Hyderabad: In our country, there are over 98,000 startups, supported by approximately 400 incubators for nurturing new ventures, and a remarkable 108 unicorns (startups valued at over 100 crore dollars). Recent articles have highlighted India's emergence as a global hub for startups - for two consecutive years, the news of India minting more unicorns than China has made sensational headlines. Predictions suggest that India will have more than 250 unicorns by 2025. At such a pivotal juncture, it's deeply concerning to note that numerous young startups across the country find themselves in crisis situations.
NASSCOM (National Association of Software and Services Companies) had previously analyzed that the number of startups in the country was increasing by ten per cent annually, thanks to an influx of investors willing to provide seed investments. However, the landscape has shifted significantly since then. In 2021, Indian startups attracted investments worth 3,000 crore dollars, but this figure dwindled to 2,000 crore dollars in 2022. Current indications suggest that the amount may not exceed 1000-1500 crores of dollars for the current year, underscoring the severity of the funding crunch.
In a bid to cut costs, many companies have been forced to downsize their workforce as much as possible. Reports reveal that, in the first half of this year, approximately 70 startups have laid off 17,000 employees. Further, recent data shows that over the past two years, 1,400 new-age companies have resorted to nearly 91,000 job cuts. Prominent names like Oyo, Ola, Cars24, and Udan are among those affected. The study warns that there will be a continued shortage of funds for startups in the coming year, implying that more layoffs may follow. The escalating funding crisis threatens to undermine the spirit of 'Atmanirbhar Bharat' (self-reliant India).
The 'Startup India' slogan, formulated by the Modi government seven years ago, aimed to nurture creative minds for fuelling innovation. Union Ministers have previously stated that India has the potential to create 100,000 unicorns and 1-2 million startups. But is this really happening? Some states like Telangana have taken special initiatives to raise funds for early-stage startups. On the other hand, gross neglect in terms of institutional support to the startups has dragged AP down below Bihar, Odisha and Rajasthan. The intense competition to attract investments is seen in cities such as Bangalore, Delhi, and Mumbai, while others seem to lag behind. The economic survey has emphasized the need to urgently address the ground-level issues stifling growth in second and third-tier cities, but this remains an unheeded plea.
For startups to thrive in a competitive world, there must be a consistent and appropriate flow of funds. Infrastructure development should follow the models of countries like Finland, Denmark, and Ireland. Likewise, technological innovation should be accelerated, mirroring the approaches of the UK, Sweden, and Switzerland. In such an environment, new employment opportunities will emerge- a magic bullet to tackle unemployment.
The Tarun Khanna Committee had previously pointed out that startups in the country were spending countless hours searching for enthusiastic funders. Regrettably, the situation hasn't improved; it has worsened. Recently, the G20 Trade and Investment Working Group discussed the creation of a digital platform for micro, small, and medium enterprises (MSMEs) and startups - this initiative should be actively promoted. Digitization, technological advancement, and substantial investments are the lifelines for prosperous startups. If we can effectively implement systemic cooperation at the state level, along with the establishment of a central-level special fund, it will pave the way for numerous startups to prosper and thrive.
(This editorial appeared in Eenadu on September 8)