Eight years of Startup India: Is it really a runaway success?

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Startup India began on 16 January 2016, and by 2018, claimed itself as a huge success for having reached an arbitrary mark of 10,000 firms registered under it. But then, that was a public-relations byte. Eight years on, the jury is still out. Yes, India has emerged as the world’s third largest ecosystem for startups—with over 112,000 of them across 763 districts recognized by the commere ministry’s department for promotion of industry and internal trade (DPIIT). In a country of 1.4 billion plus, however, an absolute number can’t be a success measure. Such an assessment of a startup ecosystem must take into consideration many facets.

As expectations go, a thriving startup eco-system should drive innovation, economic growth and job creation. To assess its health and success, several key metrics are commonly used that provide us insights into the vibrancy, sustainability and growth potential within the ecosystem.

Here are some of the primary metrics that objectively measure success:

First is the number of startups: The total count of new businesses is a basic metric. A higher number typically indicates a more dynamic and vibrant ecosystem, so this data can serve a useful purpose. For some standardization to compare it with an ecosystem like Silicon Valley in the US, we should track properly defined startups as a proportion of total legacy enterprises. As Startup India has encouraged startup formation by providing support, mentorship and incentives for entrepreneurs to launch new businesses, thus complementing the Atal Innovation Mission designed to set up incubators and accelerators across the country, our ratio would have improved in recent years.

Next is funding and investment: The amount available to startups is a critical metric. Numbers like total venture capital (VC) funding, the number of VC firms and the average funding round size are standard. Higher levels of investment indicate investor confidence. If early-stage funding gets missed by this metric, though, it could mislead. Finland’s innovation success is partly attributable to easy access to early-stage funds, as incubators had investors watching. On VC funding quantity, Silicon Valley consistently and famously ranks high. A good ecosystem attracts VC firms and angel investors by creating investor-friendly policies, showcasing successful exits and promoting a culture of innovation. Startup India has not yet been able to align all government departments and ministries to drive this. Taxation is still a sore issue with angel investors.

Third is the startup survival rate. The proportion of startups that successfully navigate their critical early years and continue to operate is a key metric. A high survival rate is indicative of a supportive ecosystem. In the US, around 80% of startups survive their first year. Most fail by their fifth year and many more by their tenth. Tracking this score carefully can reduce disputes over Startup India’s results and help develop support programmes for early-stage startups and others. Startup India may need to offer more mentoring as well as access to capital and markets, like the Finnish government has done.

The fourth metric is job creation. The number of jobs created by startups in the ecosystem is a key way to assess its broad economic impact. Startups are often significant drivers of job growth. High-performing ecosystems tend to witness fast expanding employment. Silicon Valley has a record of substantial job growth. In India, since 2017, recognized startups have created only about a million direct jobs, which is only a small fraction of total jobs. Note that India’s new job seekers number in the millions. Startup India, while monitoring this, could have encouraged the growth of startups through initiatives that support job creation, such as workforce development programmes and incentives for startups that hire locally.

Fifth is access to talent. The availability of a skilled and diverse talent pool, including engineers, designers and business professionals, is critical for startup growth. Monitoring the number of universities, job openings and quality of the education system can help assess this aspect. From that perspective, India has a major advantage. Successful ecosystems have a deep pool of skilled professionals and graduates from top universities. Silicon Valley benefits from the presence of Stanford and other prestigious institutions. Startup India has collaborated with educational institutions for incubators, but should work closer with them to guide course development, create more support programmes and also foster an open culture that attracts talent from around the world.

Other readings to check the health of a startup ecosystem include the following:

One, the number of successful investor exits, including via acquisitions and initial public offers, and overall value creation.

Two, the count of patents granted to startups and the measurable level of innovation within the ecosystem.

Three, the presence of support structures like incubators, accelerators, co-working spaces and startup conclaves that can add to the ecosystem’s vitality. Finland’s Slush became such a huge fund-raising event with over $2 billion in commitments.

Four, the ease of starting a new business and running it, taxation systems and the regulatory environment for startups, as these significantly impact an ecosystem’s success.

Fifth, the cost of living, quality of life and overall attractiveness of a locality, which could include an area’s startup density.

All need attention for eventual success.



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