat, also left his well paying job at JBL as it was financially under-satisfying and decided to “meet JBL in the market”, as stated by him in an interview by ICAI CA Tube. Today, the brand stands as a Unicorn worth INR 10,500 crores.
The surge in entrepreneurship in India is a multifaceted phenomenon driven by the confluence of various economic and social factors. The dynamic economic landscape has created a conducive environment for entrepreneurial ventures to thrive. Simultaneously, social opportunities have fueled the aspirations of the youth towards entrepreneurship and have made India the third largest ecosystem for startups globally with over 1,12,718 DPIIT-recognised startups across 763 districts of the country as of 3rd October, 2023. (Invest India, 2023). India also ranks second in innovation quality with top positions in the quality of scientific publications as stated by Invest India. As the entrepreneurial landscape continues to evolve, these factors will remain instrumental in driving the aspirations of individuals to carve out their paths and leave a lasting impact on the business world. India has some of the most inspired, innovative, and creatively unique young minds so it won’t be surprising to see some exceptional enterprises on the rise in the coming years. The growth until now is just the start, and owing to the endless potential of both the Indian market and the youth, entrepreneurship might just become the face of economic development entirely, making the world’s largest democracy self-sufficient and economically powerful.
The growth until now is just the start, and owing to the endless potential of both the Indian market and the youth, entrepreneurship might just become the face of economic development entirely, making the world’s largest democracy self-sufficient and economically powerful.
Keywords
entrepreneurship, economic growth, unemployment, startup funding, International Labour Organisation, technology, economic reforms, government schemes, Atal Innovation Mission, credit availability, Bank loans startups, unicorn startups, cheap labor, economic uncertainties, Bhavish Aggarwal, Ola, crowdfunding, revenue-based financing, venture debt, Start-Up India Seed Fund Scheme, COVID-19, Zerodha, Forbes, Invest India, market research, rags to riches, Altor, Tenzing Bodosa, Aman Gupta Boat, democracy.
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