Department of Information Technology, SAE, Pune Audit Course Report

Sinhgad Technical Education Society’s

SINHGAD ACADEMY OF EGINEERING
Department of Information Technology
“Startup Ecosystem”
Submitted to the
Savitribai Phule Pune University
In partial fulfillment for the award of the Degree of
Bachelor of Engineering
in
Information Technology
By

Chalse Tanvi Sanjay

Bearing PRN no.: 72150354D

Under the guidance of

Prof. Dr. Sunil L. Bangare

Department Of Information Technology

STES’S SINHGAD ACADEMY OF ENGINEERING

KONDHWA BK, PUNE 411048

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2022-2023

CERTIFICATE
This is to certify that the audit course seminar report entitled “Startup Ecosystem” being
submitted by Chalse Tanvi Sanjay (Roll no. 17) is a record of bonafide work carried out by
him under the supervision and guidance of Prof. Dr. Sunil L. Bangare sir partial fulfillment
of the requirement for TE (Information Technology Engineering) – 2019 course of Savitribai
Phule Pune University, Pune in the academic year 2022-2023.

Date:

Place: Pune

Teacher Guardian

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Group Information:

Division: Batch: T1 Group: 4

Roll No. PRN No. Name of Student Mobile No.

16 72150331E Barve Snehal Moshe 9890304944

17 72150354D Chalse Tanvi Sanjay 9152698688

18 72150558K Satdive Kiran Gorakshanath 7057882612

19 72150588M Waghmare Siddhant Jagannath 9765460301

20 72150620J Wankhade Prankur Sharad 9021727174

Name of Faculty/Mentor :- Prof. Dr. Sunil L. Bangare

E-mail :- _____________________________________________________

Mobile No. :- 9822239136

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ACKNOWLEDGEMENT

First and foremost, praises and thanks to Prof. Dr. Sunil L. Bangare sir, the Almighty, for
His showers of blessings throughout my research work to complete the research successfully.

I would like to express my deep and sincere gratitude to my subject professor Dr. Sunil
L. Bangare sir for giving me the opportunity to do this project and providing valuable guidance
throughout this project. His dynamism, vision, sincerity and motivation have deeply inspired me.
He has taught me the methodology to carry out the research and to present the project works as
clearly as possible. It was a great privilege and honor to work and study under his guidance. I am
extremely grateful for what he has offered me. I would also like to thank him for his friendship,
empathy, and great sense of humor.

I am extremely grateful to my teacher guardian professor Prof. Dr. Sunil L. Bangare for
the dedication and consistency towards this audit course project. And also thankful for all the
resources which are provide by him and which played a very crucial role in the accomplishment
of this seminar report.

Chalse Tanvi Sanjay

(Student Name & Signature)

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Contents
Sr. No.: Title Page No.:
1 Abstract 5
2 Introduction 6
3 Objectives 7
4 Startup splitting by region 9
and sector
5 Startup Ecosystem 10
6 Making it Possible 22
7 Make in India 23
8 Conclusion 25
9 References 26

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Abstract

The traditional industry/corporate houses are less relevant in comparison to the current business
scenarios as today’s new businesses are merging into widely networked environment circumventing the
industrial and information era thus making the brick and mortar companies of yesteryears diminish their worth.
Earlier startups were created in a startup ecosystem that was demarcated by a place like Silicon Valley,
Boston. Today’s entrepreneurship is a global occurrence that needs interconnected landscape, with lesser
money and consumer adopting the new technology at surprising speed. The critical role of startup ecosystem
in financing the ventures, making available the talent and skill has made innovation that was never clean or
linear possible. India competing with China to become the fastest growing economy, the rise of the Indian
startup ecosystem is the result of a convergence of multiple factors. Consumers going online have massively
increased due to smartphones technologies, supported by increase in income levels and desire for consumption
while on the other side there has been a huge increase in entrepreneurial and technological talent.

Indian startup ecosystem has available funding, some skilled labour and is still not equipped with
required infrastructure. Opportunities are plenty but India is yet to reach the Internet economy. Though the
creation of startups in India has made “business” a highly worthwhile career beyond the traditional trading
community, the policy journey for achieving startup creation and success at massive scale need refinement,
integrating simplicity and effective execution with continuous improvement based outcomes.

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Introduction
In the new global economy, startup firms have been considered a key player in economic development.
The reasons for their significance are their contributions to job creation (which 5 increases employment) and
economic growth at the regional, national, and industrial levels.

It’s a matter of great pride that India is ranked 68th out of 137 countries as per the Global
Entrepreneurship Development Institute, This appears nothing but moderate, if we consider the performance.
However, looking at the performance by specific criteria, deeper insights about the phenomena are derived.
Its strength areas, where its performance is above its overall score, are in product and process innovation,
internationalization, opportunity start-up, risk acceptance, opportunity perception and robust competition in
the marketplace. Its performance on human capital is broadly at par with its overall performance. In broader
terms, India’s USP lies in its ability to identify the opportunities and risk-taking, which in turn links to its
capabilities in product innovation and a healthy attitude towards globalization thus, seeking new markets
beyond the home base. India has proven its mettle for entrepreneurship and exhorted us to grow exponentially
in innovation. India, in global context has increasingly pioneered in “frugal innovation” in which products
meet acceptable performance standards and features which are often aimed at the bottom of the pyramid of
consumers and associated with an extremely low cost for the consumers.

However, experts also point towards the concerns about India’s investing in technology, technological
partnerships, the need to stay abreast of current trends, greater labor market flexibility and a more supportive
education and training system. Amidst these strengths and weaknesses, it is encouraging to note that India has
managed to be second -largest hub of startups in terms of numbers of exiting startups.

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➢ As per the Startup Outlook report 2019 (Feb), two factors make India appealing as a startup

• First, is the cost of doing business which is low because of proximity between customers and
vendors

• Second is the mammoth size of the domestic market along with huge base of internet users.
Interestingly, India is also second largest consumer internet market in the world (overtaking China)
with around 500 million1 internet users. Obviously, it has never been as easy and cheap as today to
launch digital products or services in India, courtesy, the economics of digital innovation.

While the technology is evolving and our population gives us an edge, the government at the top is
pitching in its energies to promote entrepreneurship in India Digital India is an umbrella program to prepare
India for a knowledge based transformation.

Objectives and Research Methodology:

The objectives and the research methodology are as follows:
OBJECTIVE
• The study has been geared to achieve the following objectives;
• To study an in-depth understanding and performance of the startup ecosystem in India
• To identify the role of Incubators in producing and nurturing successful business ventures
• To study thepolicy measures taken by government in fostering entrepreneurship culture and setting up
university business incubators
• To discuss the availability of grants to academic institutions for establishing the incubators in their
premises

RESEARCH METHODOLOGY
❖ Data Collection Method:
This study has been carried out with the help of secondary data only, all the data has been
collected from the various sources such as websites & reports and compiled as said by the need
of the study.

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❖ Sources of Data Collection:

The study is based on the published data. For the purpose of present study, the data was
extracted from the various newspapers, journals, articles and websites particularly from Niti
Ayog and Department of Industrial Policy & Promotion (now DPIIT) has been used. Startup
Outlook report 2019, States Startup Ranking Report 2018 by DIPP and Global Innovation
Index 2019 Report has also been analyzed. Data available from above mentioned report have
been analyzed using representative figures as and when required.
Startup split by region and sectors
India is the world’s youngest nation with 64% of its population in the working age group, so it’s no secret that
the startup ecosystem in India has evolved exponentially in recent years. According to a recent NASSCOM
report, India is the third largest startup ecosystem in the world and is expanding to become more global. With
this reassuring ecosystem, the startup culture is picking up in India as we can see.

Figure 1: Startup split by geographical distribution of the recognized startups

Source: States Startup Ranking Report by DIPP 2018, India

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Hats off to India for being the 3rd largest Startup ecosystem in the world and one of the largest consumer
markets, India has Startups working in industries ranging from Fintech to Food-tech and Robotics to AgriTech.
The following figure highlights the top 10 industries where startups recognized by the Department of Industrial
Policy & Promotion, operate.

Figure 2: Spread of startups across India recognized by Department

Source: States Startup Ranking Report by DIPP 2018, India

Startup Ecosystem
A startup ecosystem is formed by people, startups in their various stages and various types
of organizations in a location (physical or virtual), interacting as a system to create and scale new startup
companies. These organizations can be further divided into categories such as universities, funding
organizations, support organizations (like incubators, accelerators, co-working spaces etc.), research
organizations, service provider organizations (like legal, financial services etc.) and large corporations. Local
Governments and Government organizations such as Commerce / Industry / Trade departments also play an
important role in startup ecosystem. Different organizations typically focus on specific parts of the ecosystem
function and startups at their specific development stage(s).

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Figure 3: States Startup Ranking Report by DIPP 2018, India

Ecosystem – A simple definition

Everything that exists in a particular environment, the whole group of living and non-living things
that make up an environment and affect each other.

An ecosystem is a community of living organisms in conjunction with the non-living components of

their environment (things like air, water and mineral soil), interacting as a system. These biotic and abiotic
components are regarded as linked together through nutrient cycles and energy flows.

'Business Ecosystem' The network of organizations – including suppliers, distributors, customers,

competitors, government agencies and so on – involved in the delivery of a specific product or service through
both competition and cooperation. (www.investopedia.com/terms/b/business-ecosystem.asp)

An entrepreneurial ecosystem or entrepreneurship ecosystem refers to the social and economic

environment affecting the local/regional entrepreneurship. (Wikipedia)

The concept of an entrepreneurial ecosystem refers to the collective and systemic nature of
entrepreneurship. New firms emerge and grow not only because heroic, talented and visionary individuals
(entrepreneurs) created them and develop them. New ventures emerge also because they are located in an
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environment or "ecosystem" made of private and public players, which nurture and sustain them, making the
action of entrepreneurs easier. For example, the existence of prior ventures, the availability of startup
financing mechanisms, a patent system and a culture tolerating failure all facilitate the creation of new firms.
(Financial Times)

What makes a great ecosystem and how it can be improved for the Entrepreneurs who inhabit it?
An ecosystem brands entities living together in an environment. It should be clear that those entities live
healthier, extended, and contented lives if that environment is healthy.
Entrepreneurial ecosystem has three typical essentials –
• Capital— a business cannot be launched without infrastructure and that requires money. (capital tied to
tangible assets);
• Know-how— require knowledge workers such as designers, engineers, salesmen as these skills are
necessary to innovate and grow business;
• Rebellion— A businessman always is in search of something new, and challenges thegiven situation;

All three essentials are present, in flexible proportions, in every country. But the most important thing is
not simply their relative presence or absence in a certain place rather it is the degree to which they mix within
the entrepreneurial part of the economy. That is to say, is there a place where all three ingredients come together,
where capitalists, engineers, and rebels get to know one another and do great work together?

The combination of these three essentials present in a country decides the economy of that country as these
essentials can be blended in seven ways -

Capital only - Oil rich countries in the Persian Gulf are usually dominated by real estate, natural resources
and utilities. Know-how is not at all rewarded and rebellion is usually supressed by oppressive means.
Capital plus Know-how = efficiency economy – In the absence of rebellion, the concentration is on
Innovation and the goal of companies in such economy is to renew products and improve efficiency.

Know-how only = Contractor(service Provider) economy –if there are too many literates(engineers) and
no capital to invest and no rebellions then the country sells these engineers(know-how) to foreign companies
to create value. India has done this in an extensive way –doing IT related work and exporting it to customers
in developed countries.

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Know-how plus Rebellion = Playground economy – People seem to be entrepreneurs but without the
means to grow. Hence the ideas generated remain as meagre experiments and they fade away assustenance
becomes an issue. Innovation in a playground economy is mostly funded through research grants by the
government. The playground economy exists where research is entangled in the academic world, or startups
are prevented from growing due to unfriendly rules and a deficiency of capital.

Suppose the know-how disappears gradually and only the rebellion is left, this play ground economy will
slide into subsistence economy for example: Soviet Russia where the technology reached its peak but had no
business empire to support and grow. Hence, most of the country’s know-how took off for Israel or the United
States. From then only the natural resources was the only source to earn revenue (a few capitalists controlling
the natural resources) until the prices went down (to a survival economy that had no confidence). Or else if the
know-how gets fed up with failed projects trapped in this playground, these engineers (know-how) will become
contractors. For example: French startup aiming to become the next Google and ends up becoming a small IT
service business or Web agency. It’s reasonable as long as it pays the bills, but margins are thin and it doesn’t
scaleat all. These startups-turned-Web-agencies don’t add up to an entrepreneurial economy, they contribute to
developing a contractor economy with very little innovation.

Rebellion only – subsistence(survival) economy – Where capital and know-how are absent due to lack of
education and migration of talent, rebellion finds other ways - political movements, social activism, artistic
creation, and crime to start and grow business.

Rebellion plus Capital = Financial economy – In the absence of know-how, the rebellion having the
financial muscle, in order to escape the subsistence economy of his past, exerts his sense of rebellion in the
financial sector. Thus the financial economy gathers much value amassing wealth, but finance in the hands of
few does not lead to economic development.

Capital plus know-how plus rebellion = entrepreneurial economy – Silicon Valley is the best example
where Capital initially came Government and then from traditional investors, know-how was present from early
days building microwaves and semiconductors, and California having a typical rebellion mindset. These three
essentials were present during the formation stage of Silicon Valley.

The absence of one element there can be chaos or disorder in the economy. At the beginning of the 20th
century Paris was considered as extremely entrepreneurial economy but with the decline of successful
entrepreneurs the economy is likely to decline. Immigration gains importance here – after building the

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businesses it is fundamental for entrepreneurs from outside to migrate in and sustain the ecosystem thus helping
it grow.

The entrepreneurial age will be as important as the industrial age and the information age. In the industrial
and information ages, physics and information was put to great use. Physics and information were also the basis
for an organization’s differentiation and victory. In the entrepreneurial age, physics and information will be
replaced by entrepreneurship: the ability to serve a customer at the highest level of quality and scale,
simultaneously.

With access to the Internet, small businesses can now compete with big brands via social media
engagement, clever online marketing, and efficiently delivered advertising. Even in markets where there is a
mismatch between available capital and the startup community, an entrepreneur can raise money by crowd
sourcing from the public. Rather than leasing an expensive office, a startup can find a home in a local co-
working space and often outsource functions.

Talent, Density, Culture, Capital, and Regulatory Environment – composition of these five factors will
make a right ecosystem for a start up to thrive.

It is worth taking a closer look at the factors that draw companies to these particular places:

Talent – Future innovation requires skills developed in the country hence investment in talent building is
necessary.
Investing in human capital – Earlier companies use to set up their business closer to raw material available
locations, but today high growth companies scout for locations that gives them an access to assorted talent
pool. Countries are attracting a varied skills of talent to promote diversity in workplace.

Create flexible labor markets – Countries are promoting entrepreneurial visas, visas based on certain skills,
thus allowing immigration into the country of varied people having varied skills that helps in promoting
innovation contributing to the economy for example Canada, Hong Kong, Philippines.

Support new learning experiences for a competitive workforce –Hands-on skills are in demand, hence the
curricula is undergoing a change. This is happening because the job profile is undergoing a change, where
companies are demanding skills with technology and problem solving to address business challenges,
example: Estonia government started teaching coding at the age of seven.

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Promote workplace diversity- a diverse workforce encourages different ways of thinking, new products and
services to support a wide range of users, and creative problem-solving techniques. Governments can start by
addressing the gender gap. Governments could promote gender gaps for example UAE saw budding women
entrepreneurs boosting its GDP.

Density – Talent has to be created in mass to promote innovative businesses.

Foster startup density – pooling ideas together can result in something really great. Creating a density of
talented thinkers and makers dramatically increases the potential for successful ventures to emerge. Countries
can foster startup density by supporting cluster growth, creating physical hubs, driving awareness in the
media, building networks with mentors and linking academics and research networks with businesses
Support cluster growth –Governments are promoting business clusters as face to face entrepreneurial
interaction promotes competition as well as collaboration. Clusters serve as vibrant environment for
entrepreneurship for examples Las Vegas downtown.

Create physical hubs – Physical hubs are a part of clusters providing a concentrated opportunity for mentors,
investors, to support the startup ecosystem providing training, networking opportunities, access to finance and
other related activities for example late 1800 Chicago came up as tech hub, and recently iHub has caught up
in Nairobi, Kenya.

Drive awareness through media – Through marketing and promotions, attracting more investors, and using
convening powers to bring people together, governments can help create a positive environment for creating
the necessary density of networks. Local leaders can promote their own cities and towns.

Build networks & mentors -Sharing information about new technologies, success stories, desired skills, and
experts in the local market are great for innovators for example Microsoft, Google partner networks.

Link academic & research networks with business - Many successful clusters build on existing networks
between universities and business. Helping to establish a pipeline between university research and startup
formation encourages entrepreneurship. Entrepreneurs need to be able to access and build on cutting-edge
research and ideas produced by universities and other businesses. The benefits of strong connections between
business and academia include funds for joint research, development of standardized licenses to facilitate
technology transfer, and coordination of seed funding for university spin-offs.

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Culture – a fundamentalqualityfor a businessman to become role model in his activities

Open and risk-taking culture – Governments develop a culture a critical asset of a startup community
conducive to entrepreneurship by highlighting entrepreneurs as role models, celebrating failure as the next
step to success, promoting jobs for startups, and fostering public-private communication.

Highlight entrepreneurs as role models – Successful entrepreneurs are symbolic for aspiring entrepreneurs.
Promote the successful entrepreneurs in your market—tech or otherwise—and make a point of telling the
whole story—not just their success, but also their failures and how they recovered. Throughout a community,
all actors can play a part in really showing off entrepreneurs. Governments have a role to play, too, and can
design campaigns to celebrate entrepreneurs and entrepreneurship example Punjab government in Pakistan.

Accept failure as part of the learning process –The appetite for radical change is what drives the culture but
failure as a virtue is counterintuitive, and a fear of failure has been shown to hinder innovation. A culture of
innovation thrives on risk takers, but it takes time to build a community of role models who can show that
taking risks—and sometimes failing—pays off.
Promote jobs atstartups - Community initiatives can also promote jobs for startups.

Foster public-private communication - Communication between the public and private sectors encourages a
direct dialogue with the community, creating a positive feedback loop through which businesses can help
government develop policy that supports innovation.

Capital – Access to experienced capital can be helpful to coach the founders in growing their business.

Funding / Smart Capital -financing is critical for success for a business that is just getting started or is trying
to scale. . Experienced capital can really make a difference for new companies, and experienced investors can
help coach founders along their journey. Policymakers can make it easier for startups to access capital and can
create tax incentives for investors to help create more of that capital.

Provide access to capital –SMEs cannot be promoted purely on public money but such help can work as seed
money – a step to lure private investors. Governments should improve support and offer financial packages
tailored specifically for entrepreneurs. However, making funds available does not guarantee success.
Government funding structures should be designed to meet and change with the needs of the local ecosystem,
keeping in mind that more money does not necessarily lead to success, example Inter-American banks

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Multilateral Investment Fund(MIF) promoting LAC region, government of South Korea, European
Investment Fund.

Create incentives for new and experienced investors - Tax incentives can greatly increase the attractiveness
of high risk investment. Ecosystems that have government support to help investors invest more, generally
manage to unlock a stored pool of capital that can be repurposed to help stimulate the economy. Governments
can share, promote, and support best practices with regard to tax incentives for entrepreneurship and encourage
more people to reinvest their gains in businesses. Example of tax laws for startups in US and UK.

Regulatory Environment – Prediction in business policies is vital and regulations play a supportive role to
create competitive environment.
Stable / Supportive Regulatory Environment – Investors and entrepreneurs alike need a supportive regulatory
environment. Governments have a role to play in creating a stable, predictable, and supportive regulatory
environment for entrepreneurs for example in Asia and UK. As the policy and regulatory environment
increasingly define the scope for new innovations in this field, the way regulations are designed can have a
significant influence on how investors think about the location of innovators and the destination of their
investments. In order to create a supportive regulatory environment, countries should focus on the ease of
starting and closing a business, tax policy, intermediary liability protections, maintaining a global web, patent
protection, formalizing alternative funding models, and R&D.

Increase the ease of doing business – The rules and regulations to register and set up as well as wind down a
business can be cumbersome, but many governments are working to ease the burden on entrepreneurs by
making it easier to start and close a business. Putting registration processes online, reducing or eliminating
minimum capital requirements, simplifying post-registration procedures (tax registration, social security
registration, licensing), creating one-stop shops for registration, and reducing bankruptcy penalties are some
of the steps.For example Dubai businesses have a easy process to acquire trade license. World bank recognises
creation of specialises courts to expedite insolvency cases.

Focus on tax policy – Companies of all sizes want a predictable and stable tax system in order to do business.
Tax policy can be a very effective policy lever to influence entrepreneurial activity.

Create intermediary responsibility and safe harbours – Internet services like email, video conferencing, or
online storage solutions services lower the barriers for small businesses, stimulate employment, and drive
entrepreneurship. SMEs with the legal certainty needed to attract investors and to innovate and design new
products.

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Enable a free and open global web – Internet with the help of latest technologies provides an open environment
for businesses to buy and sell goods globally.

Create flexible limitations to copyright – Innovation and creativity have always relied on both copyright
protection and limitations to copyright, and that remains true online. The Internet and information technologies
are key drivers of the economy and cultural development, and copyright law’s delicate balance has been
essential to enabling this. As opposed to providing narrow black-and-white exceptions adopted at a fixed point
in time, countries should also adopt flexible, purpose-based standards so that new legitimate uses of
copyrighted content can be developed.

Provide patent protection that supports innovation – A healthy yet stable patent system is worthy for
innovation. Genuine innovation must be protected. But no one should be able to patent the obvious or use
patents as economic weapons

Formalize alternative funding mechanisms – Crowd sourcing platforms provide entrepreneurs with access to
new forms of capital. It is essential to harmonization of overarching policy structure for crowd funding in a
single market.

Support research and development – Research and development reinforce much high growth
entrepreneurship. Focused government programs can provide incentives for businesses to engage in more
R&D.

India's startup ecosystem

From Suppression to Freedom, India has gone through a harsh struggling phase before achieving the much
needed liberalization. And none can deny this fact. India has been trying to establish itself among the best,
regardless of the field.

India has always been an entrepreneurial country. Barely 300 years ago, India accounted for 25 per cent of the
global GDP, the same as China and Europe. (Saurabh Srivastava - http://www.nasscom.in/entrepreneurship-
and-india?fg=138885)

Entrepreneurship in India before Independence

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Entrepreneurship during the British Colonial Rule was confined by social, cultural and religious
bitterness. Lack of favourable laws, unsupportive political parties, instability in the political system and
stringent tax policies restricted the growth of entrepreneurship. Furthermore a series of non-conducive
economic factors did not let entrepreneurship take a strong and sharp move in India during British Raj.

The education system at that time did not support a startup entrepreneurial spirit though to some extent
the Swadeshi Movement promoted production of domestic products. The period between two world wars saw
considerable growth in entrepreneurship. Change of attitude within people, social reforms broadened the
vision of Indian businesses.

Indian Startup Ecosystem after Independence

Businesses before and after independence have an enormous difference between them as they both had
a different objective. Today’s businesses have a globalised perspective. Freedom performs great wonders.

Liberalization and technological advances, with resource accessibility, pool of knowledge, funding,
upcoming global standards, blooming domestic markets, reduced communication gap has geared the startup
culture.

The way the Indian Startup Ecosystem has changed its course is worthy of notice. From 3,100 startups
in 2014 to a projection of more than 11,500 by 2020, this is certainly not just simple growth or development.
It’s a revolution, a massive revolution. And definitely, there’s much more to come! (India – the world’s fastest
growing startup ecosystem http://thenextweb.com/in/2015/07/05/india-the-worlds-fastest-growing-startup-
ecosystem/#gref)

India offers immense opportunities. The population is huge, it's a young country, and the economy is
booming. India has the necessary skills. There also are no regulatory barriers to entry. It is fast emerging as a
dynamic destination for entrepreneurship. Despite all the positives, however, Innovation is very low in India.
Startups find it hard to get talent. People do not want to leave big companies to work for a startup.

Lack of startup ecosystem

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While opportunities are there, India lacks the right startup ecosystem. Except for some top business
schools in the country, most educational institutions do not help students to become entrepreneurs. The VC
and private equity market is still shaping up. Funding, lack of support from the government, any incentives to
startups, absence of innovation-oriented private venture capital, poor infrastructure--bad roads and train
network, and poor logistics services-reducing efficiencies, absence of free-form thinking forum in education
system, lack of vision and leadership, focus on making quick money are a few setbacks in India.

India has a long way to go but the activity happening is interesting. India's startup ecosystem is
beginning to develop. Several companies like Infosys, Wipro and likes have started incubators. Indian
government is yet to provide clear laws on taxes and investments, and eliminate unnecessary regulation on
starting companies, raising money, and selling products and services.

India – the world’s fastest growing startup ecosystem

Opportunities and Challenges
Indian business environment in last few years have strongly attracting attention by its brilliance and
interest. One of the prominent providers to this development is huge funding that has been received by these
billion dollar companies the result is the rise of many home grown companies in the country.

India has been an unexplored consumer driven market with a scope to rapidly grow. Technology
penetration and adaption is driving most of these businesses despite a host of regulatory issues.

In the past few years startup ecosystem in India has been developing driven by various dynamics like
funding, alliances and merger activities, progressing technology and flourishing domestic market. Betting big
on the Indian innovation has become a trend and global point of interest. Consumer growth backed by the rise
of mobile technology is the primary reason of foreign investor interest growing in India. The motivation
factors for investors are a combination of - acquisitions becoming possible, investor wants to be a part of
growing market expanding the geographical reach, turning the operation profitable to defend against
competition or entering new line of business.

The startups in India have given rise to additional startups. Enablers like NASSCOM, iSpirit,
Incubators like Infosys, Wipro, bring together key stakeholders of the ecosystem including other startup
incubators, accelerators, angel investors, venture capitalists, support groups, mentors, and technology
corporations. They provide startups with growth advice and decision making tools including advise on
Government policies to markets thus growing the maturity of the young ventures.

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Apart from improving the lifestyle of citizens, these maturing startups are building innovative solutions
in the field of power, education, and healthcare creating employment and increasing the productivity and reach
of these small businesses.

The industry is experiencing a new trend where these startups are creating a new world of talent. These
startups provide exciting work culture, with monetary benefits and are supported by Government policies and
initiatives in the present ecosystem. Though the investors are experimenting with their funding with clear exit
paths, startups are able to hire right talent and innovate.

India being young though having lesser population than China has a huge domestic market which can
be used as a test market by the startups before going global. The growth in consumer spending has fuelled
production and supply. With the penetration of technology, Indian market provides startups with opportunities
to innovate. Mobile penetration has altered the way business and consumers communicate which in turn has
enhanced productivity.

The incubators that are on rise provide physical as well as incorporeal services to the startups such as
accounting, computing legal services, office space, equipment and resources. They also assist in raising
capital, and provide networking opportunities that help these startups in reducing financial burden. The help
is given by these incubators in building sustainable business.

At the same time policies and regulatory environment such as taxation, multi-window clearances, and
red-tapery are the issues related to India that are being condemned for startup businesses.

People are aware of the risks and rewards as India primarily is a price sensitive market, and flexibility
is one of the major factorsto manage growth, talent and funding which are posing as challenges to these
startups.

Indian market is greatly chaotic and split. Funding challenges are the primary concern at the startup
stage as no credit history is in place. Along with this absence of complete technology penetration in Tier 2
and Tier 3 cities, cash remains the basic form of payment.

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Managing business with a lack of formal mechanism to mentor these startups within a high competitive
environment and maintaining a viable business in a challenging regulatory framework, business models and
revenue strategies have been flawed leading to the failure of many startups.

Making it Possible
The merging of technology and talent has given a boost to Indian startups who are founding their
businesses with a disruptive customer value intention fulfilling the entrepreneurial dream.

To make this dream a reality momentous energy, means and spirit will be required with different
stakeholders playing a right role. Creators of startups should adopt global business models and address issues
that are significant to India and subcontinent.

These creators are young, because of lack experience believe in learning by doing and hence have a
chance of making mistakes. The mistakes result into unnecessary delays for the solutions to be marketed at
times proving disastrous to these startups.

The startup journey needs a continuous Government support helping these ventures to make right
choices by creating more progressive policies to cultivate the right culture and encourage them to solve
country’s problems. Every startup business depending upon the industry will vary in their development cycle.
For example startups who plan to bring in social impact will take longer time to reach self-sustainability but
will create significant eco-social value. Hence there will be unbalanced expectation of such ventures becoming
commercial viable in the near term. Government can provide incentives in different forms to the ventures that
are crucial for the country by tax and depreciation benefits, subsidies for raising capital, energy concessions
and priority norms.

Corporations in India can play a vital role in designing the future of these startups by even providing
opportunities and capital to these new ventures to compete globally.

Combination of reformed government policies, help in raising capital from various sources, guidance
from established entrepreneurs and academia can be the right ways to set free the real budding potential of the
startup ecosystem.

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Make in India – Startup India
Make in India campaign was launched in September 2014 with an objective of revitalising
manufacturing businesses and accentuating crucial sectors in India amongst growing concerns that most
entrepreneurs are moving out of the country. India is a country rich in natural resources. Labour is plenty and
skilled labour is easily available. With Asia developing as the outsourcing centre India wants to be the nucleus
for investors in the world, supporting various new business initiatives and boost the Indian economy.

Startup India is a flagship initiative of the Government of India, envisioned to build a strong eco-
system for cultivating innovation and startups in the country that will energise sustainable economic growth
and create large scale employment opportunities. The Government through this initiative aims to empower
Startups to grow through innovation and design. (http://startupindia.gov.in/uploads/pdf/Action%20Plan.pdf)

The middle class is gearing up to improve the quality of life using technology and its quite common
to see someone quitting job to either start a venture or work for a new venture. The growing and established
companies are all trying to service the profitable class of the country.

Viewing the startup scenario in America, failure is often seen as a stepping stone to success.
Considering the vast majority of startups failing in India, and these failures frowned upon, Indian business
culture must start to scrutinize its tolerance for such failures, and instead gain knowledge from these failures
to be applied to future success.

The US startups access to funding is easier and can be achieved on the basis of strong concept as they
have the opportunity to prove value proposition by releasing their products to test markets. Whereas in India
a startup concentrates more on monetization, revenue and lean operations from the beginning as funding is
limited and the business has to earn for itself missing out on opportunities.

In India talent is plenty for those startups having funds whereas in US market competition for talent is
severe.

Indian companies do not have priority to delight a customer and hence risk losing customers and
significant business whereas US businesses are well known for creating a great customer experience.

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India has structural and innovation problems. Breadth – ecosystem spanning across economy of
numerous sectors, Scale – the size of the companies in each sector and Depth – number of companies in each
sector, are the three foundation stones that help these startups to prosper. Though India may have breadth in
the form of food delivery, cab aggregators e-Commerce cornering the startup scenario, but also spreading to
Biotech, Software as Service (SaaS), medical devices, digital media and Fintech startups, these companies are
yet to achieve reasonable scale. Lack of depth is partially due to lack of scale as it is difficult for a market to
support too many players without specialization. The Indian market is yet to mature.

The rise of Startup wave in India is a comparatively new phenomenon. India is today experiencing a
fundamental shift with entrepreneurship & innovation being primary promoters in job creation and solving
everyday problems. Few years ago, there used to be only a handful of Indian Startup success stories such as
MakeMyTrip.com and Naukri.com. But now, with successes such as Flipkart, Quickr, Practo, Zomato, and
Inmobi, the Indian Startup Ecosystem has indeed come a long way.

Regardless of the number of startups that have sprung up, only a small percent of population falls
under the domain of the ecosystem as these startups are concentrated in a few metros and sub metros of the
country. Also bulk of these are B2C projects with their concentration largely restricted to information
technology assisted merchandise and services such as e-commerce, aggregators, analytics, Internet of things ,
health-tech, and online payments.

The product startups sector has been mostly overlooked. Lack of funds can be the reason for this as
products develop from a concept to physical form undergoing various revisions before entering the market.
This requires enormous funding, and time. Funding in India has happened rather late in the development cycle
of a startup and mostly to those who are generating revenues rather than seed funding or venture funding. Also
funding has happened in large amounts rather than smaller amounts to large number of firms.

This is where Government involvement is required to provide alternate sources of funding to these
startups to overcome the problem of adequate collateral. While direct support in resourcing right skills with
funding arrangements is important, equally ease of doing business has a stake in the ecosystem for startups to
sustain.

The Indian startup ecosystem is undergoing a revamp, with the government announcing an Action Plan
– (http://www.profitbooks.net/startup-india/) in the areas of simplification, handholding, funding and
incentives, industry – academia partnership, innovation and incubation,addressing the various aspects of
Indian Startup Ecosystem with a hope to hasten the startup movement spreading to other sectors than

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Department of Information Technology, SAE, Pune Audit Course Report
technology such as agriculture, social sector, healthcare, manufacturing, and education and not limiting to
some metros/sub metros but even to semi-urban and rural areas.

Changes are happening in the areas of Self-certification, creation of a startup Hub for knowledge and
early finance, developing a single Mobile App for startups to interact with Government, Legal support,
Procurement norms, Funding, Guarantee for funds, Exit policies, Taxation and Capita gain policies,
Arrangement of Fests and seminars for startups to showcase innovation, harness private sector help for
Incubation, and setting up research parks with an objective to keep the compliance cost low allowing these
startups to concentrate on their core business.

Conclusion
Opportunities exist for startup companies as the ecosystem has a policy, mentor, finance, technology
and infrastructure support for development and growth. To realise this growth integration of policies, keeping
it simple and effective will be crucial. Though the government support needs to be scaled up, companies will
face challenge in identifying the right consumer need to pursue its innovation. Ofcourse this will depend upon
the capability to innovate at the right time and generate revenue to support growth.

Demonetization will be a game changer providing a platform to electronically transact boosting digital
economy, giving Indian startup ecosystem an opportunity to nurture growth based on economic, social and
happiness dynamics in the country.

The crucial role universities play in supporting the creation and development of high technology
enterprises-currently called technology-based enterprises-has aroused great interest in India. India is all geared
up to create socio-economic impact across business systems around the world in the near future. Startups form
the core of this movement and need incubators that are set up with a motive to make them into scalable and
profitable enterprises. Startups will be able to unfold their potential and think of innovative solutions to
enhance quality of life.

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Department of Information Technology, SAE, Pune Audit Course Report

References
 https://en.wikipedia.org/wiki/Startup_ecosystem
 https://en.wikipedia.org/wiki/Timeline_of_Indian_startup_ecosystem
 https://www.researchgate.net/publication/327019238_Insights_into_Startup_Ecosystems_through_E
xploration_of_Multi-vocal_Literature
 https://www.researchgate.net/publication/324128289_Startup_Ecosystem
 https://www.researchgate.net/publication/351835725_Startup_Ecosystem_in_India

 https://www.startupindia.gov.in/content/dam/investindia/compendium/Startup%20India%20%20Nati
onal%20report_Final%20Version_web.pdf

 https://cisindia.org/internet-governance/blog/technology-business-incubators.pdf

 https://www.innovencapital.com/wp-content/uploads/2019/02/Startup-Outlook-Report-
2019_InnoVenCapital.pdf

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