2015 was the biggest year for Indian Startups

The government officially launched the ‘Startup India’ programme, first mentioned by the Prime Minister in last year’s Independence day address, today.

The plan comes at a time when the startup ecosystem in the country is witnessing an exponential growth. As per NASSCOM’s “Startup-India : Momentous Rise of Indian Startup Ecosystem” report, India ranks third globally with over 4200 startups.

65 percent of these startups are housed in Bengaluru, NCR and Mumbai. Bengaluru, often referred to as India’s Silicon Valley, has been listed within the world’s 20 leading startup cities in the 2015 Startup Genome Project ranking. Chennai, Hyderabad, Pune, Ahmedabad, Jaipur are also emerging as startup-hubs.

India has seen an upsurge in startup funding. According to data from YourStory, a media body that covers startups, capital worth $9 billion was invested in Indian startups in 2015, which is equal to the cumulative funding in the 2010-2014 period. Online and mobile categories dominate the deals, owing to the rising Internet population of India, now over 350 million.

Active investors in India have increased from 220 in 2014 to 490 in 2015, says NASSCOM’s report. As of December 2015, eight Indian startups - Flipkart, Snapdeal, Ola, InMobi, Paytm, Quikr, Zomato and MuSigma - form part of the ‘Unicorn’ club (startups having valuation greater than a billion dollar).

Excluding MuSigma, the other seven held the major share in 2015 funding, as around $3billion (33 percent of total) was put into the Unicorns, says the YourStory report. ShopClues, an online marketplace, made it to the Unicorn club last Tuesday, following an undisclosed round of funding led by GIC, a Singapore-based sovereign wealth fund.

According to report of the “Expert Committee on Innovation and Entrepreneurship”, constituted by NITI Aayog, Indian entrepreneurs spend an average of four-to-five times more effort raising funds compared to their American counterparts. The report cites early stage funding as a challenge, with angel investments in India comprise only seven percent of early-stage investing as compared to seventy-five percent in the US.

Investors in India are more keen towards later-stage funding, in companies which are already generating revenues, betting large sums of money in fewer companies, says the report. Plus, eight out of ten Venture Capital and Private Equity firms are foreign-based.

Startup incubators - organizations that help business ideas to develop by providing mentorship, office space and other relevant resources - have grown from 80 in 2014 to 110 in 2015, a 40 percent increase, as per NASSCOM’s report. Interestingly, half of these incubators are set outside the dominant trio - Bengaluru, Delhi and Mumbai - to foster entrepreneurship in other Indian cities.

The government has shown their interest to support the startup ecosystem and Startup India is expected to take it ahead with introduction of key policy reforms. According to Nilotpal Chakravarti, AVP of Internet and Mobile Association of India, “Over the last one year, the government has been steadily building a conducive atmosphere for encouraging start-ups in India. Initiative like Digital India and Make in India are the biggest enablers for providing boost to startups.”