India’s Startup Roadmap For The Next Decade

The past decade has been a very exciting space for the Indian startup ecosystem—much like the Y2K phase for the services industry that enabled a $400 billion dollar industry. Many different factors have contributed to this excitement and euphoria in the startup ecosystem. There have been significant learnings in capital raising and management, creating exit opportunities and most importantly market positioning.

However, as with anything else, there is a natural evolution for what the next decade has to offer. B2C startups must think products for Bharat, SaaS (software as a service) must morph to agentic AI, and the government policies have to adapt to the changing landscape.

The journey over the past decade started with B2C aka business innovation using technology, followed by B2B aka product innovation (including SaaS) and now there is lot of excitement about deeptech and science based startups.

B2C startups started by us replicating some of the success in the U.S., Flipkart/Amazon, Ola/Uber, Swiggy & Zomato/Doordash. In the last decade, Indian startups have raised more than $150 billion in funding and $170 billion cumulative is expected to be invested in this space by the end of 2025. These startups catered to the Indian market and innovated for the Indian culture. However, we are evolving and building products in various categories such as fashion, skincare, and FMCG to name a few. With a 1.4 billion population and tech enablement, the B2C and now D2C market has tremendous opportunities including quick commerce which is unique to Bharat. With the Indian goal of becoming a $10 trillion economy in the next 10-15 years, there will be great opportunities to build for Bharat.

Like B2C/D2C, B2B has seen quite a bit of action. $68 billion (as per Tracxn) has been invested in this space over the past decade. B2B was primarily driven by the SaaS, explosion that was enabled by cloud technology. Cloud democratized software distribution, deployment and operation that enabled Indian startups to gain significant market share. Most importantly, selling from India for annual revenue of less than $50,000 became possible. There is lot of talk on the evolution of software as a service paradigm with the advent of AI and AI agents. My belief is Indian startups will play a significant role in this and will influence the world.

The new area that is evolving is deeptech and science. I have written a couple articles on this in NDTV Profit on the opportunities and challenges. It is difficult to ascertain the amount of funding that these startups have received as the term deeptech is used loosely at times. I believe there will be significant interest and growth in this sector. Some of the areas include EV, battery technology, aeronautics, space, robotics, pharma and biotech. This becomes extremely important in India achieving atmanirbharta and in its march towards $10 trillion economy.

Any startup ecosystem has three key legs—market, capital and talent. Focusing on capital, over 80% of capital in Indian startups is contributed by global VCs and this trend is beginning to change. In 2023, domestic VCs comprised over 90% of the total fund raising and this amount will be deployed in the coming years leading to a significant shift. As of 2023, the venture capital industry has approximately 1,500 funds investing in India with a dry powder of $15.6 billion.

One of the enablers of this is the DPIIT’s Fund of Funds for Startups under Startup India initiative that is managed by SIDBI. I would argue that this is one of the very important milestones in the VC ecosystem. A commitment of Rs 10,000 crore translates to a capital enablement of Rs 60,000 crore (assuming 15% SIDBI’s stake in a fund). This is huge fillip to the entire VC industry. This has enabled both B2C/D2C/B2B startups.

What is required going forward in the Indian startup ecosystem is more schemes for deeptech and science startups. These startups face key hurdles on long gestation, increased capital for follow-on rounds. We are seeing efforts in this direction such as the Rs 1,000-crore venture capital fund for space tech firms by the government and the AcE Fund of Fund by BIRAC. However there still isn’t enough risk capital available for these startups. It will great for DPIIT to have more FFS schemes that will spur the deeptech and science startups. I cannot put exact numbers, but I would argue for any deeptech and science startups need around $25 million before they are able to demonstrate solid traction. Once market traction is demonstrated, multiple capital raise options open.

The need of the hour is to support deeptech and science startups. B2C/D2C/B2B startups will continue to play a significant role in the years to come but deeptech and science startups can put India in the forefront of technology across the world.