Chapter 2: Startups-Revolutionising India’s growth story

05 May 2023 4 mins Download PDF

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.