India has grown into a heavyweight in the global start-up scene. It is the world’s second largest hub by total start-ups, and the fourth largest by venture capital investments, after the United States, China (People’s Republic of), and the United Kingdom. India’s start-up journey has been grabbing world attention, due to the country’s market size and technological potential. Since 2016, India has a targeted policy programme to support start-ups. This chapter presents an overview of the start-up scene in India, it highlights its distinctive features, including the emergence of start-ups in renewable energies; discusses India’s policies to enable start-up development and outlines options for policy reforms in going forward.
Start‑up Asia
Chasing the Innovation Frontier
Abstract
India is home to one of the world’s largest start-up ecosystems in absolute terms. It is the second largest start-up hub in the world after the United States in terms of number of start-ups and the fourth largest by venture capital investments, after the United States, the People’s Republic of China (hereafter “China”), and the United Kingdom (2021-23) [authors’ calculations based on Crunchbase (2024[1])]. India’s start-ups have captured world attention, as the country represents one of the largest and most populous markets in the world, and has showcased a growing capacity for innovation, particularly in digital technologies (KPMG, 2019[2]; Bloomberg, 2021[3]). Together with start-ups, India’s ecosystem has become denser over time, with growing start-up activity by venture capital and other financing players, incubators and accelerators, universities and academic institutions and others.
India launched start-up India in 2016. This programme, spearheaded by the Department for Promotion of Industry and Internal Trade (DPIIT), was designed to revitalise the country’s start-ups, which had already been developing since the 1990s building on India’s strength as a software centre. India Stack, the country’s public digital infrastructure programme, strengthened by Digital India launched in 2015, has also boosted digitalisation in the country, and acted as a lever for start-up development. In line with regional and global trends, the country has looked to tap into start-ups as a way to boost local innovation capabilities, increase employment opportunities and meet development goals.
This chapter presents an overview of India’s current start-up ecosystem, highlights its distinctive features, including the emergence of renewable energy start-ups, and analyses the country’s policies to support start-up development. It concludes by identifying key policy recommendations for India to continue unleashing the potential of start-ups for development.
India is the second largest start-up hub in the world (9% of world’s start-ups) after the United States (32%) and Asia’s largest one (45% of Asian total in 2021-23) (Box 2.1). India is also one of the oldest start-up ecosystems in Asia, with several start-ups born in the margins of the country’s large IT sector attracting large investments already in the 2000s, such as OnMobile, a gaming spin-off of InfoSys founded in 2000. However, growth was not linear. The burst of the dot.com bubble cooled down investor interest globally in internet-related ventures, and it would be another decade before investments started accelerating and surpassing the USD 1 billion mark. Around this time, several of India’s early unicorns started appearing, such as Flipkart, an e-commerce giant and InMobi, an ad-tech firm, both established in 2007, and acquiring unicorn status in 2011-2012. Despite its large size, the ecosystem’s density is still below potential. In India, there are about 4 start-ups per 100 000 people, which compares well to the Asian average (3) but is a long way from the OECD one (42) and the United States (76) (Figure 2.1).
Despite increased interest in these firms, there is no unique definition for start‑ups; different stakeholders use different criteria to define them. A common understanding is needed, and not only to facilitate measurement and cross-country comparisons. Tangible definitions also enable public- and private-sector initiatives that target start‑ups to identify their beneficiaries, monitor their performance and assess their impact.
Two main criteria stand out in classifying start-ups: one based on market performance and one based on the nature of the business, including the extent of its innovation and disruption. The performance-based approach classifies start-ups as enterprises that are young but above the average in terms of their growth and impact. The approach that is based on the nature of start-ups’ business aims to grasp their use of new technologies and their potential to create new products and services in a high-risk environment. Countries and regions that are implementing policies to support the development of start‑ups usually adopt mixed definitions that combine performance and the business nature of these firms.
India, for example, has adopted a mixed approach. In 2016, the country launched Start-up India, a programme spearheaded by the Department for Promotion of Industry and Internal Trade (DPIIT), part of the Ministry of Commerce and Industry. A key pillar of this work has been to ease the administrative and financial burden on start-ups through registering them, and thereby enabling their access to targeted public policy support.
To facilitate measurement across countries, this chapter defines start-ups as those companies registered on Crunchbase, a commercial database of technology-related firms that are less than ten years old. When discussing policy frameworks, this chapter uses the term “start‑up” to refer to innovation-intensive or high-impact new enterprises for which India and other countries are creating support mechanisms. As a result, there may be discrepancies between the data reported in this chapter and the data gathered by DPIIT regarding the total number of start-ups in the country.
The country accounts for about 5% of global venture capital (VC) investments, fourth highest after United States (48%), China (14%) and the United Kingdom (5.5%), and second highest in Asia (data for 2021-23). India’s VC scene is also large with respect to the local economy: VC accounted for 0.62% of GDP in India in 2021-23, the second highest in Asia after Singapore (1.54%), and close to the United States (0.79%). This makes India stand out compared to newcomers in Asia, such as Thailand, Malaysia and the Philippines, whose VC investments have grown fast during the past decade, but account for around six times less, at around 0.1% of GDP.
The fast growth of the start-up ecosystem fostered large valuations in India. The country is home to 47 unicorns (defined in this report as firms valued at over USD 1 billion and created between 2014 and 2023), the fourth largest number after the United States, China and the European Union. Unicorns in India are diverse in terms of sectors, with the majority of India’s concentrated in the consumer and retail sector (36%), fintech (24%) and industrial (19%) areas (Figure 2.2). Among the more highly valued unicorns are new digital payments firms such as Razorpay, CRED and BharatPe, e-commerce / food delivery platforms such as Swiggy, and manufacturers such as electric scooter maker OlaElectric.
India is now facing a funding slowdown that became sharper in 2023, compared to other global hubs. Drops in funding were observed worldwide as interest rates crept up to reduce inflationary pressures and reflecting higher perceived geopolitical risks. Data for 2023 show a decline of 40% in funding for the United States, and 65% for India compared to the year before. The larger decline in India is explained by the role of unicorns in total financing in India – the current shortage of capital and the preference of global investors to reduce risk affects larger and later stage deals more, like the ones that involve unicorns. In line with trends in other hubs in Asia, this funding “winter” is contributing to a re-balancing of the start-up ecosystem towards smaller valuations and an emphasis on profitability. Preliminary data for 2024, show a trend towards recovery, although still below the peak of 2021.
Note: Panels B and D: based on active start-ups founded between 2014-2023. Panels C and D: Asia and OECD values are regional averages. Panel D: Asian average is computed on countries with over 50 active start-ups and excludes Singapore.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com and IMF (2024[11]), World Economic Outlook, https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD.
Note: Only unicorns founded after 2013.
Source: Authors’ elaboration based on CB Insights (2023[12]), “The complete list of unicorn companies”, https://www.cbinsights.com/research-unicorn-companies.
India’s start-up ecosystem is characterised by three main features: 1) India is home to several large hubs with distinct histories and assets; 2) domestic investors account for the majority of deals, while foreign investors provide the bulk of financing; 3) IT and software, e-commerce and fintech are the top sectors for start-ups and investors in India, while emerging sectors, including deep-tech, are increasingly attracting investments and talent.
India is home to several large hubs with distinct histories and assets
Delhi, Bengaluru and Mumbai stand out as the country’s largest and most mature hubs, accounting for 51% of Indian start-ups. However, growth in start-up ecosystems has spread well beyond these. About 12 of India’s cities are among Asia’s thirty largest start-up hubs, with Delhi the largest one in the region followed by Tokyo, Singapore, Bengaluru, Seoul, Mumbai and Beijing (Figure 2.3). India’s relatively dispersed start-up geography is characteristic of large economies that have developed multiple poles beyond the capital city. For instance, in the United States, the top three hubs (Silicon Valley, New York and Los Angeles) account for 33% of the total, a smaller concentration than in India, while in China for 56%, about the same as India. By contrast, in most countries the capital city dominates, as for instance in Korea (85%), Japan (76%) and Indonesia (71%).
Each of India’s main hubs is unique in its history, assets and culture, and adds to the overall variety of ideas and talent in India’s start-up culture. For instance:
Delhi is India’s largest hub by number of start-ups (24% of total), and second in terms of funding (20% of total, data for 2021-23). It is also among the world’s largest, about half the size of Silicon Valley, New York, and London, the world’s top three by number of start-ups. Delhi’s development as a start-up hub has been linked to the populous and diverse economy of an increasingly well-connected metropolitan area. Delhi has an estimated 33 million people, 2.3% of India’s total, compared to Mumbai’s 21 million and Kolkata’s 15 million that trail it [based on (United Nations, 2018[13]), data for urban agglomerations]. In 1985 the National Capital Region was formed which included Delhi together with the areas from the surrounding union territories of Haryana, Rajasthan and Uttar Pradesh, to better manage and develop the growing urban agglomeration around Delhi. This enabled the creation of an integrated and large local market and production ecosystem, that has been attractive for start-ups. As capital city, Delhi also concentrates many of the country’s quality educational resources that have become poles for start-uppers. About 7 of the 41 Indian universities that are among the world’s top 1500 (as measured by QS rankings) are in the NCR, including the Indian Institute of Technology Delhi (IITD), Jawaharlal Nehru University and University of Delhi.
Bengaluru is India’s oldest start-up hub, the second largest in terms of start-up numbers (15% of total) and the top third by funding (18% in 2021-23). Bengaluru’s rise as a start-up hub owes to a heritage of industrial development and a large talent pool, particularly in software (Bala Subrahmanya, 2017[14]; Kumar, 2001[15]). After independence, a handful of technology-intensive state-owned firms (so-called public sector units) were set up in Bengaluru, spanning telecommunications and aeronautics, among others, putting the city on a path of technological learning. In the 1980s, Bengaluru became the epicentre of India’s IT boom, facilitated by a policy of relaxing trade rules for IT and electronic products, attracting investments and encouraging offshoring of services to India. Next to several large multinationals that set up shop in Bengaluru, home-grown IT giants emerged, such as Infosys and Wipro, that became the seeds of the local start-up ecosystem. The ecosystem was strengthened by the presence of various technology parks for IT and biotech, set up by the government in the 1990s, and top universities such as the Indian Institute of Science and the Indian Institute of Management – Bangalore that have not only been training talent, but also incubating start-ups. Bengaluru is home to the majority of India’s unicorns: 53%, compared to Delhi’s 26%, which explains why the city was formerly top in terms of funding until 2023 when capital started becoming scarcer for the country’s largest start-ups.
Mumbai accounts for 12% of India’s start-ups, the top third hub in the country, and 35% of funding (the top in India, 2021-23). The city is one of India’s oldest trade and industrial hubs, being a port city with an important role in the centuries preceding Independence. Mumbai is known in India as a large financial centre, and is home to several public financial institutions, such as the Reserve Bank of India, the National Stock Exchange and the Securities and Exchange Board of India, as well as being the headquarters for several public and private banks (KPMG and TiE Mumbai, 2019[16]). Mumbai’s start-up scene is mainly located in the Powai area and is anchored to the Indian Institute of Technology Bombay (IITB), one of India’s best universities, which has an incubation centre named Society for Innovation and Entrepreneurship (SINE).
As India’s larger hubs become increasingly crowded and cost pressures mount, as emerging technologies grow ever more diffuse, and with the support of local public policies, new hubs are emerging in India, such as Pune, Hyderabad (6% of India’s start-ups each), Chennai and Ahmedabad (4% respectively). Pune, for example, is a hub that is located close to Mumbai, with easy access to its financial ecosystem, and counts with several high-quality educational institutes feeding its talent pool, such as Savitribai Phule Pune University, Symbiosis International, the Indian Institute of Science Education and Research (IISER) and the College of Engineering Pune. It also has a rich industrial ecosystem of automotive and IT businesses, that could serve as levers of demand for start-up innovations. In Hyderabad, the start-up ecosystem has been boosted by T-Hub, established in 2015 as an incubator and ecosystem builder, with a partnership between the government of Telangana state, the private sector, the International Institute of Information Technology, the Indian School of Business and the National Academy of Legal Studies and Research.
Note: Based on active start-ups founded between 2014-2024. Data on start-ups for metropolitan areas. Population data refer to urban agglomerations with the exception of cities in Japan and Korea which refer to functional urban areas. Data for Japan and Korea for panel B are for 2022.
Source: Updates OECD/UNCTAD (2023[17]), Production Transformation Policy Review of Bangladesh, https://doi.org/10.1787/8b925b06-en, based on Crunchbase (2024[1]), database, https://www.crunchbase.com, United Nations (2018[13]), Revision of World Urbanization Prospects, https://population.un.org/wup/ and OECD (2023), regional statistics, https://www.oecd.org/regional/regional-statistics.
National investors account for the majority of deals, while foreign investors provide the bulk of financing
The investor scene in India has been maturing fast, responding to the local market dynamism:
About 77% of venture deals during 2020-22 had participation by a local investor, either on their own (40.4%) or together with a foreign investor (36%) (Figure 2.4). Among the most prominent local investors include Venture Catalysts, Blume Ventures (both based in Mumbai), Inflection Point Ventures (based in Delhi-NCR), and Kalaari Capital (based in Bengaluru). Also notable is the activity in India of angel investor platforms, such as the Indian Angel Network and Mumbai Angels that channel angel investments into dedicated funds and facilitate investor-start-up partnerships through their network.
However, foreign investors account for the majority of the funding in India, with as much as 75% according to some estimates (Kant, 2023[18]), as they are particularly active in funding the late stage, larger deals. This is explained by the fact that the Indian local VC scene is still developing, while it is relatively easier for established foreign VC funds to raise large investment sums in overseas markets, increasing their potential for investment. The relatively high exposure to foreign investors explains the credit crunch experienced by start-ups as inflation and high interest rates repositioned interests.
Compared to Southeast Asian hubs, India is the one with the highest/strongest linkages with the United States, with investors based there accounting for some 20% of all VC rounds. Among the most prominent foreign investors are global funds, such as Sequoia that also has significant local operations, Accel ad the accelerator Y Combinator. A further 5% of deals were made with investors based in Singapore, the second top source, 4% in the UK, 2% in the United Arab Emirates and 1% in Japan. By contrast, in Indonesia, for instance, it is Singapore that is the main hub (31% of rounds, followed by 20% by US investors). In terms of value, Japan-based Softbank, and Singapore-based Tiger Global and Alpha Global are among the ones with the largest investments (Bain & Company, Inc. and IVC Association, 2022[19]).
Corporate venture capital accounts for a relatively low share of overall deals, about 7%, similar to the United States (8%), but lower than other countries in the region, such as Singapore (18%) and China (20%), where large corporates [both private and state-owned enterprises (SOEs)] are investing in start-ups, particularly those with a more proven product. Brand Capital is one of the more prominent ones CVCs in India, an offshoot of the Times Group, a media conglomerate. Some of the larger start-ups are also funding new firms, such as Zomato, a food delivery platform that has invested in a dozen related e-commerce and logistics start-ups.
Share of deals by location of investor, India and selected hubs in Asia, 2020-22
Note: Includes only deals for which investors have known location. For deals with over five investors, the first five listed were included in the analysis.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com and additional research.
Despite the increasing density of the investor ecosystem, access to sizeable finance, particularly at the seed stage, remains an obstacle for start-ups in India. The share of seed deals in India stands at 72%, in line with the OECD average (75%) and Asian one (67%), but the share of financing that these deals receive is significantly lower, at 6% of total, half that in Asia (13%) and three times less than in OECD (19%). Similarly, early-stage deals are relatively numerous (18% of total, compared to 20% in OECD on average), but they receive about half the financing that they do on average in Asia and OECD. This suggests that seeds and scale ups do get opportunities for financing in India, but that the bets are relatively small compared to potential, whereas capital is chasing large deals, contributing to higher value valuations for start-ups with proven potential.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com.
IT and software, e-commerce and fintech are the top sectors for start-ups and investors in India, but deep-tech is increasingly attracting investment
The top sectors by share of total VC funding in India in 2021-23 were fintech (22%), e-commerce (12%), transportation and logistics and IT and software (11% each), showing a tendency for investors to back start-ups that solve consumer needs, and in line with wider trends in Asia. Fintech in particular, has been an important driver of financial inclusion in India. About 77% of people had a bank account in India in 2021, up from 35% in 2011 and higher than the Asian average (57%) [authors’ calculations based on (World Bank, 2024[20])]. The creation of public digital platforms, such as Aadhar and e-KYC, to drive financial inclusion in the past decade, boosted fintech firms and investments in this area, with new digital wallet and e-payment firms emerging. Investments in e-commerce too have been driven by the country’s large consumer potential, particularly as COVID-19 made online retail more popular, fuelling the growth of retailers. However, e-commerce’s share has been decreasing over time as the space has become highly competitive and relatively more saturated. While fintech, e-commerce, IT and transport services (representing mostly car sharing apps) were also popular among OECD country members, the share of investments was higher in relatively more sophisticated activities, such as AI and data analytics (8% on average in the OECD vs 3% in India) and health and biotechnology (13% in OECD vs 7% in India).
The top sectors for start-ups in India are IT (25% of all start-ups), business services (12%) and sales and marketing (8%), closely matching the average pattern of specialisation in Asia. Beyond these, there are other areas where the country’s potential could be further tapped and support the country’s socio-economic objectives. For example, India’s share of electronics and manufacturing start-ups is a bit higher than the regional average (6% vs 4%) and has shown an increasing trend. In addition, about 5% of India’s start-ups are in agro-food, in line with OECD trends and higher than the Asian average. Finally, there is scope to increase the relevance of health and biotechnology start-ups and related investments in India. While their share at 5% of total is similar to the average in Asia and OECD, it is below potential given the country’s large pharmaceuticals industry. In the United States, for instance, 12% were active in this sector, and in Korea the number is 10%.
There is some variety in terms of specialisation among India’s hubs. For instance, about 4% of VC investments in Hyderabad were in AI, the highest among India’s top 5 hubs, and slightly higher than the national average (4%). The city’s share of AI start-ups stood at around 7%, similar to Pune and Bengaluru and higher than the country total (5%). Similarly, In Mumbai 10% of start-ups are in fintech, compared to 5% of the country total, in line with the city’s reputation as a finance hub.
Note: All active start-ups founded between January 2014 and December 2023. Asia average includes countries with over 50 start-ups and over 10 annual VC deals.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com.
A dense ecosystem of support organisations has emerged in India and is increasingly oriented towards nurturing firms that are aiming to push the technological frontier, often grouped under the term “deep tech” (Box 2.2). Over 28% of seed investments took place with the participation of an incubator or accelerator in India during 2020-22, similar to Singapore (32%) and the United States (26%), and higher compared to other large regional hubs, such as Indonesia (22%) (authors’ elaboration based on Crunchbase (2024[1])). An estimated two thirds of these programmes are in universities, supported by government programmes since the mid-2010s to incentivise start-up development (NASSCOM, 2020[21]). Their distribution is also spread out across the country, with only 26% in the top three hubs, a lower percentage than the share of these cities in the start-up population (56%). Incubators and accelerators, together with a growing set of specialised investors, are important for the emerging deep tech start-ups in India. Incubators in India’s top universities, for instance, such as SINE at IIT Bombay foster the transfer of technologies from university to market, and act as a pole for other local start-uppers, that can access advanced facilities for testing and prototyping, mentoring for intellectual property and a rich tech community. In some cases, they do not only spawn start-ups, but also become the seeds of new venture funds, such as Bharat Innovation Fund, whose team originates from CIEE incubator at IIM Ahmedabad. Next to these academic initiatives, private accelerators and venture funds have also emerged, characterised by an acknowledgement of the patient capital required for deep tech, the need for support with complex issues, such as IP, and the benefit of partnering with multiple stakeholders.
Deep technology or deep tech is a classification of an institution, an organisation or a start-up company, with the expressed objective of providing advanced and emerging technology solutions to deep societal challenges. Deep tech presents scientific or engineering challenges requiring lengthy research and development, and large capital investment before successful commercialisation. The primary risk for deep tech institutions, organisations or start-ups is technical risk, while market risk is often significantly lower due to the clear potential value of the solution to society. The underlying scientific or engineering problems being solved by deep tech companies generate valuable intellectual property and are hard to reproduce. Moreover, the solutions provided by deep technology and applications are critical for solving the complex global challenges that humanity faces, including climate change, sustainable energy or health.
Source: EIT (n.d.[22]), “What is deeptech?”, https://www.eitdeeptechtalent.eu/the-pledge/what-is-deeptech.
SINE (Society for Innovation and Entrepreneurship) is an incubator established in 2004 at Indian Institute of Technology Bombay (IIT Bombay). SINE provides grants, 3 years of incubation support and runs accelerator programmes in partnership with firms. For example, the Plugin Alliance is a one-year acceleration programme in partnership with Intel, which aims to be a platform for connecting corporates, suppliers, start-ups and support organisations for finding solutions for Industry 4.0. Eligible start-ups need to be ready to scale up, with an existing product/technology and some existing revenue.
YourNest is a venture capital firm established in 2011 in NCR-Delhi, focused solely on early-stage deep tech start-ups, including AI, IoT, Robotics, virtual reality, and other advanced digital technologies. YourNest targets firms with strong IP potential that are ready to scale. Some of the companies that YourNest has invested in include Uniphore, a conversational AI firm that begun in Silicon Valley and Chennai, and Mumbai-based Miko, that develops educational AI-based robots.
Ethereal Machines is a deep-tech Indian start-up that specialises in the innovation and provision of 5-Axis CNC technology. This technology enables the company to offer bespoke CNC milling services across different industries including aerospace, automotive, biotech, industrial automation, robotics and healthcare. The start-up specifically helps in providing manufacturing solutions for components with micron-level precision, from prototyping to mass production. The company employs a transparent 4-step process that includes uploading a CAD file, design analysis with real time pricing, manufacturing upon order confirmation, and fast shipping of the produced parts.
Pixxel is an aerospace firm established in 2019 with office in Bengaluru that operates in the sectors of agriculture, environment, government, energy, and mining. Specifically, the firm is building a constellation of hyperspectral satellites to acquire ground-based imagery and the analytical tools to extract information from the extracted data. The constellation is designed to provide global coverage every 24 hours, with the goal of detecting, monitoring and predicting global phenomena. Compared to traditional satellites, Pixxel’s hyperspectral imaging (HSI) technology offers the advantage of targeted monitoring, localised problem detection and hyper-optimised solutions in every sector globally. HIS is a technique that analyses a broad spectrum of light instead of simply assigning primary colours (red, green, and blue) to each pixel, so that the light striking each pixel is broken down into many different spectral bands to provide more information about the image object. The collected spectra are then used to form an image so that each pixel in the image includes a full spectrum.
Yuktix Technologies is a start-up established in 2013 and based in Bengaluru that engages in the application of wireless sensor network technologies to environmental sensing, agriculture, and smart infrastructure with the aim of increasing farm productivity. Specifically, the areas in which the company operates are smart irrigation, disease and pest, weather forecasting, soil and nutrition and IoT devices for 24-hour monitoring. Among its products, Yuktix Technologies provides automatic weather stations and solar weather stations, along with its GidaBits App and Cloud that allow farmers to access and store sensors data, forecasts, irrigation, and disease alerts.
Source: Authors’ elaboration on company websites.
India has been supporting the creation of start-ups since the mid-1980s. One of the first steps India took to foster new tech firms, was to set up a series of venture capital funds to kick-start the local investment scene (Pandey, 1998[23]) (Subhash, 2006[24]). These were owned by domestic development finance institutions or public banks owned by the central and state governments, such as the Technology Development and Information Company of India set up in 1988 by the Industrial Credit and Investment Corporation (ICIC), now called ICIC ventures and specialised in late-stage deals. Next to the government-controlled VCs, private (both local and foreign ones) also grew and started proliferating since the 1990s, but at the time these still accounted for a small portion of funding. The Indian Venture and Alternate Capital Association (IVCA) was set up in 1993 to further support venture capital development and foster multistakeholder dialogue. The first regulatory framework for VC was also launched in 1996, by the Securities and Exchange Board of India (SEBI) (replaced in 2012 by the regulation on Alternative Investment Funds, amended in 2023). Another tool used to promote start-ups was the establishment of various software and biotechnology parks in the 1990s.
India launched “Startup India” in 2016 – a flagship, one-stop-shop initiative, aiming to build a strong start-up ecosystem which nurtures innovation and drives sustainable economic growth. Start-up India is co-ordinated by the Department for Promotion of Industry and Internal Trade (DPIIT), an agency under the Ministry of Commerce and Trade, but it is a multiministerial in nature, with initiatives, policies and actions across the government (Box 2.7). DPIIT in addition to being the co-ordinator of this programme, is also responsible for several of the policies that are part of start-up India, including registering start-ups, and providing support, in the form of grants channelled to start-ups and incubators, funds of funds and awareness raising efforts. In addition to DPIIT, among the main institutions involved are the National Institution for Transforming India (NITI Aayog), a think tank that replaced the National Planning Commission in 2015, and through the Atal Innovation Mission programme aims to stir a culture of innovation and entrepreneurship (grants to incubators and students among others), the Ministries of Science and Technology (MOST), and the Ministry of Electronics and IT (MeitY) which are particularly active in supporting biotechnology and electronics start-ups respectively and others. The initiative was launched alongside a comprehensive 19-point Action Plan, grouping the various policies and tools that the government recognised as key for fostering start-ups, and detailing responsibilities across Ministries and agencies.
Note: AIF: Alternative investment fund; CBDT: Central Board of Direct Taxes; CSIR: Council of Scientific and Industrial Research; GeM: Government e-Marketplace; MeitY: Ministry of Electronics and Information Technology; MSME: Micro, medium and small enterprise; NCGTC: National Credit Guarantee Trustee Company; PM-STIAC: Prime Minister's Science, Technology, and Innovation Advisory Council; PRISM: Promoting Innovations in Individuals, Start-ups and MSMEs; PSA: Principal Scientific Adviser of the Government of India; SERB: Science and Engineering Research Board; SIDBI: Small Industries Development Bank of India.
Source: Authors’ elaboration based on official sources.
As of February 2024, 31 of the 36 Indian states and union territories (UTs) have their own start-up policies. India has a federal structure, with policymaking power and responsibility shared between the central (also called union) government and the states, while union territories are administered directly by the central government. States have their own legislative assembly and can draft policies, and decide their spending, in line with national objectives. Local governments at the municipal level can also raise revenues and spend mainly on municipal infrastructure and welfare. This decentralisation allows for learning across state and cross-pollination of initiatives. The states of Andhra Pradesh, Rajasthan and Karnataka were the first to launch a dedicated policy on start-ups before the launch of Start-up India (since 2014-15). Start-up India actively supports the development of such plans in states, sharing technical expertise where needed. An annual ranking of states’ efforts to foster start-up ecosystems has been launched since 2018 by DPIIT (DPIIT, 2022[25]).
Most states have a nodal team to co-ordinate the policy. However, the exact institutional modality differs by state. For instance, in Karnataka the co-ordinating agency is the Karnataka Innovation and Technology Society within the Department of Electronics, Information Technology, Biotechnology and Science and Technology, reflecting the long-time tradition of supporting IT and biotech entrepreneurs. In Kerala, co-ordination lies with the Kerala Startup Mission (KSUM), an agency set up in 2006 at a local technopark with links to the Department of Electronics and IT. The Maharashtra State Innovation Society is in turn under the Department of Skills, Employment, Entrepreneurship and Innovation Department.
Start-up India encompasses several tools for start-up promotion including:
Regulatory framework: The main thrust of start-up India in terms of regulatory reform was the creation of a unique start-up certificate through which firms can access financial and non-financial support that relies on a mixed definition (Box 2.1). Start-ups benefit from targeted provisions including:
Tax deferrals and exemptions. Start-ups qualify for a tax exemption for 3 years out of the first 10 years of a start-up’s life (80 IAC Tax Exemption). Other tax conveniences, include an exemption on tax for issuing premium shares (Section 56 of the Income Tax Act, Angel Tax), deferral of tax for ESOPs, an allowance for start-ups to carry forward losses for 10 years, and a reduction of capital gains tax from 37% to 15% for unlisted companies. Long-term capital gains are also tax-free if invested in a fund notified by Central Government.
Relaxations of rules on foreign investment and currency export. Rules have been relaxed for start-ups to accept loans (convertible or not) from abroad (up to USD 3 million), to set up foreign currency accounts provided they have subsidiaries located outside of India. To enable foreign venture capital (VC) to make investments in the local start-up ecosystem, the government scrapped a rule that required foreign VC to get permission by RBI to invest in equity and equity-linked debt instruments.
A scheme to promote intellectual property rights (IPRs), with an 80% rebate in patent filing fees and 50% of trademark filing fees, as well as financing of IPR facilitators that can support start-ups with the process of filing for protection (through DIPP funds).
Fast-tracking of insolvency procedure for start-ups, from 180 days to 90 days, through the Insolvency and Bankruptcy Code (2016),
Indian-based start-ups are also able to self-certify compliance in relation to nine labour and three environmental laws. Compliance inspections are not systematic and rather are only carried out in the case of a complaint of violation.
India counts with eight stock exchanges the largest of which are the Bombay Stock Exchange (BSE), established in 1875, and the National Stock Exchange (NSE), established in 1992. A small and medium enterprise (SME) segment was launched in these exchanges in 2012 to facilitate high growth smaller firms. A platform for start-ups has operated in BSE since 2019, with those high-tech start-ups that are more than 2 years and have a positive net worth. This platform further relaxes the criteria for firms to list and fundraise. If their post-IPO paid-up capital rises they can move to the main platform provided they meet the additional criteria. One of the often-cited benefits of listing in the start-up platform is that Employee Stock Option Plans (ESOPs) become liquid and investors can exit should they wish without waiting for the start-up to become more mature (Bain & Company, Inc. and IVC Association, 2022[19]). ESOPs have become an increasingly used tool in India to draw in employees, used for instance in unicorn firms such as Flipkart and Swiggy. Since 2020, the tax paid originally when the employee agreed to receive ESOPs can be deferred to five years, or to the date of sale or his/her termination of employment (taxed as salary). The capital gains tax stands (20% flat tax).
Several regulatory sandboxes have also been introduced, in line with global trends, to encourage innovation, particularly in fintech and healthtech. The Reserve Bank of India (RBI) launched a framework for approaching sandboxes for financial innovation in 2019, while other sandboxes have been launched by the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India’s (IRDAI) also in 2019 and the International Financial Services Centres Authority (IFSCA) in 2020. Schemes differ in their design. RBI accepts applications in cohorts with the purpose of developing innovative solutions and products from fintechs, financial institutions and others, with successful exits announced by the scheme as having met the test phase and available for use by regulated entities. SEBI adopted an approach whereby it offered regulatory relaxation to SEBI-registered entities in its sandbox, as well as offering offline access to test the proposed solution to other entities. The National Health Authority (NHA) also launched a sandbox in 2021, while India’s Telecom Regulatory Authority of India (TRAI) has also provided recommendations in 2024 for a future sandbox oriented towards new communications technologies.
Creating targeted funds for start-ups through:
The Startup India Seed Fund Scheme (SISFS): This Scheme targets start-ups in the early stages of development by disbursing funding through incubators (both private and public), approved by DPIIT’s Expert Advisory Committee. Each start-up can receive up to INR 2 million (approx. USD 24 000) for proof of concept in the form of grants (disbursed in milestones) for prototype development or product trials or up to INR 5 million (approx. USD 60 000) in terms of convertible debentures or debt or debt-linked instruments for commercialisation activities. Other early-stage schemes include the Startup-NIDHI (National Initiative for Development and Harnessing Innovations) by DSTI, which encompasses various grant schemes for student start-ups and technology business incubators. For instance, NIDHI gives 20 student start-ups a year INR 1 million (approx. USD 12 000) to student start-ups affiliated with designated Innovation and Entrepreneurship Development Centres.
The Fund of Funds for Startups Scheme (FFS): The scheme, established in 2016, invests in alternative investment funds (AIFs) which are registered with the state, which in turn invest in start-ups. The FFS is managed by the Small Industries Development Bank of India (SIDBI). As of December 2020, the fund had invested INR 45 billion (approx. USD 539 million) channelled to 384 start-ups.
The National Credit Guarantee Scheme for Start-ups (CGSS): This was established in 2022, and provides credit guarantees coverage up to INR 100 million (approx. USD 1.2 million) to loans from banks, financial companies and AIFs. The scheme is managed by the National Credit Guarantee Trustee Company Ltd and hopes to encourage start-up loans, mitigate risk and enable collateral-free funding.
Other schemes exist that have a sectoral focus, such as a fund of funds set up by the Biotechnology Industry Research Assistance Council (BIRAC), under the Ministry of Science and Technology, which targets AIFs with a biotechnology focus (up to INR 700 million, approx. USD 8.4 million); up to 30% of fund corpus per daughter fund, or INR 300 million (approx. USD 3.6 million). Other schemes of BIRAC include a seed fund of up to INR 3 million (approx. USD 36 000), provided through the BioNEST incubators.
Creating markets, through a dedicated public procurement programme. Since 2015 the central government, state governments and public sector units (PSUs) are required to set aside 20% of their procurement needs to SMEs, but with Start-up India, start-ups can also bid for projects, particularly in manufacturing. To do this, the government has mandated a relaxation of rules for prior experience in public procurement, annual turnover, and earnest money deposits that are normally in place for procurement, with an exception for items that could be important for public safety, health and security. A Government e-Marketplace (GeM) Startup Runway portal has been set up for procurement by start-ups. By December 2020, 53 226 orders from public entities have been placed to start-ups worth more than INR 22.8 billion (approx. USD 273.4 million). Other challenges and awards also aim to stimulate market development, such as the national start-up awards (for start-ups and accelerators, up to INR 500 thousand to 1.5 million), and NITI Aayog’s annual incubator grand challenge. iDEX (Innovation for Defence Excellence) is a programme launched in 2018 managed by the Defence Innovation Organization (under the Ministry of Defence) with the aim of disbursing grants to SMEs, start-ups and academia/institutes for carrying out research that could be later adopted for Indian defence purposes, with a budget of INR 4.5 billion (approx. USD 54 million), through challenges.
Encouraging the establishment of incubators and accelerators: The Atal Innovation Mission supports incubators in educational or R&D institutes (INR 100 million – USD 1.2 million – or 50% of project cost). It also channels funding to already established incubation centres. New technology business incubators have been set up by the Department of Science and Technology, and the Ministry of Human Resource Development. Through BioNEST (Bioincubators Nurturing Enterprises for Scaling Technologies) BIRAC supported 65 incubators specifically for biotechnology. Another set of targeted tools comes from the Ministry of Electronics and IT (MeiTY). For example, the Technology Incubation and Development of Entrepreneurs (TIDE) scheme, which channels grants to higher education institutions in electronics and engineering mainly for technology incubators. The incubators would be supported with INR 15.5 million (approx. USD 186 000) in instalments with up to INR 3 million (approx. USD 36 000) to be spent on incubated companies and the rest on infrastructure.
Raising awareness through the Atal Innovation Mission, by NITI Aayog, which supports the creation of workspaces in schools. mentorship modules, online courses (knowledge repository), capacity building, innovation showcases, pitching sessions, and b2b facilitation.
Note: BIRAC: Biotechnology Industry Research Assistance Council; CSIR: Council of Scientific and Industrial Research; DPIIT: Department for Promotion of Industry and Internal Trade; GeM: Government e-Marketplace; MAARG: Start-up India Mentorship, Advisory, Assistance, Resilience and Growth portal; MoD: Ministry of Defence; MoF: Ministry of Finance; NASSCOM: National Association of Software and Service Companies; NCGTC: National Credit Guarantee Trustee Company; PRISM: Promoting Innovations in Individuals, Startups and MSMEsK; SINE: Society for Innovation & Entrepreneurship - IIT Bombay.
Source: Authors’ elaboration based on official sources.
In India, state governments are introducing their own initiatives, adding to the national support. For example:
In Karnataka there are additional seed funds for proof of concept at a level similar to that of the central government (INR 5 million, approx. USD 60 000) and an allocation of 10% to deep-tech and social impact start-ups, a funds of funds (with a size of about 1 tenth the central one) with an emphasis on advanced technologies, and sizeable contributions to set up and upgrade incubators, with a focus on those outside Bengaluru, acceleration programmes for social impact start-ups, challenges, and additional exemptions of local GST taxes. Karnataka is also supporting start-ups to engage with public sector regulatory sandboxes by reimbursing fees for operating and start-ups applying.
Kerala, where the ecosystem is less advanced, support is mainly geared towards subsidies for rent, seed grants (at a smaller scale than Karnataka, up to INR 300 000, approx. USD 3 600 for ideation phase and up to INR 1.5 million, approx. USD 18 000 for scale-ups), and seed loans (up to USD 18 000), reimbursing patent fees and mentoring, disbursed through the state’s nodal agency, the Kerala Startup Mission (KSUM). KSUM is also prioritising inclusion through a dedicated seed stage scheme oriented to women start-uppers, granting INR 1.5 million, approx. USD 18 000, for those start-ups looking to bridge the gap between angel investments and VC funding. A similar level of support is given to those women or transgender individuals applying for product development grants (a sum about 70% higher than the ceiling for other applicants).
In Telangana, T-hub has been a big boost to the local ecosystem through catalysing partnerships with the private sector and academia. T-Hub was established in 2015 as an incubator and ecosystem builder, with a partnership between the government of Telangana state, the private sector, the International Institute of Information Technology, the Indian School of Business and the National Academy of Legal Studies and Research. T-hub is an incubator, accelerator and ecosystem builder that features programmes targeted to all stage start-ups, and networking events, often in partnership with other stakeholders. It also collaborates with the government for the disbursement of national and state funds, such as with T-Fund, an INR 2.5-10 million (USD 30 000–120 000) for early stage tech start-ups.
Start-up India has benefited from linkages with other policy initiatives that have aimed to strengthen investment (Invest India in 2009), manufacturing capabilities (Make in India, launched in 2014), and most importantly digitalisation (Digital India in 2015) (David, Gopalan and Ramachandran, 2020[26]). The different policy initiatives had the benefit of catalysing actions around unique objectives, but also created complementarities across different areas of the production and innovation ecosystem. Digital India, starting with actions to deliver a digital identification for Indian citizens already in 2010 and culminating in the development of a stack public digital platforms for identification, verification, and e-payments among others, was an accelerator for start-ups in digital technologies, and also in fintech (Box 2.4). Indian start-ups are reshaping the financial services model by leveraging India Stack’s open architecture, challenging the traditional paradigm of a single institution providing monetary services. Digital India also decreased costs for start-ups by on the one hand, expanding and making cheaper digital infrastructure, and on the other hand through India Stack making verifications and payments faster, and enabling the use of technologies for free in start-ups.
India Stack is a suite of public digital platforms that offers open and modular technologies to facilitate the creation and operation of applications like identity verification, digital payments, and data sharing. These technologies are developed and maintained by public agencies, fostering collaboration with the private sector. Due to its modular design, the technologies within India Stack can operate independently for single-purpose services or be combined to innovate and build new functions.
Key technologies of India Stack:
1. Aadhaar: Launched in 2010, it provides a unique digital identity and was adopted by 93% of the population. It collects demographic and biometric data, serving as a foundation for other applications.
2. E-KYC (Know Your Customer): Introduced in 2013, it streamlines the verification process for opening bank accounts, reducing transaction costs for companies and enhancing access to banking services.
3. Unified Payments Interface (UPI): Launched in 2016, it is a technology platform that can be integrated into different payment apps. It facilitates real-time, contactless transactions, accounting for 80% of retail electronic payments in India by mid-2023.
Note: KYC: Know your customer; UPI: Unified Payments Interface.
Source: Authors’ elaboration based on Arvind Gupta (2022[27]), “Digital platforms as public goods: the case of India”, background paper developed for the EU-OECD Asia Facility on Transforming Asian Economies project and India Stack, https://indiastack.org.
India Stack together with the 2012 National Data Sharing and Accessibility Policy (NDSAP) have formed the basis of different open data technology platforms that have benefited start-up creation:
The Open Credit Enablement Network (OCEN), established in 2020, addresses the substantial credit gap for MSMEs in India, by establishing a framework that facilitates short tenures, small-ticket loans, enables remote lenders to operate across distant geographies, and allows consented access to alternative data sources.
The Open Network for Digital Commerce (ONDC), established in 2021, leverages open-source specifications to create an inclusive and scalable e-commerce platform.
The Account Aggregator (AA) network, launched in 2021, aims at providing secure digital access to financial data. Regulated by the Reserve Bank of India (RBI), AA allows individuals to share information across financial institutions within the network with explicit user consent. Key elements include Financial Information Providers (FIP) and Financial Information Users (FIU), operating through open APIs. The AA, evolving into a key player in India's financial services, holds the potential to be the next transformative force, akin to the Unified Payments Interface (UPI).
Source: Authors’ elaboration based on Arvind Gupta (2022[27]), “Digital platforms as public goods: the case of India”, background paper developed for the EU-OECD Asia Facility on Transforming Asian Economies project and India Stack, https://indiastack.org.
Going forward, India plans to place more emphasis on high technology start-ups. A second phase of Start-up India is being deliberated with a draft policy created in January 2024 by the Office of the PSA that focuses on deep-tech start-ups under public consultation during 2024 (Principal Scientific Adviser to the Government of India, 2023[28]). The policy proposes strengthening the R&D and innovation ecosystem to support the growth of deep-tech, including raising investments in R&D, partnerships between academia and the private sector, and commercialisation efforts, IPR system and create thematic funds among others, that can match the lifecycle of deep-tech investments. In addition, closer collaboration among stakeholders is envisaged including through an inter-ministerial deep tech committee, which will also look into the supply chain vulnerabilities that impact deep-tech start-ups.
Start-up India has been supported by a growing budget from around USD 37.5 million in fiscal year (FY) 2016-17 to around USD 256 million in 2023-24, representing a five-fold increase as a share of the total central government budget from 0.01% of total to 0.05%. Most of this budget has been absorbed by Funds of Fund schemes, that has accounted for about 57% of total, a further 31% is dedicated to grants for various incubators, labs and research centres, including those supported by the Atal Innovation Scheme, and finally around 9% is dedicated to seed grant and equity schemes. States are also channelling resources to start-ups (DPIIT, 2022[25]). For instance, while a detailed executed budget is not available, the spending foreseen in the start-up policy 2022-27 could reach about INR 1.7 billion annually (about USD 20 million). However, the spending still falls short of countries that are putting deep tech at the centre of their start-up policies. For instance, Germany is mobilising EUR 1.6 billion in 2024 for investments in start-ups, through the German Future Fund for investments in high tech firms (created in 2021 with a total budget of EUR 10 billion), the equivalent of about 0.33% of the country’s federal budget (Clasen, 2024[29]).
Note: Included in the Start-up India budget are the following lines: Start-up India, Funds of Funds, Seed Fund Scheme (SFS), Credit Guarantee Scheme for Startups, Atal Innovation Mission (AIM), Startup India Initiative in Higher Educational Institutions (SSI-HEI), PRISM and selected lines from BIRAC. All AIM budget has been classified as grants and other support to incubators, labs and research centres. Total budget for 2023-2024 does not include any BIRAC budget as it was not available at the time of writing for that year.
Source: Authors’ elaboration based on Government of India, budget statements of various years, https://www.indiabudget.gov.in.
Investments in renewable energy start-ups are gaining ground again globally, following an earlier peak at the end of the 2000s. While technological developments and policy support, particularly in solar and the first electric vehicles (EVs), fuelled investments towards renewable start-ups at the end of the 2000s, interest waned in the following decade with industry maturation and the slowdown of new technological advances. However, in line with global commitments to enable the green transition, and geopolitical tensions around energy supply chains, investments have risen once again, from a low of 1.6% in 2015 to around 6% on average during 2019-2023 (Figure 2.11). The distribution of these investments by country closely follows the pattern for overall venture capital investments, with the exception of Sweden which is a large investment hub for renewables (5.3% of global VC), far above its share for VC overall (0.9%).
India is one of the largest hubs worldwide for renewable start-ups. The country accounts for 4.6% of total renewable VC investments, the top fourth after the United States (40%), China (26%) and Sweden (5%), and 9.6% of start-ups in this industry, the top third, in line with its role in the global start-up scene overall. The country’s ecosystem is relatively more specialised in renewables than other Asian countries, featuring the highest share of renewable energy (RE) start-ups (1.6%), on par with China, and above the regional average of 0.9%. However, OECD countries show a higher overall orientation towards sustainable technologies, with renewable energy start-ups in the OECD on average about 1.7% of total, and Norway, Italy and Germany, the top three countries, reaching around 3.8%-2.4%.
Note: The top three OECD countries included are those with the highest share of renewables start-ups in total. Only countries with over 10 renewables start-ups on Crunchbase are included. Renewable energy start-ups include those that have chosen among their industry categories the following ones: biofuel, biomass energy, clean energy, electric vehicle, hydroelectric, fuel cell, renewable energy, solar and wind energy.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com.
Share of renewable energy start-ups in total country start-ups (2023) and VC funding (2021-23), Asian countries and top 3 OECD member countries
Note: The top three OECD countries included are those with the highest share of renewable start-ups in total. Only countries with over 10 renewable energy start-ups are part of the Asian country analysis. Renewable energy start-ups include those that have chosen among their industry categories the following ones: biofuel, biomass energy, clean energy, electric vehicle, hydroelectric, fuel cell, renewable energy, solar and wind energy.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com.
In India, key drivers for the development of renewable energy start-ups have been the high consumer demand for new transport solutions and consumer-facing energy solutions, as well as targeted policies to develop capacities in renewables to secure energy supplies and foster the green transition. For example, among the handful of start-ups that have raised more than USD 50 million in financing, are Ola Electric, the country’s unicorn that specialises in electric scooters, Euler motors, an EV manufacturer and Juniper Green Energy, an operator of solar, wind and other renewable projects, now part of the AT Group. However, new technology areas are emerging where Indian start-ups are active, such as in green hydrogen. For instance, start-ups are developing new technologies in green hydrogen, one of the priorities industries for renewables in India (Box 2.5). The development of RE start-ups in India has gone hand in hand with a broader policy environment that has prioritised sustainability, in line with the country’s ambitious target to reach net-zero emissions by 2070. Among the main thrusts of India’s approach has been the mobilisation of public finance institutions to finance large-scale RE projects and the introduction of various subsidies to make various technologies cheaper to consumers, including electric vehicles (Aggarwal et al., 2022[30]; Ghosh, 2023[31]).
Hygenco
Founded in 2020, this start-up specialises in the production and integration of green hydrogen and ammonia solutions tailored for a wide range of industries, including iron and steel, fertilisers, oil refineries, chemicals, glass, food, and pharmaceuticals. Also, Hygenco extends its outreach to the oil and gas sector, mobility and transportation sector, and power grids. The start-up is backed by the NEEV Fund, a collaborative initiative launched in 2015 with the UK government, and implements projects such as Photo Leap, in partnership with Sterlite Technologies Limited for sustainable optical fibre production, Steel One, a solar-powered plant project with a high-capacity alkaline electrolyser, and Heartland project, a 100% green hydrogen plant launched in 2022.
Greenzo Energy
Based in Bengaluru, this start-up specialises in electrolyser manufacturing for green hydrogen production. The company is dedicated to full value chain green hydrogen energy solutions, developing, owning and operating renewable and green hydrogen infrastructure to provide zero-emission energy services to its customers. Its portfolio spans various sectors, including consulting for green hydrogen and ammonia plants, and Engineering Procurement Construction (EPC) for renewable energy projects such as solar, wind, and floating solar. It has more than 500 MW of green hydrogen projects in the pipeline and the completion of more than 20 solar projects and 51 detailed project reports (DPRs).
Grassroots Energy
Grassroots Energy is a Bengaluru-based company committed to sustainable agricultural practices that offers a comprehensive approach to waste management and renewable energy. It aims to make an impact in three critical areas: methane/carbon mitigation by preventing emissions and replacing fossil fuels with bio-methane; poverty alleviation by increasing farmers' incomes through organic waste valorisation and improved agricultural and livestock practices; and enhancing food security by replacing chemical fertilisers with high-quality organic compost, which reduces agricultural input costs, improves soil quality, increases yields, and makes food safer for consumption.
The company provides a system where farmers collect waste that is then treated with biogas digesters owned by the company itself. These digesters are designed to handle agro and animal waste, turning it into high-value products such as bio-methane and enriched compost that are distributed and shared through co-operatives, promoting local economic growth. Among its services, it provides instant soil testing and produces enriched liquid compost with versatile applications and active enzymes that aid seedling germination. Also, Grassroots Energy has developed the BioCNG plant that offers decentralised and low-cost energy solutions.
Newtrace
Established in 2021 in Bengaluru, this start-up is an innovator in the green hydrogen sector, aiming to develop scalable and economically feasible hydrogen production technologies for different industries (i.e. petrochemical, ammonia, mobility, energy and steel). To date, it has raised approximately USD 6.55 million, with investments (approx. USD 1 million in pre-seed funding) from Speciale Invest and Micelio Fund in June 2022, followed by USD 5.6 million in seed funding in May 2023. Its modular approach, paired with alternative manufacturing techniques like 3D printing, facilitates automated production and scalability, positioning the company to efficiently meet mass production demands while helping industries in reducing their carbon emissions.
Infuse Ventures
Infuse Ventures is an early-stage venture capital fund and ecosystem architect focused on sustainability and clean energy sectors in India. Housed at IIM Ahmedabad's Centre for Innovation Incubation and Entrepreneurship (CIIE), this initiative supports entrepreneurial teams with capital – their investments span between INR 10 and 100 million (approx. USD 120 thousand to 1.2 million) –, business guidance, and a network of Indian and global partners to build and scale new cleantech businesses.
With an interest in seed and early-stage ventures, the specific sectors on which Infuse Ventures focuses are renewable energy, energy efficiency, water and waste management, distributed energy, sustainable agriculture, green buildings, sustainable transport, and green IT. Their partnership network encompasses the Indian government, academia and the private sector, with partners bringing in a vast range of technology, business, market and policy expertise. Key partners include the Ministry of New and Renewable Energy for Policy Support, International Financial Corporation for investment expertise, Small Industries Development Bank of India (SIDBI) for financing, and corporate entities like BP Ventures and Godrej Industries for industry insights.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com/ and on companies’ websites.
Targeted programmes to support renewable energy start-ups could help unleash their potential. Renewable energy start-ups share several characteristics with other start-ups that look to develop advanced technologies, including the need for access to capital that can support the potentially long journey from concept development to prototype and market-ready production and to scientific resources alike, including specialised laboratories. Partnerships with established energy firms and other supply chain firms can also be catalytic, by providing networks, scale-up capital and markets for experimentation to start-ups, as well as supporting them in reaching global markets. In turn, start-ups can provide established corporates with new technological solutions to improve their business, add to their product or service portfolio and help co-create new knowledge. Already energy companies are engaging corporate VC or scout energy start-ups for collaboration for this purpose, as well as through dedicated platforms for engagement through events and bootcamps, such as Free Electrons. Programmes that target these needs could better support the emergence and survival of these start-ups, complementing other areas of the country’s renewables innovation ecosystem. In the OECD, several countries are embracing start-ups as a tool to meet their wider goals for innovating for the green transition (Box 2.6).
Germany
The Startup Energy Transition (SET) initiative, co-organised by the German Energy Agency (DENA) and the World Energy Council (WEC), focuses on achieving net-zero greenhouse gas emissions, amplifying global awareness of emerging clean energy technologies, and fostering connections among policymakers, industry leaders, and new entrepreneurs in the clean energy domain. The initiative supports start-ups showcasing innovative solutions in categories such as renewable energy, transportation, and sustainable development. Specifically, SET offers promotional and networking opportunities through events and financial incentives, including a prize for the SET Award winner of EUR 10 000.
Sweden
The Swedish Energy Agency supports energy technology entrepreneurs by extending a variety of funding opportunities tailored to the developmental stage of the technology and facilitating connections with potential investors and customers. The financial support provided includes direct, non-dilutive public subsidies distributed through two-yearly calls for proposals, with offers such as subsidies for concept development up to SEK 300 000 (approx. USD 30 000) for technology concepts, up to 45% of eligible costs for customer verification up to a maximum of SEK 3 000 000 (approx. USD 300 000) and support for pilot and demonstration projects at Technology Readiness Level (TRL) 5 with the goal of TRL 6-8. The Agency's networking support involves direct assistance in finding project partners through the “Ignite Sweden Network” which pairs start-ups with large companies and public sector entities, as well as market entry and accelerator programmes abroad.
United Kingdom
The Energy Systems Catapult Living Lab, a joint initiative by Innovate UK and the Energy System Catapult organisation, seeks to accelerate the development and market entry of clean energy innovations through real-world testing in over 2 000 digitally connected homes. This project focuses on providing companies and innovators with the possibility to apply innovative clean energy products or services and gain consumer feedback. After the innovators apply to use the Living Lab for trials, the support offered includes access to a network of homes, independent validation, technical assistance, consumer data and analysis, and expert insights on clean tech engineering and market, policies and regulations. Moreover, the Living Lab facilitates networking opportunities for innovators, potentially leading to consortium building for government funding.
Note: USD approximate values of the Swedish subsidies are based on the 2022 exchange rates. Technology Readiness Levels are a type of measurement system developed by NASA and used to assess the maturity level of a particular technology.
Source: Authors’ elaboration based on IEA (2022[32]), How Governments Support Clean Energy Start-ups, IEA, Paris https://www.iea.org/reports/how-governments-support-clean-energy-start-ups.
India is home to one of the world’s largest start-up ecosystems, a feat supported by dedicated start-up initiatives, co-ordinated under the umbrella of the Startup India programme. To fully unleash the role of start-ups in the country’s inclusive and sustainable development, India should consider:
Updating the policy mix to support learning in advanced technologies. India’s start-ups continue to specialise in adapting technologies for the local market, particularly in e-commerce and fintech. Going forward, an updated policy mix will be needed to foster start-ups that are geared towards more sophisticated products and services, in line with the country’s planned Deep Tech policy. Such so-called “deep tech” start-ups have different needs, including larger, more patient, long-term financing. Several global hubs are raising the financing available for deep tech start-ups or launching new instruments more suited to their needs. For example, in Singapore, deep tech start-ups qualify for SGD 500 000 (approx. USD 360 000) in grants as well as matching co-investments that reach up to SGD 8 million (approx. USD 6 million). Attaching conditionalities in terms of sectors or technologies developed in seed and scale-up programmes could help concentrate resources to where they are needed most, and where private investors are more risk averse.
Stronger linkages with the scientific base, opportunities to experiment and a mature quality infrastructure and intellectual property system are also needed to help deep tech start-ups reach markets. As a result, fostering such start-ups requires programmes that go beyond financing to help support partnerships with the scientific community and large corporates to improve access to talent, ideas and other resources, as well as potential markets. Addressing the weak links of India’s ecosystem will be essential in this respect. However, investments in innovation are low. India’s investment in R&D for instance is 0.64%, compared for instance to 2.72% in the OECD (OECD, 2024[33]; UNESCO, 2024[34]). Only about 40% of R&D was financed by the private sector, compared to approximately 65% in the OECD (Department of Science & Technology, 2023[35]). Addressing talent shortages will also be necessary, particularly with respect to advanced skills. While 28% of India’s graduates are in STEM, higher than some countries in the regions, such as Indonesia with 20%, more is needed to increase talent across the board (UIS, 2024). Only 13% of women and 18% of men have a bachelor or master’s degree in India, compared to 51% and 48% respectively in the United States and 27% and 39% in Korea (World Bank, 2024[20]). A recent study by NASSCOM (2023[36]) suggests that the skill supply gap in AI, machine learning and Big Data analytics stands at 51% in India, and that similar competition for talent exists in other big hubs, such as the United Kingdom and Canada (50%-51% skills gap) and the United States (73%) pointing to global competition for quality talent. Other countries are pushing for talent initiatives that are more targeted towards deep talent, such as the deep tech talent initiative of the European Institute of Technology and Innovation (EIT) with the aim of skilling 1 million people in deep tech by the end of 2025 (Box 2.7).
The Deep Tech Talent Initiative, led by the European Institute of Technology and Innovation (EIT), a body of the EU, is a programme designed to foster a highly skilled workforce in the domain of deep technology. Launched in 2022, it aligns with the European Commission's New European Innovation Agenda, addressing the need for a skilled workforce capable of leveraging new technologies for sustainable and digital advancements across Europe.
Targeting a diverse range of learners, the initiative focuses on three specific demographics: secondary education students with an emphasis on young women, higher education students requiring specialised training, and adults in the workforce or job market seeking to enhance their deep tech skills. To achieve its purpose, the EIT provides advanced technology courses, financing opportunities for the development and expansion of teaching materials, and an extensive network of more than 3 200 partners. This collaborative network spans training providers, companies, higher education institutions, public authorities, and financial partners, all unified under the Pledge for Deep Tech Talent.
Central to the initiative, the Pledge for Deep Tech Talent is an invitation extended to organisations worldwide, encouraging them to play an active role in nurturing Europe's deep tech talent pool. These organisations can engage in one of four categories: education and training providers, enterprises or enterprise associations, financing partners, and member states and institutional partners. Pledge members are expected to report on the progress and outcomes of training efforts, so to measure the initiative's impact and success.
Participants in the initiative stand to gain diverse benefits, including international exposure, first-hand access to deep tech calls from the EIT and its partners, networking and financing opportunities, and a wealth of knowledge on deep tech educational best practices.
Additionally, the initiative offers the EIT Deep Tech Talent Initiative Radar, a tool for rapidly identifying emerging deep tech technologies and applications, the Deep Tech Finder, that helps investors and businesses identify potential investment opportunities, the EUIPO Academy Learning Portal, which provides over 600 courses on intellectual property, and the Deep Tech Talent Training Prize that specifically incentivises partnerships and targeted training efforts with financial rewards.
The latter is an annual call divided into two categories: Partner Training, which celebrates collaborative efforts to advance deep tech skills and technologies in Europe, and Targeted Training, which rewards training organisations specialising in initiatives for underrepresented groups or urgent market needs. The EIT has allocated up to EUR 1 000 000 for this award, with prizes up to EUR 60 000 per recipient. In 2023 successful applicants were awarded a total of EUR 440 000.
Source: Authors’ elaboration based on EIT Deep Tech Talent Initiative (2024), “EIT Deep Tech Talent Initiative”, https://www.eitdeeptechtalent.eu.
Strengthening image and reputation. India, through initiatives such as Start-up India and Digital India, has made fast progress in building a modern narrative of a country that is betting on digital technology and innovation to further development goals. Image and reputation are emerging as major competitiveness assets in an increasingly digitalised economy where consumers value safe, secure and transparent offerings in addition to traditional considerations of the price-quality-speed ratio. However, Indian start-ups sometimes suffer from reputational issues, linked to a perceived lower quality when it comes to new technologies. Going forward, India could consider strengthening tools to support local start-ups in projecting a better image and reputation both in India and abroad. Access to resources that can help ensure quality is paramount, including a quality infrastructure system particularly suited to digital technologies. This could be accompanied by specialised consulting services to support start-ups in meeting quality criteria for different markets. Additionally, it is important to advance with building regulatory frameworks to strengthen confidence in corporate governance, particularly as the global venture capital boom of 2020-2021 encouraged runaway valuations and contributed to shift attention away from appropriate due diligence (Shukla, 2024[37]). Geopolitical alliances will also play a crucial role in enabling Indian start-ups to grow globally and provide solutions to global markets, therefore their success will also depend on India’s international partnerships and policies.
Tapping into all talent available. With 4 start-ups per 100 000 people in India, about 10 times less than the OECD (42), there is scope to increase the density of India’s start-up ecosystem. Increasing the diversity of start-ups is essential in this respect. For instance, female start-uppers are still few in India, in line with broader entrepreneurship trends (OECD, 2021[38]). Only about 16% of start-ups in India have at least one female founder, compared to 23% in the United States for instance. These receive about 11% of funding, compared to 14.4% in the United States. Some dedicated initiatives already exist to support women. For instance in Kerala there is an exclusive seed programme for women beyond Bengaluru and about 25% of the INR 1 billion venture capital fund set up by the state has been earmarked for women, among others (DPIIT, 2022[39]). Expanding such efforts and making sure the necessary outreach activities exist to make them known and accessible is important. Similar targeted funds and mentorship programmes could also be strengthened for other underrepresented groups, including rural entrepreneurs. Diversity could also increase with respect to socio-economic and educational status, as studies show that investors tend to have a strong preference for funding graduates of a handful of elite colleges (Bhattacharya, 2022[40]). It will also be important to strengthen programmes to tap into all talent available in light of the current funding winter the country is experiencing, thereby mitigating the impact on those entrepreneurs who might suffer harder the consequences of increased risk appetite among investors.
Start-ups with at least one female-founder as a share of start-ups (2022) and venture capital (2020-22), top 20 hubs by total number of start-ups and additional selected Asian ones
Note: Only active start-ups that were founded between 2013 and 2022. All Asian hubs with more than USD 1 billion in investments.
Source: Authors’ elaboration based on Crunchbase (2024[1]), database, https://www.crunchbase.com.
India has grown into one of the world’s largest start-up ecosystems. The country is home to some of the largest start-ups globally, with 47 unicorns, the fourth largest after the United States, China and the European Union. The country’s large and growing market, its well-known software talent pool and a committed government that launched the dedicated Start-up India programme in 2016, have been among the country’s key strength in building a start-up ecosystem that goes beyond the top tier cities, and is innovating in emerging technology areas including AI and renewable energies. However, fast growth has not been without challenges. Chief among them has been the need to adjust to lower liquidity and improve governance, the need to continue increasing technological capabilities among India’s start-uppers and making entrepreneurial opportunities more inclusive, starting from tapping into women’s entrepreneurial talent. India will need to switch gears and adapt its support to not only meet these long-term challenges but also enable start-ups to navigate an increasingly complex geopolitical and tense environment. To meet these challenges, the country will need to transition from a mindset of prioritising quality over quantity when it comes to its start-up ecosystem, in terms of prioritising knowledge generation, contributing to meeting sustainability and inclusivity goals and realising global impact.
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