India's start-up ecosystem: Tracing its growth and challenges in 2023
India's start-up ecosystem has undergone a transformative journey over the past decade. With a perfect blend of ambitious minds, technological advancements, and supportive infrastructure, India has emerged as one of the world's most promising destinations for start-ups. However, it's not all smooth sailing. These start-ups face their fair share of challenges. Let's take a closer look at what's been happening in India's start-up scene lately and some of the top names that have done well this year.
India has become world's third largest start-up ecosystem
India has emerged as the third largest ecosystem for start-ups globally. Bengaluru (20th), New Delhi (24th), and Mumbai (31st) are among the top three cities in India for start-ups. In terms of the number of unicorns (start-ups with a valuation of $1 billion or more) produced, India ranks third in the world behind China and the United States. Bengaluru, Delhi, and Mumbai combined had a share of 83% of the unicorns.
However, India is seeing a slump in unicorn formation
Indian government has massively invested in infrastructure and pushed growth and investment-oriented policies and reforms. This has transformed the nation into a major manufacturing and technology hub. However, despite this good development, India is currently experiencing a slowdown in unicorn creation. In 2021, India created a record 45 unicorns. In 2022, the number of unicorns was down to 24. And surprisingly, only 1 unicorn has emerged in 2023 (as of October 3).
Top start-ups that are on the rise in India
We have compiled a list of top start-ups based on the latest LinkedIn top-start-ups list This list ranks start-ups using four key factors: their employment expansion, engagement levels, job appeal, and their ability to attract top-notch talent. LinkedIn assessed these factors from July 1, 2022, to June 30, 2023, to compile the rankings. Take a look at these start-ups.
Zepto: Online grocery store
Zepto, headquartered in Mumbai and established in 2021, operates as a quick commerce company, specializing in the delivery of groceries and essential items across 10 cities in India. This start-up, with a full-time headcount exceeding 1,400 employees, made headlines in August by securing a monumental $200 million investment. This propelled it to the coveted status of India's very first and the only unicorn of 2023.
BluSmart: Ride-sharing company
BluSmart specializes in providing electric ride-hailing services within Delhi NCR and Bengaluru. Headquartered in Gurugram, the company boasts a fleet of 4,500 electric cars. With a current full-time headcount of 620, BluSmart aims to expand its electric vehicle fleet to 10,000 cars by year-end while also committing to significant investments in establishing electric chargers throughout India. Founded in 2019, BluSmart continues to lead the charge in sustainable transportation solutions.
Ditto Insurance: Insurance distribution platform
Ditto Insurance, based in Bengaluru and established in 2018, operates as an 'insurtech' (insurance technology) start-up that simplifies the insurance process through its online platform. With a growing full-time headcount exceeding 250 employees, this company helps individuals compare insurance plans, understand policies, and facilitate the purchase of insurance seamlessly. Since its inception, Ditto Insurance has been reshaping the insurance landscape by making it more accessible and understandable for consumers.
Pocket FM: Audio entertainment platform
Pocket FM, headquartered in Bengaluru and established in 2018, stands as an audio series platform offering diverse audio entertainment across various genres and Indian languages. Boasting a content library exceeding 1,00,000 hours, this company, with a full-time headcount surpassing 480 employees, has carved a niche in providing engaging content. Pocket FM declares a global listener base of eight crore, solidifying its position as a frontrunner in the audio entertainment industry.
Skyroot Aerospace: SpaceTech company
Hyderabad-based Skyroot Aerospace, established in 2018, specializes in pioneering space-launch vehicle design and construction. With a dedicated full-time team of 260 employees, this company has made monumental strides in the realm of space technology. In 2022, Skyroot Aerospace achieved a historic milestone with its first mission, Prarambh. With this mission, the start-up became the first Indian private company to launch a rocket into space.
Indian start-ups facing a funding winter?
Start-ups play a crucial role in driving innovation and job growth in India, contributing significantly by creating about 10 lakh direct jobs. This number spiked by 64% in 2022. Despite this positive trend, Indian start-ups seem to be facing a "funding winter." This term describes a prolonged period when funds become scarce due to private equity firms and venture capitalists delaying new investments, backing out of current deals, or postponing the release of promised funds to target start-ups.
Indian start-ups see a decline in deals
The first half of 2023 saw a noticeable drop in both the volume of deals and the total funding in the Indian investment landscape. According to Venture Intelligence, 332 deals amounting to $17.6 billion happened in H1 2023, down from the previous year's $21.7 billion. Similarly, the 'Tracxn Geo Semi-Annual Report: India Tech - H1 2023' highlighted that funding rounds decreased drastically to 536, a sharp decline from 946 rounds in H2 2022 and over 1,500 rounds in H1 2022.
Issues impacting Indian start-ups
The surge in global inflation has led to central banks worldwide increasing interest rates to combat rising prices. This directly impacts the cost of borrowing for start-ups and businesses. Finding skilled workers is another big hurdle. On top of that, start-ups also grapple with high taxes, stringent labor laws, and bureaucratic delays in obtaining licenses and permits. Things may get better in 2024 as central banks look to reduce interest rates.
