India’s Decade of Tech Startup Growth

2023 might have been India’s lowest-funded year in last 5 years as the funding winter continues, but the decade shows good progress. A tech-savvy young population, Internet penetration, and an expanding middle class have led to an explosion of startups in India in the past decade

On National Startup Day, Tracxn reported that India witnessed an unprecedented surge in the creation and funding of startups in the last ten years. The country has solidified its position as a major global center for innovation and entrepreneurship with a rise in the number of tech companies in India to 122k to date, with a peak in 2020, witnessing more than 16K new additions. The funding landscape has also experienced a monumental shift, with 2020 and 2021 being the highest investment years over the past decade.

Despite the challenges faced in the funding landscape in 2023, investors, including venture capitalists, angel investors, and private equity firms, have shown remarkable confidence in Indian startups. The funding scenario, both from Indian and global investors, has been encouraging, with a total funding of $8.4 billion in India in 2023, demonstrating resilience amid market uncertainties.

The startup ecosystem is ready to lead in bringing more innovation, creating jobs, and boosting economic prosperity. We are on the verge of a new era of success, supported by technology, business-friendly regulations, and the strong dedication of our entrepreneurs

Neha Singh, co-founder of Tracxn

Neha Singh, co-founder of Tracxn, said, “Over the past ten years, India’s startup sector has grown a lot, becoming a global hub for new ideas and economic growth. Entrepreneurs have shown great determination and creativity, contributing significantly to the country’s economic development. Looking ahead, we are optimistic about the future. The startup ecosystem is ready to lead in bringing more innovation, creating jobs, and boosting economic prosperity. We are on the verge of a new era of success, supported by technology, business-friendly regulations, and the strong dedication of our entrepreneurs.”

Key Factors to Growth

The upsurge in the number of startups in the country can be attributed to several key factors. These include a tech-savvy young population resulting from widespread mobile internet access, the expansion of the middle class, and a favorable regulatory landscape. These elements collectively have fostered a conducive environment for entrepreneurial growth and innovation in the startup ecosystem.

Top Performing Sectors

Top-funded sectors from 2014 to 2023 include retail, enterprise applications, FinTech, transportation & logistics tech, food and agriculture tech, auto tech, travel & hospitality tech, and EdTech. Factors like increased internet penetration, digitization, and government initiatives have fueled the growth of these sectors.

Startups have played a pivotal role in driving Research and Development (R&D), especially in knowledge-intensive sectors. India’s investment in Deep Tech (R&D oriented) has been increasing steadily over the years with total funding of US$6.73B, and in a decade, it received US$6.23 billion, reflecting the country’s steady growth and commitment to science and technology, particularly in Deep Tech, funding has witnessed a substantial increase, reaching $753.7 million in 2023. This trend emphasizes the importance of technology-driven innovation in shaping India’s future.

India’s online commerce has grown tremendously, with sectors like Retail Tech receiving substantial funding. The funding trends in retail tech showcase the sector’s resilience, with US$2.3 billion invested in 2023, indicating sustained growth.

New Emerging Sectors

The addition of new sectors such as DeepTech, SpaceTech, AI, and EVs has broadened the startup landscape. Noteworthy sectors like DeepTech have seen a rise in funding, reaching $2.1 billion in 2022, underlining the market’s confidence in innovative technologies. The EV industry, which attracted investor interest and is one of the booming sectors, has seen $4.8 billion in funding in the past ten years. Even Space Tech has been in demand after its transformation which is credited to privatisation. India ranks seventh in terms of funding within the International SpaceTech landscape to date. The funding reached $114.9 million in 2022 and $122.2 million in 2023 and will continue to grow.

Job Creation

One of the most significant achievements of the Indian startup ecosystem has been job creation, with approximately 10 lakh jobs generated by startups till 2023, as per Economic Survey 2023. Furthermore, startups focusing on continued learning and professional upskilling have attracted significant investments, reflecting the industry’s commitment to employee empowerment.

Top Favorable Cities for Startups

City-wise, Bengaluru remains the startup hub, with a total funding of $70.4 billion in a decade, followed by Delhi-NCR and Mumbai. The government’s focus on promoting entrepreneurship is evident, with increased funding across metros and non-metros alike. Several successful startups have emerged in non-metropolitan areas, driving innovation and transforming their regions, such as Jaipur, which has notably secured its position among the top cities in FinTech funding, garnering an impressive $214 million in 2023.

Unicorns, Soonicorns, & Minicorns

In a significant achievement for the Indian startup ecosystem, it marked a major milestone by welcoming the 100th Indian startup into the unicorn club in 2022. As of now, a total of 111 unicorns have been created in India, with 355 promising ones poised to join the ranks soon.

Similarly, the rise of Soonicorns began in 2019, and the year 2022 witnessed an unprecedented surge with the creation of 96 Soonicorns. Additionally, the Minicorn trend, which also boomed in 2019, experienced substantial growth, reaching its pinnacle in 2022 with the emergence of 264 Minicorns. This showcases the dynamic and flourishing nature of the Indian startup ecosystem, with both Soonicorns and Minicorns contributing to the nation’s entrepreneurial landscape.

Women-Led Startups

Over the past decade, entrepreneurial advancements have transformed India significantly, with women playing a significant role in driving this progress. The addition of women-led startups has also witnessed growth, with total funding reaching $1.1 billion in 2023 from $0.456B in 2014. This trend is exemplified by the fact that twenty out of the total unicorns created to date are women-led startups, highlighting women’s impactful and growing role in shaping the nation’s startup ecosystem.

Future Outlook

India’s economic growth is intricately tied to the success of its startup ecosystem. India’s economic outlook remains optimistic, with a projected annual growth rate of 6.3% (as per IMF) in 2023–24. The government’s ongoing support, as seen in the 2023 budget with initiatives like tax concessions and the Drone Shakti Program, reinforces the commitment to nurturing the tech ecosystem.

Investor confidence in the Indian startup ecosystem has seen a substantial increase over the last decade. Despite the recent funding winter, the number of investors has increased from 2.45k in 2014 to 16.3k in 2021.  The long-term prospects remain favorable, with India poised to become the third-largest economy in the world by 2027, according to the IMF. As the global situation stabilizes, a revival of investment activity is expected in the coming years, reaffirming India’s position as a top destination for investors.