Startup India: High on intent. Can the speed be better?

Startup India: High on intent. Can the speed be better?

Monday May 28, 2018,

4 min Read

In January 2016, Prime Minister Narendra Modi launched the ambitious Startup India programme to provide government support to the country’s expanding startup ecosystem in terms of funding as well as a nodal agency that would be their single point of contact. The Rs 10,000 crore fund announced for investments sent the message that the government had big plans. Startups were excited by the scope of the programme. Many startups heaved a sigh of relief because the government also promised to invest in sectors that traditional VCs often ignore for a variety of reasons.

One significant achievement of the Startup India programme is that it brought the startup ecosystem into attention – it was a validation for startups as viable contributors to the economy. And it did a lot to raise awareness about startups in the mainstream consciousness.

A key focus area was funding. It took a while to figure out that the funds would be invested via the Small Industries Development Bank of India (SIDBI). Progress was slow but what was encouraging was the government’s approach – they admitted they were new to this and would spend time and effort to better understand the startup ecosystem and its challenges.

More than two years down the line, according to the latest update on the Startup India website, as of September 2017, only 73 investments have been made across 30+ sectors, averaging barely two companies per sector. Fintech leads the pack with eight investments in the sector. (See tables below)

Part 1 of the list of startups funded via the Startup India programme (see Parts 2-4 at the end of the article)

While I commend the government on the initiative and the investments made, the larger question is: has the pace of investment been fast enough? This especially applies to 2016 and 2017 which were sobering years in terms of fund-raising, especially in areas like deep science where VCs are still not investing enthusiastically. All the more reason for the number of government investments to have risen proportionately.

(Note: while 2017 racked up impressive numbers, a big chunk of that came from massive late-stage investments running into >$1 billion into the likes of Flipkart and Paytm.)

Much like in the rest of the ecosystem, women-founded startups remain a small minority of the total startups funded.

I have been speaking to entrepreneurs and the fact is that there is disillusionment creeping in that Startup India, despite its transparency and publicly available quarterly updates, could well become yet another programme that could fall by the wayside. I hope, like every other Indian startup, that there will be greater momentum, faster execution and bigger disbursements. 

Moreover, how can we ensure that more disbursements spread to beyond Bengaluru and Delhi-NCR, the twin capitals of the ecosystem? The big clusters attract enough and more VC interest. The real impact will come through significant investments beyond these clusters.

One of the goals of the Startup India programme was to create 18 lakh jobs once the entire fund is deployed. According to a January 2016 PTI report quoting an official statement, “The fund is expected to generate employment for 18 lakh persons on full deployment. A corpus of Rs 10,000 crore could potentially be the nucleus for catalysing Rs 60,000 crore of equity investment and twice as much debt investment.”

The focus needs to shift from big cities to make that happen. In the past few months, my travels have taken me across India and having met youngsters in Tier 3 and Tier 4 cities, it is clear that qualified talent across India is hungry to work for startups. At the same time, startups are looking for talent that is hungry to learn and work on new technology and solutions. Which means we need to bring the two together to achieve Startup India’s goal of creating lakhs of jobs.

I know the government is aware of this and is working towards this, but more can definitely be done. Wouldn’t it have been great if we had 573 investments to talk about rather than just 73? YourStory’s own database has close to 25,000 startups registered (even accounting for a mortality rate of 30 percent).

If there was ever a time to accelerate investments, it is now. It is my heartfelt request to the government to act decisively and immediately. The startups of India are waiting. And waiting with hope.

Part 2 of the list of startups funded via the Startup India programme
Part 3 of the list of startups funded via the Startup India programme
Part 4 of the list of startups funded via the Startup India programme