Ey start up ecosystem

India@100

How the start-up ecosystem is thriving in India with the help of private capital

Economic growth over the last few years has truly spurred the Indian start-up ecosystem.

The India stack of digital assets and digital public goods and services has laid a sound foundation, on which the start-up businesses are innovating and growing. It is the development of this digital infrastructure, which has fueled much of the growth of start-ups in India. A robust availability of private capital from Venture Capital and Private Equity funding in India has supported the boom in start-ups.

Start-ups often develop new products and services that address unmet or new needs and seed new industries. They bring in innovations, create new jobs and increase the competitiveness of the economy. Growth of start-ups has been remarkable over the last six years, with India emerging as the third largest ecosystem for start-ups globally after the US and China.

The presence of start-ups in India is widespread, covering 56 industry sectors with 13% in IT services, 9% in healthcare and life sciences, 7% in education, 5% in professional and commercial services, 5% in agriculture and 5% in food and beverages. Till 2016-17, approximately only one unicorn was being added to the tally every year but over the past four years (since 2017-18), this number has been increasing exponentially, with 66% year on year growth in the number of additional unicorns every year.

With greater access to Venture Capital and Private Equity funding, equity markets and credit, the start-up wave would continue to fuel growth in India, both in terms of employment and economic value addition.

Supportive Venture Capital and Private Equity funding

While funding has gone to a variety of investments, for e.g., buyouts, real estate and infrastructure, the largest flow has been to support start-ups. In 2021-22, US$33.3b, approximately 40% of this funding was provided to start-ups.

Investment appetite has grown on the back of successful exits through both public markets and secondary sales.  In 2021-22, the value of exits for Private Equity and Venture Capital firms was recorded at US$42.5b demonstrating the value investors have been to create in India through their investments.

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    Summary

    While there has been a slowdown in the current year due to an increasingly uncertain global economic environment, this ecosystem of entrepreneurship supported by Venture Capital/Private Equity funding, with a history of successful exits, is now well established in India.

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