Startups in India are a concoction of a personal dream, endless working hours, and a determination to carve a niche for yourself. From India’s first unicorn startup, InMobi, to the latest, LeadSquared, every startup begins as a small seed that dreams of becoming a tree someday—strong and sustainable. 

From 0 startups in India to 99,371 startups as of May 14, 2023, the Indian startup ecosystem has grown by leaps and bounds. It is a remarkable trend that has been unfolding in recent years, igniting entrepreneurial spirit like wildfire and giving birth to a vibrant culture of innovation and disruption. 

The question is: Is this boom real or a bubble that will break just about anytime now? 

In today’s blog, we are going to understand 

• The start of startups
• Building blocks of the Indian startup culture
• Is it a bloom or a bubble?

Shall we begin?

The Start of Startups

Over the years, the advent of technology, the accessibility of capital, and a burgeoning middle class with disposable income have all played pivotal roles in fostering this entrepreneurial culture. But if we were to look closely at the history, we may be able to identify some major pivotal touchpoints in the evolution of Indian startup culture. They are: 

1. Liberalization of the Indian Economy in 1991

Prior to the 1990s, the Indian economy was heavily regulated, marked by protectionist policies, bureaucratic hurdles, and limited foreign investment. The liberalization reforms, also known as the New Economic Policy, initiated a significant shift towards a more open and market-oriented economy.

For one, it removed the License Raj, which required businesses to obtain many permits. Thus making it easier for entrepreneurs to start their own ventures. Furthermore, liberalization of the economy opened doors to FDI or Foreign Direct Investments. Foreign investments injected 3 much-needed things into the ecosystem to help startups scale easily:

• Capital
• Expertise
• Technology 

It also introduced cutting-edge technology to India, which, coupled with the availability of skilled talent, fueled the growth of startups in sectors such as software development, e-commerce, and digital services.

Finally, the move pushed the government to support the entrepreneurs in the following ways:

• Tax incentives
• Incubation centers
• Startup funds
• Regulatory reforms

A study by Kaustubh Dhargalkar, Business Design professor and head of the innovation lab at the Center For Innovation and Memetics of the Welingkar Institute of Management Research and Development, reveals that the number of first-generation companies listed in Group A of the BSE (Bombay Stock Exchange) increased from 9 in 1991 to 62 in 2011. An incredible increase of 588%. 

2. The Great Recession

The Great Recession, as we all know, was a challenging time for the global economy. However, it played a significant role in shaping the Indian startup culture. 

Job losses and the downsizing of established companies led to a surplus in talent. These talented individuals, in search of employment opportunities, set off to start something of their own or join early-stage startups. Take, for example, Zomato and Policybazaar—both of them were founded in 2008. 

Since then, there has been no stopping—quite literally!  

Building Blocks of the Present Indian Startup Culture

Several factors have contributed to the growth of the present startup culture in India. Here are some of the prominent building blocks—

1. Young and Dynamic Workforce

There is a vast pool of young, intelligent people in India who are keen to go out on their own and make their mark— the Gen Zs. This group has become pivotal in the startup movement thanks to the success of the educational system in developing top-tier talent.

2. Supportive Government Initiatives

One simply cannot overlook all the work the government has done to support startups in India. From initiatives like Startup India to the SAMRIDH Scheme, Multiplier Grant Scheme (MSG), and NewGen IEDC, these initiatives have played a pivotal role in:

• Providing incentives and tax benefits
• Offer regulatory support to startups
• Empower collaborative research and development within industries and institutions
• Inculcate entrepreneurial spirit and innovation through guidance and support, and more.

3. Venture Capital and Funding

Access to capital has been a crucial element in the success of startups. The growth of venture capital firms, angel investors, and crowdfunding platforms like Kunal Shah, Accel Partners, SAIF Partners, and Indiegogo has created a thriving ecosystem that fuels innovation and supports early-stage startups.

4. Changing Consumer Behavior

The rise of the digital age has transformed the way Indians consume products and services. The widespread use of e-commerce, online banking, and digital entertainment has created a sizable market that startups are eager to enter.

Is it a bloom or a bubble?

Now, the question that lingers on everyone’s mind—is the Indian startup boom real or just a bubble waiting to burst?

While the enthusiasm and growth are undeniable, it’s essential to tread cautiously and analyze the long-term sustainability of this culture. Although we have had several success stories in the startup realm, it’s important to understand that not everyone will succeed. So to decide whether its a bloom or a bubble, we need to look closely at these 3 points:

• Quality of Ideas: Sustainable startups are built on strong and innovative ideas that solve real problems. Startups that offer unique value propositions and address market needs are more likely to thrive in the long run.
• Scalability and Profitability: The ability to scale operations and achieve profitability is crucial for startups. While rapid expansion might be attractive, it is essential to focus on building a sustainable business model that generates consistent revenue and profits.
• Market Dynamics: The sustainability of the Indian startup ecosystem is also dependent on market dynamics. Factors such as competition, consumer behavior, and regulatory changes can significantly impact the long-term viability of startups.

   

See You For Our Next Blog!

Now that we’ve explored the Indian startup revolution, it’s evident that this growth isn’t just a bubble. India’s startup scene has a strong foundation thanks to a mix of talented people, cutting-edge tools, and a supportive environment. However, a healthy dose of realism is required when evaluating the culture.

As a reliable partner of D2C firms, StartInc Consultancy is familiar with the inner workings of this dynamic startup scene. Our core value lies in building a supportive system to boost the growth of Startups in India further. If you’re an entrepreneur with an idea or a business, schedule a call with us to see how we can help your business grow!