Chapter 2: Startups-Revolutionising India’s growth story
Introduction:
Startups have emerged as a crucial driver of economic growth in India in recent years. With the government's emphasis on encouraging entrepreneurship and innovation, India's startup ecosystem has been rapidly expanding.
According to NASSCOM, India has the world's third-largest startup ecosystem, with over 50,000 startups.
Over the last few years, the country's entrepreneurial ecosystem has also seen an exponential increase in investment activity. In 2022 alone, Indian companies raised more than $25 billion.
Indian unicorns thrive in the fast-paced, dynamic ecosystem, offering innovative solutions and creating large-scale employment.
India now has over 108 unicorns, making it the world's second-largest unicorn nation.
Boosted funding:
The rising acceptance of digitalisation and the simple availability of finance at the early phases of growth for startups drove the surge in funding for startups.
Startup India has implemented a number of initiatives to streamline and facilitate the process of acquiring capital at both the early and mature phases.
The Startup India Seed Fund Scheme (SIFSS), with an outlay of Rs 945 crore, is one such scheme that supports early-stage funding from angel investors and venture capital firms. It provides financial assistance to early-stage startups for proof of concept, prototype development, product trials, market entry, and commercialization.
The Fund of Funds scheme, which was created in 2016, is another government initiative dedicated to aiding entrepreneurs financially.
Aside from the numerous management and regulatory hurdles, one of the most significant issues that startups confront is simple access to early-stage funding to finance their capital requirements. Traditional lending institutions, such as commercial banks, continue to operate under the same mandate.
The government has set up the Credit Guarantee Scheme for Startups to provide credit guarantees on loans made to DPIIT-recognized startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs), and Venture Debt Funds (VDFs) under SEBI-registered Alternative Investment Funds.