Opinion How India can become the world’s leading startup ecosystem

Progressive policies have opened up new sectors, including space, geospatial technology, defence, and drones, encouraging startups to venture into cutting-edge domains. Realising the full potential of these advancements requires collaboration between policymakers, entrepreneurs, and educational institutions.

Despite their success, Indian startups, particularly in deep tech sectors, face challenges in accessing patient capital. The Fund of Funds for Startups (FFS), launched in 2016, has been a game changer. With Rs 11,688 crore committed through 151 AIFs, it has catalysed a capital pool of Rs 81,000 crore, creating a significant multiplier effect.

However, India needs a specialised fund of funds for deep tech startups that require long-term investments. Increasing domestic capital sources is also essential. Although Indian startups raised over $12 billion in 2024, about 75 per cent of this funding came from international sources. Large domestic institutions like insurance companies and pension funds can allocate a portion of their surpluses to support startups, while family offices and businesses should take on more active roles as angel investors.

Private equity (PE) and venture capital (VC) have significantly shaped India’s startup ecosystem. Funding from these sources grew from $19.7 billion in 2015 to a peak of $77.07 billion in 2021, and in early 2024 alone, it stood at $49.54 billion. Over 50 per cent of India’s unicorns have been backed by PE and VC investments.

To ensure sustainability, domestic funds must grow and focus on long-term value creation. A shift toward profitability, quality over quantity, and more robust business models can help startups achieve sustainable growth.

In designing Startup India, we prioritised avoiding excessive regulations that could hinder startups. India’s startup ecosystem thrives on minimal regulatory interference, fostering innovation. However, recent incidents of corporate mismanagement in startups such as Byju’s, Dunzo, and BharatPe have raised concerns. Startups must adopt self-regulation frameworks that emphasise accountability, transparency, and ethical conduct. This involves strong mentorship, professional boards, and sound financial management. Venture capitalists and angel investors play a vital role by ensuring governance and mentoring startups to balance growth with long-term stability.

India’s premier educational institutions, including the IITs, IIMs, and IIITs, are integral to the startup ecosystem, producing skilled professionals and fostering innovation. To keep pace with emerging needs, curricula must address skill shortages in areas such as product development, data science, and AI-ML. Collaboration between academia and industry is vital to ensure that educational programmes align with market needs. Programmes for internships, apprenticeships, and recruitment can attract talent to startups and bridge existing skill gaps.

As new technologies disrupt industries, regulators must adapt to the changing landscape. India’s regulatory framework must balance innovation with oversight, enabling startups to thrive while mitigating risks associated with unregulated growth. Pro-innovation policies will be crucial in maintaining India’s competitive edge.

India produces approximately 24,000 PhD graduates annually, driving advancements in science and engineering. However, the country paid $14.3 billion in IPR royalties in 2024, while earning only $1.5 billion, highlighting a significant gap. Greater innovation and breakthroughs are essential to bridge this gap. Creating a vibrant ideas ecosystem, one that rewards and protects intellectual property, can establish India as a global hub for innovation. Startups must lead this charge, contributing to advancements in science, technology, and intellectual property.

India’s startup ecosystem is no longer confined to metro cities like Bengaluru, Mumbai, and Delhi. Nearly 50 per cent of the country’s startups originate from Tier II and Tier III cities, including emerging hubs like Indore, Jaipur, and Ahmedabad. With nearly half of India’s urban population living in smaller cities, these regions offer immense potential for growth. Tech companies are increasingly establishing operations in cities such as Chandigarh, Visakhapatnam, and Ahmedabad. Supporting these regional hubs with infrastructure, educational opportunities, and inclusivity — especially by increasing women’s representation in leadership roles — will unlock untapped talent and drive innovation.

India is well-positioned to become the world’s leading startup ecosystem. Favourable policies, a thriving culture of innovation, and collaborative efforts across sectors provide the foundation for scaling startups into global enterprises. As India works towards its vision of Viksit Bharat by 2047, startups will play a pivotal role in driving economic growth, creating jobs, and positioning the country as a leader in innovation.

Kant is India’s G20 Sherpa and former CEO of NITI Aayog