What it will take for startups to spearhead innovation to transform urban India

India’s startups are bursting with innovative tech-led solutions to several problems faced by people living in the city. But for their commercialisation, success and scale, the stakeholders in the ecosystem need to come together.

Set to become the largest contributor to the world’s urban population, India is becoming a land of cities. Even as the population in cities is expected to double in the next 30 years, outpacing that of rural areas, 75 percent of the infrastructure required to serve urban India is yet to be built. And municipal finances and resource allocation continue to be seriously constrained presenting deep concerns about infrastructure and utility provisioning to meet water, housing, energy and transport requirements for the growing populous.

Sprawl-led development--urbanisation that is brought about by people migrating to peri-urban areas of overpopulated cities, that now host residential projects--has pushed people to the peripheries of cities, where, facilitated by rising income levels, services are being self-provisioned.

Self-provisioning carries the weight of direct costs to households and indirect costs to the community, society and the environment in the form of ecological degradation, resource depletion, human stress, ill-health from pollutants and lost hours of productivity – all of which are vital considerations to the economics of urban sustainability.

The real estate sector, which contributes almost seven percent of India’s GDP is recipient to large private investments and the private sector has become an important catalyst for ensuring access to services. In Indian cities, one of the prime housing models, referred to as townships or gated communities, exemplify and even exacerbate these concerns of negative environmental impact, particularly related to waste, water and energy management. This then provides a vital opportunity for engagement and discussions on sustainable innovations and standards for service delivery.

Also read: Finally, an accelerator programme for solutions that ensure women's safety in public transportation

Domestic enterprises drive solutions

Ranked third in the world in startup ecosystem, there is a growing body of domestic enterprises in India that are developing solutions aimed at managing and solving urban challenges. While a majority of these are tech-startups aimed at ecommerce and consumer products and services, 2018 was touted as the year of food startups: ones aimed at easing public service delivery and driving efficiencies, whether in waste, water or energy in built form are slowly but surely emerging.

Solutions these companies offer range from supply-side efficiencies such as better materials or efficient equipment, to demand-side management like monitoring and IT-enabled solutions. Solutions that are driven by Internet of things (IoT), software as a service (SaaS) and artificial intelligence (AI) in this space are finding growing traction.

For any of these innovations to have a catalysing impact on an economy, it is necessary that they be successfully commercialised. Presently, the main hurdles to making the journey from mind to a marketplace for startups are in the form of access to consumers, access to finance and access to government.

First, small enterprises lack the know-how on combining and leveraging government schemes to their advantage and are further debilitated by the inability to access a rigid request for proposal (RFP) process. Second, since there are limited financial products or risk-mitigation instruments, these investments are seen as being risky. This, combined with investor pressures of achieving quick results and returns, make investments in early stages hard to come by.

Thirdly, due to limited data, awareness and capacity, residential markets are not inclined to adopt solutions that involve major capital investments. This, in turn, necessitates self-financed research and development of lower cost products, which, most startups in their initial stages are hard-pressed to pursue.

Fostering a startup ecosystem

Currently, the Indian government is using policy measures and incentives such as the recently launched Startup India to promote the growth of the Indian startup ecosystem. These measures are in the form of financial assistance, relaxing of norms and procedures around setting up and dissolving businesses, applying for patents, and public procurement, as well as tax exemptions and easing the flow of foreign investment.

This has, in part, contributed to India climbing up the ranks in Global Competitiveness (WEF) and Ease of Doing Business (WB), while also making the country a favoured investment destination. However, while the country displays strong innovation capability, and a growing entrepreneurial culture, in order to grow as an investment destination in basic services management and to make low-carbon growth through judicious use of resources a reality, active participation from all stakeholders including businesses, investors, startups, the government and research community is crucial.

Only this meeting of the minds can help foster a startup ecosystem that supports innovation, creative new business models and access to skills, finance and markets that can help startups better meet customer needs, overcome barriers and scale.

The authors, Jaya Dhindaw and Aarathi Kumar, are part of Integrated Urban Planning programme, WRI India Ross Center and lead TheCityFix Labs accelerator initiative.