The Government of India (GoI) announced the Start-Up India initiative on 16 January 2016 to provide a favorable business environment for start-ups in the country and enhance the ecosystem. The initiative is aimed at promoting bank financing for start-up ventures to boost entrepreneurship and job creation, with a focus on reducing state intervention, smoothening the licensing process, and mitigating other shortcomings such as difficulties in securing land permissions, foreign investment, and environmental clearances. Various GoI ministries, including the Department of Industrial Policy and Promotion (DIPP), have initiated a number of activities for encouraging the growth of start-ups in the country.

This study sheds light on the entire start-up landscape in India and outlines Frost & Sullivan’s value proposition for start-ups and the investor community and their partnering benefits. The Indian market is well-positioned for start-ups and small and medium businesses, driven by the substantial investments, support activities, evolving technology, and expanding domestic market that characterize it. Longstanding expertise, locational advantage, and availability of resources such as raw materials and cheap labor, along with burgeoning income and increasing domestic demand, make India a perfect melting pot for start-ups to flourish, particularly in certain key sectors that offer significant growth opportunities. The entrepreneurial spirit of the country, ably backed by the current government, has attracted billions of dollars of foreign funding, encouraging the rise of promising start-ups in India. The huge leap forward in the start-up movement is largely attributable to the changing investment landscape in the Indian start-up ecosystem. 8 out of the 10 venture capital (VC) / private equity (PE) investments made in 2015 came from foreign companies, driven by the insatiable consumer market demand created by the mobile/Internet revolution. Focus of giant VC companies such as Tiger Global Management and Accel Partners has boosted the confidence of other private equity and hedge funds in the Indian market.

Despite strong growth prospects, however, start-ups in India face some structural challenges. Addressing these can accelerate the momentum of growth in this space. As India progresses on its transformational high-growth trajectory, a substantial gap between consumption demand and supply of goods and services persists. This is primarily owing to inadequate professional guidance, underutilization of talent, and inappropriate channelization of funds. A proper linkage between entrepreneurs and their go-to markets will make the start-ups and small enterprises more sustainable and profitable in the medium to long term. Frost & Sullivan’s advisory and operational support offers unique partnering benefits for both start-ups and investors and enables bridging the gap in the ecosystem.

Author: Krishanu Banerjee