Kerala startups are a Left success story, but can they overcome the scaling hurdle?

Ahead of the polls, startups have emerged as a key plank in political parties’ narrative centred around employment. State Industries Minister P Rajeev tells The Indian Express that the government has been supporting entrepreneurship through several interventions, including Maker Village, an electronic hardware incubator; innovation zones; and a fund-of-funds scheme to improve access to capital.

He also cites Campus Industrial Parks that aim to convert unused land at educational institutions into industrial hubs. “The scheme helps link education with industry and provides hands-on experience to students,” he says, adding that the government offers subsidies of up to Rs 1.5 crore for such projects.

The ruling Left Democratic Front (LDF)’s election promises include expanding skill training, facilitating campus placements and increasing the share of manufacturing through industrial corridors and sector-specific hubs. The LDF in its manifesto has proposed interest-free loans and incubation support to promote startups and job creation.

In its manifesto, the Congress-led United Democratic Front (UDF) has also proposed measures such as interest-free loans of up to Rs 5 lakh for young entrepreneurs and targeted financial support for MSMEs.

Leader of Opposition V D Satheesan, however, has questioned the government’s claims. “The valuation of the startup ecosystem in Kerala was not grounded in reality,” he said last year, noting that the state’s contribution to GDP has remained unchanged at 3.8%.

At an education summit this February, he said, “Kerala must move beyond being a consumer state to become a global industrial hub,” calling for stronger industry linkages and more startup-friendly policies.

5 notable Kerala startups

Optimism and the next step

“The startup scene has come of age in Kerala,” says K N Harilal, professor at the Centre for Development Studies (CDS) in Thiruvananthapuram.

He points to a broader social acceptance of entrepreneurship. “This can easily be understood from the acceptance up-and-coming businesspeople have in the matrimonial market. Earlier, that was not the case; everyone was looking for a person with a stable job.”

He says the change was also visible in higher education, with institutions slowly moving towards encouraging entrepreneurship.

Scaling, however, remains a challenge for startups. While the number of companies launched is increasing, many have not grown into large, sustainable businesses.

Despite attracting around $665 million (approximately Rs 6,200 crore) in funding, according to the KSUM, some founders say access to larger pools of capital remains limited compared with established hubs such as Bengaluru. The ecosystem, they say, supports early-stage experimentation, but thins as companies grow.

“The ecosystem has definitely grown,” says FindMyHostel CEO Shiyas V P. “Seed funding and angel funding come. But larger venture capital funding remains a challenge for Kerala firms compared to a city like Bengaluru.” While networking opportunities exist, founders often lack mentors with experience in building companies at scale, he adds.

For deep-tech ventures, the constraints can be more stringent. Abhijith Kusalan, the founder of Volador Aerospace, a drone startup specialising in defence technology, points to the difficulty of accessing both capital and infrastructure.

“Funders generally prefer startups founded by those who graduated from premier institutes like IITs,” he says. Even testing prototypes can add to costs. “We often have to go to places like IIT Kanpur,” he says, highlighting the absence of local facilities.

Part of the challenge also lies in the nature of the ideas. Many startups are built around niche or problem-specific solutions that do not easily translate into large, revenue-generating businesses, limiting their ability to scale.

A Kochi-based entrepreneur who launched a remarriage platform found that while users signed up readily, converting them into paying customers proved far more difficult. “People were expecting it to be like Tinder,” he says, explaining how users preferred free engagement over paid subscriptions.

Some startups are navigating these constraints by adapting their ideas for broader markets. Astrek Innovations, a Kochi-based firm, develops robotic exoskeletons for lower-limb rehabilitation. Sitting beside the fourth iteration of their product — a skeletal frame of motors and joints that mirrors the human leg — co-founder Vishnu Sankar recalls how the idea took shape after a friend’s grandfather lost mobility. The company has since attracted funding from international sources, including Chile and Japan, and now supplies its product to hospitals. It is also exploring applications in sectors such as defence.

Astrek Innovations, a Kochi-based firm, develops robotic exoskeletons for lower-limb rehabilitation. (Express Photo)

KSUM CEO Anoop Ambika tells The Indian Express that the agency has introduced initiatives to address issues such as growth-stage funding, market access, and regulatory bottlenecks. These include Big Demo Day, where startups pitch directly to corporates and MSMEs, and Close the Deal, which aims to convert pitches into business outcomes. “In 2025 alone, more than 80 procurements were facilitated from startups across government departments, amounting to over Rs 12 crore,” he says.

A paradox

The challenges are layered on top of deeper structural factors shaping Kerala’s economy. The state’s long-standing dependence on remittances has influenced both investment patterns and risk-taking, says International Institute of Migration and Development chair S Irudaya Rajan.

“In one of our studies, we found that nearly Rs 2 lakh crore comes into Kerala as remittance income, about 25% of the state’s income,” he says, adding that much of this had historically flowed into housing and gold rather than job-generating enterprises. This has resulted in a paradox: while people from Kerala have built successful businesses outside the state, far fewer have done so at home.

This paradox, Rajan says, is also rooted in social attitudes. Migration has long offered a reliable pathway to upward mobility, reinforcing a preference for stable incomes over risk-taking. “From a young age, children are encouraged to pursue secure careers,” he says.

Both Rajan and Harilal point to changing global conditions that could alter this trajectory. With tighter visa regimes and uncertainties in traditional migration destinations, Kerala could see more skilled workers returning. If their experience and capital are channelled into enterprises, it could open up new possibilities for the state’s economy.

Ambika says policymakers are also looking to tap into the state’s diaspora through initiatives such as the “Thirike” campaign, which aims to connect returning professionals with local startups.