The term ‘startup’ is the talk of the town nowadays, and it is the most popular topic! Many people define the startup as ‘the tech business and with less than 100 employees.’ Many people want to become entrepreneurs and open their own businesses. A much-needed thing is to explain all about startups to clarify the concept of startups for young and enthusiastic entrepreneurs in the making.
“A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”
Start-ups play a key role in supporting the growth and development of a country’s economy as well as in improving the quality of life for citizens. “…Economic development preserves and raises the community’s standard of living through a process of human and physical infrastructure development…” Foster cooperative international tie-up and technological support through Startup programs of bilateral and multilateral interest. Make cities and human settlements inclusive, safe, resilient, and sustainable.
Startup Ecosystems Ranking
In accordance with the “Countries Global Ranking of Startup Ecosystem 2020” by global innovation mapping and research company Startup Blink, India ranked at 23rd position, a drop of 6 places from 17th position in 2019. The ranking has been topped by the United States (US), followed by the United Kingdom (UK), and Israel at 2nd& 3rd position. It should be noted that India is home to the third-largest startup ecosystem.
|1||United States (US)|
|2||United Kingdom (UK)|
Among the top 100 startup cities, only four Indian cities were named in “2020 Cities Global Ranking of Startup Ecosystem” while a total of 38 cities made it to the world’s top 1000 cities with the startup ecosystem.
- Bengaluru (down by three ranks to 14th position)
- New Delhi (up by three spots to 15th position)
- Mumbai (improved by seven sports to 22nd position)
- Hyderabad (falling 21st ranks to disappointing 96th position).
Distribution of startups worldwide by industry
7.1% of the startups in the world operate in the Fintech industry. Followed by Life sciences and healthcare with 6.8%, Artificial intelligence with 5.0%, Gaming with 4.7%, AdTech with 3.3%, and EdTech with 2.8%. Even though there isn’t completely accurate data about industry distribution, it’s clear that modern startups gravitate towards the internet and digital technologies. With this information, we can also see which industry is best for startups now.
Interesting Global Startup Statistics
- The United States is the leading country by the number of startups (63,703);
- 1% of the startups in the world operate in the Fintech (Financial technology) industry;
- The highest-valued private startup in the world is Bytedance from China ($75 billion);
- Over 69% of startup companies started as home businesses;
- Only 40% of startups can become profitable;
- Competition (19%) is the greatest challenge when starting a business;
- 58% of startups have less than $25,000 at their disposal during the startup phase;
- 60% of entrepreneurs agree that AI is currently the most promising innovation technology.
Which countries have the most startups?
The United States is the leading country by the number of startups (63,703) by a long shot. The second on the list is India, with just 8,301 startups, and the third spot is occupied by the UK, with 5,377 startups.
To put things into perspective, the US has almost three times more startups than the rest of the following 9 countries in the world combined. There are currently more than 600 Unicorn companies around the world. However, most of them are in China or the United States. Unicorn companies are startups that are valued at US$1 billion or more. Most unicorn companies today are involved in the global sharing economy, where they can make quick gains.
Second place is held firmly by China, with 25% of all unicorn companies in the world. Third and fourth places are constantly being traded by India and the United Kingdom, with about 5% of unicorns or around 20 companies each.
The value of e-commerce sales globally is around $3.5 trillion, with rapid growth expected in the future. That is why e-commerce is one of the most popular industries for new startups. The next industry in line is “Fintech” – Financial technology.
Online financial services have been booming since the introduction of PSD2. Another big focus of new startups is cybersecurity. These companies understand how important online security will be in the future. FoodTech combines food and technology, specifically the internet, to deliver products to customers – another popular industry for startups. With over US$16 billion of investments in 2018, EdTech is becoming another popular startup industry that provides educational technology solutions to people worldwide.
95% of entrepreneurs that create startups have at least a bachelor’s degree. Many people say that education is not important. They point to Mark Zuckerberg and Elon Musk as examples. However, most of the people involved in some of the world’s most successful startups have a higher education.
Look at the honest statistics below about how many startup businesses fail, this information will give you an idea of what percentage of startups are successful:
- 9 out of 10 startups don’t make it.
- 20% of startups fall apart after a year.
- 30% of startups close within two years.
- 50% of startups shut their doors within five years.
- 70% of startups dissolve within 10 years.
The primary reason for these numbers is a lack of ability to offer a product for a target market. Many companies aren’t able to generate interest in their products or services. Some companies also struggle with marketing. They don’t have the finances to do it right and present what they have to offer to the right segment of the public.
Another reason for startup failure is poor team organization. Companies are unable to develop a group of people that will work together effectively towards the same goals.
Challenges in the Startup
19% of startup leaders agree that competition is the greatest challenge when starting a business.
The second biggest challenge is cash flow (12%), taxes (11%), economy (11%), and growth are last with 10%. Other startups face a variety of other challenges.
Not only that, but they also agree that it will be the most promising technology over the next 10 years. The areas of this technology with the most potential are autonomous transportation and big data. Even though these two areas are already making strides, it is expected that they will grow substantially soon.
The startup industry will continue to be the driving factor for global innovation and business growth for many years. However, companies need to learn how to adjust to trends while being sustainable and efficient so that more startups can survive long term.
Role of Entrepreneurship in the Indian Economy
Entrepreneurs are rightly known as national assets and individuals who are motivated to a great degree. These are the people responsible for changing the way of life of the people in a country. They aren’t only adding to their own account with a successful venture, rather they create wealth in the society with these ventures. For the jobless, these entrepreneurial ventures are boon due to the immense job opportunities that come in the market. More jobs are always reflective of a well-balanced society and one that is geared for progress. If the production function model is to be taken into account then entrepreneurial capital is truly of great importance to the entire nation. In India, innovation has taken leaps and bounds of growth in the fields of IT, Education, Health care, etc. due to the numerous start-ups in these domains. If you take a closer look, innovativeness has achieved more growth due to the reign of entrepreneurship. There are numerous competitors in the same domain and hence the need for something new and added quality is always rife to gain more market space and popularity. Here are some of the major impacts that entrepreneurs have on the Indian economy.
It is rightly said that people are of utmost importance in everything you do. If you have got the right people, business models and products will surely find a way into the market. There are numerous youth and fearless entrepreneurs in India that have taken huge strides to bring about a positive change in the economy of the country. On a deeper insight, entrepreneurship is the driving force in the market. However, there are people who have the idea that entrepreneurship is all about the struggle of a man to start a project or business on his/her own, it is not true. The struggle is far behind and the focus should be on the growth it offers to the country.
Right from gathering workforce, funding, resources, and creating an organizational structure, these are the things that encompass the idea of entrepreneurship. What remains a question is how the practice benefits the Indian Economy.
Promoting capital formation: The idle savings of the people are mobilized by the entrepreneurs by providing them with new opportunities. Resources are employed so that people can set up their own enterprises. With these kinds of entrepreneurial activities, value addition to the wealth of the nation is assured. Such creation of wealth adds to the industrial and economic growth of the nation. More capital formation means that a noticeable increase in the overall production of the nation.
Job creation: If success is to be achieved in entrepreneurial ventures, then it is to be understood that the work will need more than two hands. Varying skills sets are needed for a project to become successful, and this is where a new scope for jobs opens to the people. Thriving business setups make sure that the job queues are cut to half in a particular geographical area. Given the fact that unemployment at a large scale is an unending problem prevailing in the country, skilled and technically qualified people are sure to land a job with these opportunities.
Regional development: India vs. Bharat is a debate that has been prevalent for a long period of time and truly the difference in the growth of rural and urban areas is immense in the nation. However, 73% of households are in rural areas and therefore there is a need for balanced regional development. Entrepreneurial ventures remove the disparities between rural and urban areas with the help of industrialization. The benefits from these ventures lead to community development such as roads, education, health, and entertainment. Dwelling habits in slums and congestions are reduced as they have job opportunities and can sustain a better living.
Decentralises economic power: Monopoly takes growth when the industrial setup is more prevalent in the nation and hence the economic power is only within the hands of a selected few. Through entrepreneurship, economic power is distributed to subsequent contributors and hence the wealth is no longer decentralized. It makes society a lot more balanced and paves overall development.
Increases GDP and per capita income: Every entrepreneurial venture adds to the economy of the nation. Every innovation in the market is improving the quality of service and hence helping the market to be further advanced. Resource and skill mobilization in an effective manner helps in developing prospects in the market as well as adding substantially to the economy of the nation. These help to let the gross national product along with per capita income in the place.
Standard of living: As new ideas and innovations keep coming into the market on a daily basis, variety in the market gets a major boost along with prices that are competitive in order to gather better space in the market. It enables people to avail themselves for leading a better life and without compromising on their budget. It helps boost the standard of living of the people and suddenly the nation becomes a better place to live for even with minimal finances.
Export trade boost: The export trade gets a huge boost since entrepreneurs produce goods in large quantities and there is enough to be exported to foreign countries. Foreign exchange amount is enhanced with this and thus greater economic independence is achieved. All these only point towards a single point agenda of national development and financial growth.
Backward and forward linkages: The essential target of every entrepreneur is to maximize capital flow with the help of rapid innovations which they come up with. Backward and forward linkages are influenced by these practices and hence better economic growth is achieved. Such linkage theory reflects the fact that meaningful investments are being done in the country and there is a plan behind every step taken financially.
Beneficial competition: It is a fact that competition in the market is sure to come when there are entrepreneurs vying for the attention of the same consumer base in a market. Several producers in the same domain will make sure that each of them will be in search of better facilities which they can provide to their customers. Also, there will be a price war in the market and the one with the best quality will sustain for the longest period of time. It benefits the customer as they can now afford the services without burning a hole in their pockets.
Social change beyond imagination: Entrepreneurs are all about breaking the traditional idea of freedom and further expanding it because the sky is the limit now. The dependency on the lower level of technology and outdated systems are a thing of the past as they can be easily replaced with local producers or through imports. The underdeveloped countries are getting access to high-end technology to get the work done and as a result, they are coming up with new goods and ideas. It is economically viable to them because the cost of living is low for people based in underdeveloped countries. The economic freedom they get along with the wide array of choices makes it the best-suited system of production in any given economic setup.
On the other hand, there are always grimmest to any positive aspect. As flawless as the system may look on the outset, it is difficult to master unless you are a crafter agent in the domain. Proper education and a sense of the market must be imbibed in a person before they are ready to wave off their entrepreneurial venture. If they fail, then it is a massive financial loss for the person and the employed people will find it hard to get their salaries. Additionally, the resource base of the country is stressed with such initiatives. Overexploitation of natural resources is always a threat and it can lead to serious consequences later.
Startups Incubation in India
Incubators are a prominent part of and contributor to the business ecosystem. By October 2020, this number had multiplied. While the number of incubators is believed to be much higher, we have listed and verified over 326 incubators in India. This translates roughly to one incubator per 150 start-ups in India. Incubators are predominantly housed within academic institutions (such as Indian Institutes of Technology, Indian Institutes of Management, universities) or as part of industry bodies and organizations (such as NASSCOM) and research agencies (such as Centre for Cellular and Molecular Platforms). As the start-ups’ ecosystem is emerging from Covid-19, we pause to reflect upon the evolution of start-ups incubation in India over the last two decades. Incubation can be analyzed in three ways – the spatial or geographic spread of incubators, affiliation and focus of incubator, and temporal or growth of incubators over time.
Secured Governance for Startup will provide for high-quality commercial development along with HUB, which serves as Techno-Economic HUB. These HUBs will be part of existing or new development projects. These HUBs will not only facilitate technology-based users but also promotes commercial units generating employment and revenue from the defined region. The HUBs aid to boost employment generation and sustainable investment opportunities in a big way. It is expected to attract a billion crore rupees over the next five years and generate millions of direct and indirect employment opportunities in this region. With the robust outlook of new startup entrepreneurs, it is expected that India will see private and foreign participation in the development and financing of multiple HUB infrastructure, engineering services, equipment supply, and technology partnerships in digital communication and sustained economic growth. Through proper mentoring and support the success rate of the Startups will be increased and greater National progress achieved.
Dr. P. Sekhar, Chairman,
Global Smart City Panel,
Mr. Parthasarathy Iyengar,
Founder & CEO, India Start-Up 360