In an attempt to foster the start-up drive in India, Prime Minister Narendra Modi announced last year that 16 January will be celebrated as ‘National Start-Up Day’. This year, it has been coupled with ‘Azadi Ka Amrit Mahotsav’ and 75 cities across the country are organising various events to laud and nurture the start-up ecosystem.
The Department of Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Industry and Commerce organised the ‘Startup India Innovation Week’. The event, which culminated today, saw the participation of Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Piyush Goyal and Som Prakash, Minister of State for Commerce & Industry in New Delhi.
Throughout the country, many other stakeholders also held various initiatives for National Start-Up Day. Atal Incubation Centre at Banasthali Vidhyapeeth, which held a two-day fest to acquaint students about the start-up sector.
Startup India organised the 6th session in the seven-day series of industry-focused webinars on the topic, ‘Channelizing Private Investments into Start-ups’, focusing on what different category of investors look at while investing in start-ups.
Mumbai’s Veermata Jijabai Technological Institute’s Technology Business Incubator organised a 9-kilometer and 18-kilometer cyclothon, while Aurangabad’s Marathwada Accelerator for Growth and Incubation Council organised an ‘Interaction Meeting of Women Entrepreneurs’ for women-led start-ups.
Coming A Long Way
While start-ups have always been a part of India’s economic fabric, the sector got an administrative push in 2016. To nurture the ecosystem, the government introduced The Startup India initiative with a focus on areas of 'handholding and simplification,’ ‘funding support and incentives’ and ‘industry-academia partnership’. The government also launched a new funding scheme called the Fund-of-Fund Scheme (FFS), which has an investment plan worth Rs 10,000 crore and has allocated Rs 7,527.95 crore till now.
In 2021, the prime minister announced another funding scheme called Startup India Seed Fund Scheme (SISFS). The scheme plans to support the companies with Rs 946 crore investment and it has so far approved Rs 345 crore. TechpromIot Solutions Private Limited, ArishtiCybertech, Aloe Ecell, Manini Renewables and Vivalyf Innovations are some of the start-ups, which availed funding under the scheme.
Last year, the government rolled out Digital India Startup Hub and the Supporting Entrepreneurs in Transformation and Upskilling (SETU) programme. It also introduced the Credit Guarantee Scheme (CGS) to provide loans to DPIIT-registered start-ups.
With the financial and technological support from the government, the number of Indian start-ups has drastically increased. According to data from the Ministry of Commerce & Industry, India has 84,602 DPIIT-registered start-ups, a stunning rise from 452 in 2016. A Tracxn report pointed out that the country is also home to 108 unicorns, the third most after the US (865) and China (224). Bengaluru is home to the maximum number of unicorns (39), followed by Mumbai (19) and Delhi (10). Last year, 23 start-ups stepped into the unicorn club and the total valuation of unicorns is $345 billion. Multiple sources reported that nearly 8.6 lakh direct jobs have also been created in the start-up arena.
Indian Start-Ups: The Challenges and Hard Times
While the fact that India has the third highest number of unicorns and the government is doing its best to extend its financial and technological assistance the flipside to the rosy start-up picture is becoming more evident with the growing news of -layoffs and funding crunches.
Since last year, Indian start-ups are struggling to generate funds at the expected valuation, a situation that experts call a ‘Funding Winter’.According to a PwC report, late-stage funding in India dropped by 52 per cent last year, taking it to $6.5 million compared to $12.5 million in 2021. Venture Capital (VC) investment also dropped by 42 per cent to $4 billion in November 2022.
Coupled with a fund crunch and fear of a global economic downturn, the start-ups were seen to cut down employee numbers as cost-cutting measures. Nearly 18,000 employees in the Indian tech sector have been fired by the companies. The Indian edtech sector alone was accountable for 44 per cent of the total layoffs.
Highly-valued edtech unicorns like Byju’s, Unacademy and Vedantu trimmed their workforce to keep their business on the profitability track. In October 2022, Byju’s announced its plans to rationalise its employee bandwidth by 5 per cent. Unacademy laid off nearly 1,100 employees in 2022 whereas the Bengaluru-based unicorn Vedantu fired 350 employees.
Last year Gaurav Munjal, CEO of Unacademy, said that the upcoming year might bring more difficulties for Indian start-ups. His words were predictive after Unacademy-owned Relevel welcomed 2023 with a slew of layoffs, akin to upGrad-owned Harappa. The layoffs this year have triggered a critical question: ‘Is the start-up space heading towards difficult days?
Down Not Out
In an online interaction with Shantanu Deshpande, the CEO of Bombay Shaving Company, Aman Gupta, co-founder of boAt, said that India is in a transition period when it comes to working culture. “Now people are moving out of the old system of being in service to entrepreneurship,” Gupta said. However, the founder expressed his fear that the people may go back to the old world if the companies conduct too much firing.
The firings in the past year have suggested that India’s start-up space is on shaky grounds. However, data shows that there was some silver lining for the Indian start-up ecosystem in 2022. Of the 23 companies that entered the unicorn club last year, 13 managed to be profitable. Despite the funding winter, VCs and PE (private equity) invested $33.3 billion in Indian start-ups. The early-stage start-up funding went by 12 per cent.
Going forward, the health of the Indian start-up space will be determined by who gets to hog the headlines. If news of layoffs keeps coming out, it won’t fit well for the narrative of a thriving start-hub ecosystem. However, if more and more news of fundraising comes out, it will suggest that investors are confident in India’s start-up culture.