4 emerging trends from India's booming entrepreneur ecosystem

In the last 10 years, over 120,000 startups have been registered in India, making it the third-largest startup ecosystem in the world. Alongside this, the country is home to the third-highest number of startup unicorns (privately held ventures with greater than $1 billion in valuation), rising from just one unicorn in 2011. Here are four emerging trends from this rapidly evolving entrepreneurial ecosystem in India:

In terms of broader business conditions beyond tech, the gender gaps between male and female entrepreneurship are narrowing in India. According to the Global Entrepreneurship Monitor (GEM) 2023/24 report, in 2001 there was a 3:1 gender ratio of male to female entrepreneurship, but in 2022 there was near gender parity – though that has since regressed slightly in favour of male entrepreneurship.

In recent years, two government schemes have played a major part in narrowing this gap. First, women entrepreneurs lacked credit due to limited access to collateral; the MUDRA scheme helped bridge this by offering collateral-free loans of up to INR1 million for small businesses. Over 69% of beneficiaries of this scheme have been women. Second, the Jan Dhan scheme enabled financial inclusion for women by making it easier to open bank accounts and offering an overdraft facility of INR 10,000. This has brought gender parity in bank account ownership in India, as outlined in the Global Findex database 2021.

A confluence of government efforts and press coverage has provoked an Indian cultural mindset change from people being job seekers to job creators. Starting with the school education phase, efforts have been made in recent years to focus on creativity and innovation. In 2020’s New Education Policy, there was an explicit focus on critical thinking and multidisciplinary thinking to develop innovation. Alongside it, there has been a drive towards the creation of spaces for experimentation with required support infrastructure, such as the Atal Tinkering Labs in schools in 2016, Atal Incubation Centres in universities in 2017, and Atal Community Innovation Centres in rural areas in 2021.

From personal experience, startup equity dilution is now a dinner-table conversation even among grandmothers, thanks to popular television reality shows like Shark Tank India. The stats are beginning to mirror this story of mindset change across generations. For instance, being part of a young population with a median age of 28 years, Indian youth are more engaged in entrepreneurial activity. However, the Global Entrepreneurship Monitor (GEM) 2023/24 report finds that older people (35-64 years) are only a couple of percentage points behind.

In 2022, on one of our visits to a remote rural community in Andhra Pradesh, we stopped to buy a cup of tea from a streetside vendor (i.e. an informal entrepreneur). After producing a hot cup of masala chai, she said it would cost INR10 (~10p). We were about to pay in cash when she surprised us by showing us a QR code. This seamless digital transaction conveyed multiple messages. First, this woman in a rural remote location had a digital bank account that allowed her to receive digital payments. Second, for her to have the account she had to have some proof of identity, which in her case was a unique 12-digit number linked to her biometrics: her Aadhaar. Third, it showed that she trusted using digital payments through the United Payments Interface (UPI); indeed, it was so easy for her to use it that she preferred it to cash. Aadhaar and UPI are part of India’s Digital Public Infrastructure (DPI), called India Stack, which is helping formalize the informal sector entrepreneurs, like the streetside vendor, through financial inclusion and digital payments.

More recently, the creation of a DPI-supported commerce effort, Open Network for Digital Commerce (ONDC), is digitizing the informal sector and enhancing market visibility. For instance, startups such as eSamudaay are building applications on top of ONDC and creating platforms to digitize informal entrepreneurs in small towns, empowering digital market access.

The Global Entrepreneurship Monitor (GEM) 2023/24 report placed India second on ecosystem quality. This marked improvement is partly attributable to the enhancements in physical and digital infrastructure. On the physical infrastructure side, India’s road network has grown by over 59% in the last 10 years, making it the second largest in the world. The number of operational airports has also doubled over the same period from 74 to 157. These physical infrastructure improvements are making logistics and transport easier for entrepreneurs.

On the digital front, internet subscribers in the country have risen from 251.9 million in 2014 to 954.40 million in March 2024, with average monthly data consumption rising from 0.27 GB to 20.27 GB in the same duration. Private sector providers such as Reliance Jio have played a crucial role in this by offering very low-cost data rates. This has made digital access to markets possible for entrepreneurs irrespective of the location. Such improvements in ecosystem quality have made India the third largest startup ecosystem and created unicorns across sectors like e-commerce, logistics, software services, and fintech.

While the improved startup numbers and ecosystem conditions are encouraging, nearly 60% of startups are concentrated in about five states of the country, and certain select cities within those states. In other countries too, we observe a similar concentration of entrepreneurship in a few regions of the country. For India to realize its ambition of a $55 trillion economy by 2047, it needs to democratize entrepreneurship to reach more regions of the country. This is also crucial for stemming the large migration of youth away from rural areas, which has led to overcrowding in certain cities, and disruption in the social and family structures within rural areas.