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India’s Startup Ecosystem

Context:

Recently, Prime Minister  praised India’s startup ecosystem as he highlighted that the country has reached a landmark figure of 100 unicorns with a valuation of more than $300 billion.

Relevance:

GS III- Indian Economy

Dimensions of the Article:

  1. What is a unicorn startup?
  2. India’s unicorn record
  3. Challenges faced by the Start up’s

What is a unicorn startup?

  • Unicorns are privately held, venture-capital backed startups that have reached a value of $1 billion.
  • The valuation of unicorns is not expressly linked to their current financial performance, but largely based on their growth potential as perceived by investors and venture capitalists who have taken part in various funding rounds.
  • American venture capitalist Aileen Lee is credited with coining the term in 2013.

India’s unicorn record

  • According to Invest India, the government’s National Investment Promotion and Facilitation Agency, The year 2021, 2020, and 2019 saw the birth of the maximum number of Indian unicorns with 44, 11, and 7 unicorns coming each year, respectively.
  • It adds that between 2015 and 2021, the country’s startup ecosystem has seen a nine-time increase in the number of investors, and a seven-time increase in the total funding of startups.
  • We are gradually transitioning from the age of unicorns to the age of decacorns.
    • A decacorn is a company that has attained a valuation of more than USD10 billion.
  • As of May 2022, 47 companies world over have achieved the decacorn status.
    • India has four startups namely, Flipkart, BYJU’s, Nykaa and Swiggy, added in the decacorn cohort.
  • Bengaluru has more unicorns than cities like Boston, Palo Alto, Paris, Berlin, Chicago among others, with a tally of 28 such companies (the seventh-highest in the world).
  • India led the way for emigrant unicorn founders, followed by China, Israel and Russia.

Challenges faced by the Start up’s

  • Financial scarcity: Access to capital is important for startups, and obtaining sufficient funds is always a challenge.
  • Lack of Infrastructure: Incubators, science and technology parks, and other support mechanisms that play a vital part in the lifecycle of startups are lacking.
  • Regulatory bottlenecks: Starting and quitting a firm involves a number of government permits. Even while there is a noticeable difference, it remains a difficulty.
  • Compliance issues: For example, the earlier Angel tax, which has been repealed, is plagued by corruption and inefficiency in the bureaucracy.
  • Low success rate: Several firms fail as a result of a shift in focus away from the foundations of business.

-Source: Indian Express


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