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The Indian tech start-up landscape has witnessed exponential growth in the past decade, growing upwards of 15X. In 2023 alone, we had 950+ new tech start-ups that were incepted, taking the total tally over the past decade to a staggering 31,000. Ranked the third largest start-up ecosystem in the world, the Indian tech start-ups have cumulatively raised a massive USD 70 Bn+ in funding since 2019. Despite macro-economic headwinds, factors including rapid penetration of consumer Internet, digitalization-led growth in enterprises, and changing consumption patterns propelled growth in sectors such as Edtech, EnterpriseTech, RetailTech, BFSI, HealthTech, and ConsumerTech.
With technology, innovation, and entrepreneurship at the helm, Indian tech start-ups are successfully transmuting challenges into opportunities, creating jobs, and catalyzing economic growth, while ushering in an era of innovation for all. This democratization has enabled the emergence of tier-II and tier-III locations as innovation hubs. With 40% of all tech start-ups in 2023 originating from emerging hubs, the ecosystem is ripe for disruptions from tier-II and tier-III locations. In fact, we believe that with targeted government interventions such as innovation labs, technology and business mentorship opportunities, access to market, capital, and infrastructure, emerging hubs will become fertile grounds for disruptive innovation.
Indian tech start-ups witnessed substantial dips in funding as well as deal volumes in 2023, mirroring the global slowdown. While this funding value drop was holistic across all start-up stages, late-stage investments bore the brunt with a 71% drop. Tech start-up founders reaffirm the challenging market environment with cash flow issues, funding availability, and low customer demand to bleed into 2024 as well. The annual nasscom-Zinnov Tech Start-up survey of 2023 highlighted that 82% of start-ups stated that longer sales cycles were affecting their growth.
Though 2023 was a difficult year for tech start-ups, there were some silver linings on the horizon. Tech start-ups increased their focus on business fundamentals, with nearly 60% of start-up founders reporting an increase in revenue and profitability in 2023. New start-ups’ increased focus on DeepTech underscores its importance going forward. In fact, 25% of the tech start-ups founded in 2023 leveraged DeepTech, compared to ~12% in the last 2 years. As an extension, India now has 100+ Generative AI start-ups, focused on building horizontal and vertical applications. B2B sectors such as Automotive, Industrial, and Manufacturing were more stable and witnessed an increase in the share of funding.
On the global stage, the Indian start-up ecosystem proudly claims its space – ranking second in start-up activity, fourth-largest in enabling ecosystem players, and third-largest ecosystem overall. Weathering macro-economic uncertainties and heightened investor caution, the ecosystem continues its ascent to unparalleled heights, fortified by a reservoir of STEM talent, supportive government policies, and the support of incubators and accelerators. Interestingly, India scores well on the size of the landscape, unicorn-creating ability, and employment growth, but falls behind in attracting early-stage funding.
The strength of the Indian tech start-up ecosystem lies in its large pool of start-ups, unicorns, and ability to scale. However, assessing the percentage of funding tech start-ups to the overall start-up base reveals a more moderate figure of 18%. In contrast, Israel takes the global lead with an impressive 34% share. And with 16% of the world’s AI talent, India is positioned perfectly to become a global innovation hub.
The Indian tech start-up ecosystem expects improved performance in 2024, with a renewed focus on business fundamentals. As the Indian start-up saga unfurls, its relentless evolution against all odds propels it towards a future defined by burgeoning investments, impending IPOs, and the unlocking of value in transformative sectors like Advertising & Marketing, Media & Environment, Professional Services, and Gaming. In 2024 and beyond, the journey of the Indian start-up ecosystem promises to transcend boundaries, creating a narrative that resonates far beyond the subcontinent.
This joint Zinnov-nasscom annual thought leadership report titled, “Weathering the Challenges: The Indian Tech Start-up Landscape 2023,” provides a comprehensive view on –
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