Scope for start-up companies in modern India

An emphasis on start-ups and entrepreneurship has been among the stated priorities of the NDA government. Indeed, one of the Prime Minister’s most memorably pre-demonetisation speeches was his declaration from the ramparts of the Red Fort that India must become ‘Number 1 in start-ups’.

We have covered elsewhere on these pages the facilities provided for start-ups by the Government in the months following the aforesaid speech as well as the importance of start-ups to an economy. But today, let us look at the scope for start-ups in India today.

Among a certain class of people, I have observed a quite strong desire to be a part of the start-up revolution. Where an earlier generation hankered after government jobs, and later ones for going abroad and geting private-sector jobs, the youth of today seem to have a penchant for doing their own thing. Whether it is developing apps, starting their own design firms or even getting into manufacturing, India’s youth wants something quite beyond the safety and security of government / corporate life.

It is estimated that the number of start-ups in India will exceed 10,000 by 2020 and this could well change how the labour market as well as the overall economy works in India.

One of the major factors contributing to this will be India’s population. As a Professor from my B-school once told me, the scale for success in India is something very different from elsewhere. The sheer numbers of users / consumers available in India means it is easier to break-even here than anywhere else provided an entrepreneur has a business model. If a product, whether it is a physical one or an app or even a service, is able to fill a consumer need, it will invariably become sustainable fairly quickly.

Secondly, we must remember that the MBA and engineering graduates from even our topmost colleges are no longer as predictably opting for foreign jobs or investment banks as they used to. Many prefer to either opt out of placements and try to build their own companies or join lesser-known start-ups with good potential for growth and offering an exciting product or service. This means some of India’s best talent is gravitating towards start-ups and this can only be good for the country’s start-ups in the medium-to-long-term.

This is not even confined to the fresh graduates. Indeed, middle-level managers at prestigious and high-paid corporate jobs have been quitting to join or establish their own startups. We live in a fascinating time, where the lure of following one’s passion has become more important than being able to make just enough to pay the EMI for a house one does not even live in. To be fair, start-ups that have received funding have been able to offer very attractive salaries, which too is a part of corporate evolution.

Speaking of funding, one must also acknowledge the role of venture capitalists and angel investors in providing start-ups with funding. These are the visionaries who spot the potential in the work and ideas of the start-ups and are able to provide the all-important money required to keep them going. As the norms for foreign investment in India are being gradually eased, it makes it a lot easier to attract multiple rounds of venture funding from abroad. The amount of money raised by Indian start-ups thus far is in the very healthy range of more than $6 billion.

Last but not least, there has been considerable push from the Government, as I mentioned at the beginning of this article. By easing the norms required to commence a business and by providing schemes for start-ups to access bank funds, a favourable environment for start-ups has been created which wll hopefully sustain itself and lead to great dividends in future.