In an effort to facilitate business dealings and spur the practice of “reverse flipping”, which involves Indian start-ups and other companies moving their domicile from abroad to the country, the government has expanded the fast-track route for approval of mergers and amalgamations to include more categories of companies.
More company types are now eligible for the fast-track merger process under Section 233 of the Companies Act of 2013 thanks to changes to the relevant rules that the Ministry of Corporate Affairs (MCA) has notified. The National Company Law Tribunal is not involved in this approval process.
How Fast-Track Merger will Help the Companies?
When the total borrowings, including loans, debentures, and deposits, are less than INR 200 crore and there is no default, the revisions have made it possible for mergers between (unrelated) unlisted companies to proceed more quickly.
Additionally, unless the transferor company is listed, the fast-track scheme will now apply to a variety of additional transactions, including mergers between a holding company (listed or unlisted) and its subsidiary (listed or unlisted). Additionally, if the transferor companies are not listed, mergers between subsidiaries of the same holding company may receive expedited clearances.
Key Changes in MCA Rules
Up until a year ago, inbound cross-border reverse mergers needed NCLT permission. To expedite the approval of such bids, the government modified Rule 25A for cross-border deals on September 17 of last year. To eliminate any ambiguity, the most recent revision has brought this rule into compliance with Rule 25, which deals with expedited approvals, according to sources.
Since many Indian-born or Indian-connected start-ups have chosen to establish their headquarters here, cases of combining a foreign holding company with its Indian fully owned subsidiary have increased in frequency in recent years. The possibility of exiting at a greater valuation in India was one of the attractions.
According to analysts, global firms who intend to relocate their operations to India in order to take advantage of the thriving capital markets for possible listings and to combine group companies stand to gain from the move to expedite and simplify clearances for such mergers. Flipkart, Dream11, Meesho, PhonePe, Zepto, Razorpay, Pepperfry, and Groww have all relocated their parent firms from foreign jurisdictions back to India throughout the last two to three years.
Government Push for Flexible Corporate Restructuring
The enlarged and modified regulations, according to experts, demonstrate the government’s intention to increase the flexibility of business restructuring procedures. At the moment, only start-ups and “small” businesses, as determined by turnover, etc., are eligible for fast-track merger approvals.
Special start-up promotion programmes and easier access to funding have also contributed to the rise in popularity of reverse flipping. It has been helpful to loosen some of the limits on round-tripping. The expedited approach would still require requesting approval from the MCA’s regional director.
Quick
Shots
•Boost ease of doing business & encourage
reverse flipping (Indian start-ups shifting domicile back to India).
•Revision brings Rule 25A (cross-border mergers) in
line with Rule 25 (fast-track mergers).
•Start-ups like Flipkart, Dream11, Meesho, PhonePe,
Zepto, Razorpay, Pepperfry & Groww have shifted parent firms back to
India.
•Global firms may relocate to India to tap into
thriving capital markets & higher valuations.
A growing number of AI and deep-tech startups in India are bypassing domestic enterprise clients altogether. This trend, now popularly known as the “Skip India” movement, is being driven not by lack of ambition but by structural and systemic hurdles that stifle innovation at home. Indian founders, even those with successful track records, are increasingly shifting focus to foreign markets early in their journey, seeing more predictable, faster-moving, and innovation-receptive customers abroad. This article dives into why this trend is accelerating, what it says about India’s enterprise and innovation culture, and how it could reshape India’s tech future.
The Reality for AI Startups in India
Despite India’s positioning as a global IT powerhouse and its aggressive digital public infrastructure push, most early-stage Indian AI startups are unable to find a supportive local market.
The Reality for AI Startups in India
They face a unique cocktail of challenges:
Unpaid Proofs of Concept (PoCs): Startups are routinely asked to build unpaid PoCs that demand months of work without guaranteed conversion. Unlike global counterparts that budget for innovation and are open to piloting emerging tech with budgets, many Indian enterprises treat PoCs as free trials, exhausting startup resources and morale.
Bureaucratic Sales Cycles: Enterprise sales in India involve long decision cycles, multiple gatekeepers, and unclear timelines. For startups, this burns cash and time, making India an unattractive first market. Founders cite a lack of access to key decision-makers and frequent ghosting even after initial enthusiasm.
Risk Aversion and Status Quo Bias: Indian enterprises show a strong bias for buying from established IT services firms and legacy players. Startups, especially in bleeding-edge spaces like GenAI or privacy-focused AI, struggle to convince risk-averse buyers to invest early. Even after strong demos and PoCs, buyers often default to safer, known vendors.
Lack of Strategic Capital from Enterprises: In more mature markets, enterprise clients act like strategic partners. They might be early customers, design partners, or even angel investors. In India, such deep collaborations are rare. The market views startups as vendors rather than collaborators.
Voices from the Ground
Paras Chopra, founder of Wingify and Lossfunk, publicly stated he banned his team from engaging with Indian clients. He shared that Indian clients often waste time, don’t pay, and expect the impossible for free.
Vaibhav Domkundwar, founder of Better Capital, called out Indian firms for treating startups like free consulting shops. He stated on record that the culture of unpaid PoCs is actively killing the domestic AI ecosystem.
These are not isolated rants, they reflect a growing sentiment among founders who feel that the Indian enterprise ecosystem lacks the culture to nurture early innovation.
Why AI Startups are Choosing Global Markets Over India
Startups that shift focus to the US, the Middle East, or Southeast Asia find:
Faster sales closures
Better respect for IP
Paid PoC culture
Constructive feedback loops
Strategic customer partnerships
In contrast, India’s digital economy, though massive, is often inaccessible to early-stage tech innovators unless they have backing from powerful networks or legacy credibility.
Loss of Localized Innovation: When startups ignore the Indian market, solutions aren’t tailored for Indian consumers or enterprises. This slows down digital transformation domestically and makes India dependent on imported AI solutions.
Brain Drain 2.0: Many founders either relocate abroad or build with foreign markets as the only target. This time, the drain isn’t just talent, but IP, revenues, and eventual value creation.
Missed Opportunity for Enterprises: Indian businesses risk missing the AI wave entirely. By not engaging startups early, they lose competitive advantages and risk becoming digital laggards.
Broken Ecosystem Flywheel: Successful local exits create capital, mentors, and second-time founders. Without early traction in India, these cycles break. The startup ecosystem remains dependent on foreign buyers and venture capital.
Underlying Cultural and Systemic Issues
Transactional Mindset: Many Indian buyers approach B2B SaaS or AI products with a cost-first mindset, not a value-first one.
Innovation Theater: There’s often more talk about innovation (via hackathons, challenges, showcases) than actual paid deployments.
Lack of Internal Champions: Unlike Silicon Valley, where PMs or engineering leads can drive adoption, Indian orgs lack such evangelists who can push for startup solutions internally.
Preference for Build Over Buy: Large IT departments often try to replicate startup solutions in-house, even if inefficient.
What Needs to Change: The Way Forward
Enabling Innovation in India
Enterprises Must Pay for PoCs: If Indian corporates are serious about innovation, they must allocate budgets for experimentation and pay startups for their work. Even small pilot contracts send a strong signal of intent.
Create Innovation Sandboxes: Firms can create innovation arms or test environments where startups can plug in and demonstrate value without being blocked by compliance or bureaucracy.
CIOs and CTOs Need Mandates for External Innovation: Leadership must incentivize teams to work with startups and not just with established vendors. KPIs should track how many startups get onboarded annually.
Strategic Capital and Customer Equity: Enterprises could take equity positions in promising B2B startups they pilot with, aligning incentives and signaling seriousness.
Government and DPI Institutions Can Lead: Public institutions like NPCI, ONDC, and MeitY can set the tone by funding, piloting, and scaling solutions from Indian startups.
Conclusion: Skip India Is Not a Trend, It’s a Symptom
The “Skip India” movement isn’t just a startup complaint. It’s a mirror to India’s enterprise culture and innovation readiness. If the world’s fastest-growing tech talent base continues to look outside for validation and value, India risks being a factory for the world, but not a market. To change that, Indian enterprises must stop treating startups as vendors and start viewing them as partners in transformation.
India’s future as a global innovation leader depends not just on how well it builds, but how willingly it buys from its own.
FAQs
What is the “Skip India” movement?
It refers to a growing trend where Indian AI and deep-tech startups avoid Indian enterprise clients and focus on global markets due to systemic challenges in the domestic ecosystem.
Why are Indian startups skipping the local market?
They face issues like unpaid Proofs of Concept (PoCs), long sales cycles, risk-averse clients, and a lack of strategic partnerships from Indian enterprises.
What are the consequences of skipping India?
It leads to brain drain, loss of localized innovation, and missed opportunities for Indian enterprises to leverage homegrown AI solutions.
How do global markets differ for these startups?
Startups find faster deal closures, paid PoCs, strategic collaborations, and greater respect for IP in markets like the US, the Middle East, and Southeast Asia.
Venture capital (VC) is crucial in financing startups and small businesses with long-term growth potential. Typically sourced from wealthy investors, investment banks, and financial institutions, VC funding offers several advantages, including no obligation for repayment even in the event of business failure. Additionally, VC firms often provide valuable networking opportunities, aiding startups in marketing and promotion efforts to establish themselves in the market.
VC investment occurs across various stages:
Pre-Seed: At this earliest stage, founders work on shaping their ideas into a viable business plan. Many seek support from business accelerators for initial funding and mentorship.
Seed Funding: This stage marks the launch of a startup’s first product. With no revenue streams, startups rely on VC funding to cover operational expenses.
Early-Stage Funding: Once a product is developed, startups require additional Capital to scale production and sales before achieving self-sustainability. This stage often involves multiple funding rounds, such as Series A and B.
Despite the potential benefits of VC funding, there exists a significant gender gap in this realm, with women-founded startups receiving disproportionately less funding compared to their male counterparts. This disparity underscores the need for dedicated women-centric VC funds, which provide access to Capital and foster supportive investor communities tailored to female founders.
These specialized VC funds are particularly timely for India as the country strives to enhance women’s workforce participation and unlock female entrepreneurs’ economic potential. By highlighting VC funds focused on supporting innovative women-led companies across high-growth sectors, this article underscores the importance of bridging the gender gap in venture capital funding and empowering female founders in India’s startup ecosystem.
StrongHer Ventures – VC Fund Supporting Women Entrepreneurs
StrongHer by Arise Ventures, led by founder Ankita Vashistha, is a leading platform dedicated to empowering early-stage women entrepreneurs with essential resources such as Capital, connections, community, and coaching. Committed to fostering gender diversity and empowerment, the firm invests in women-led tech startups across three key verticals: Consumer, Climate, and Enterprise.
Driven by a passion for supporting visionary founders driving positive change, StrongHer invests in diverse ventures. The firm seeks disruptive companies in the consumer sector that redefine traditional industries and enhance people’s lifestyles. Within the B2B realm, StrongHer directs its investments toward SaaS, DeepTech, and Enterprise ventures across fintech, health tech, and cybersecurity domains, prioritizing innovation and efficiency.
With a notable track record of investments, StrongHer plays a significant role in supporting transformative ventures and driving positive impact across diverse industries.
Saha Fund
FOUNDER
Ankita Vashistha
Founded
2016
Headquarteres
Bangalore, India
Investments
Fitternity, MyAlly, LoveLocal, Shoptimize, and Joules to Watts
Website
www.sahafunds.com
Saha Fund – VC Fund Supporting Women Entrepreneurs
Established in 2014, Saha Fund has emerged as a pioneering global gender lens fund committed to investing in companies that promote the empowerment and engagement of women. Continuously building on this esteemed legacy, the firm is dedicated to establishing a leading platform for women entrepreneurs worldwide.
Acknowledging the importance of operational expertise in scaling early-stage ventures, Saha Fund leverages its strong network and investment acumen to foster growth and success. Saha Fund is steadfast in promoting gender diversity and inclusion and leads the way in championing women-led enterprises, driving positive change in the entrepreneurial landscape.
Value of Funding of Women-Led Startups in India from 2021 to 2023
AWE Funds
FOUNDER
Seema Chaturvedi
Founded
2019
Headquarteres
Troy, United States
Investments
Freshokartz, Remedico, Velmeni, and Agam
Website
www.awefunds.com
Kalaari Capital – VC Fund Supporting Women Entrepreneurs
AWE (Achieving Women Equity) Funds believe in HER power to transform communities, drive sustainable economic development, and deliver superior financial returns. They are an early growth venture fund investing in exceptional value-creating entrepreneurs driving innovations that promote sustainability. AWE, which is based out of the US, said that it has attracted investment support from many international and Indian institutional investors and also from high net-worth individuals.
AWE Funds has aimed to empower 30 million women to gain ‘agency’ by 2030 through a quantitative threshold-based gender lens gating criteria to invest in women-owned, led, or influenced companies. It pursues investments early in an enterprise’s lifecycle (Pre-Series A, Series A equity rounds). Additionally, it seeks to assist companies with the diverse skills of the firm’s investment professionals, strategic relationships, and its global network of executives and advisors to deliver market returns for its investors.
Aastey, Kindlife, Samosa Party, and Creative Galileo
Website
kalaari.com
Kalaari Capital – VC Fund Supporting Women Entrepreneurs
Kalaari Capital is a prominent early-stage, technology-focused venture capital firm renowned for its significant role in the Indian startup ecosystem. Founded and led by Vani Kola, a distinguished Indian venture capitalist, the firm primarily invests in Seed and Series A startups. Their mission is to empower visionary entrepreneurs to develop innovative solutions that revolutionize various aspects of Indian life, spanning work, consumption, and transactions.
Vani Kola, recognized as one of the most influential women in Indian business by Fortune India in 2014, along with Kalaari Capital, is deeply committed to fostering entrepreneurship in the digital economy. They strive to build enduring partnerships with founders, offering unwavering support as they navigate the challenges of building thriving enterprises.
In line with their commitment to gender diversity and empowerment, Kalaari Capital launched the CXXO initiative in 2021. Rooted in Capital, community, and coaching principles, CXXO aims to empower female founders and CEOs in India, enabling them to shape the nation’s digital landscape and drive exponential economic growth.
Beyond providing Capital, Kalaari Capital offers invaluable domain expertise, access to resources, and strategic guidance to the companies it supports. By nurturing disruptive entrepreneurs early, the firm lays the groundwork for their long-term success and impact in the market.
She Capital – VC Fund Supporting Women Entrepreneurs
Established in 2018, She Capital is a pioneering diversity-focused venture fund dedicated to transforming India’s startup ecosystem by providing financial support to female entrepreneurs. Anisha Singh founded She Capital as a unifying force for female founders through its “Together” community, fostering collaboration and support among its members.
Driven to empower the next generation of exceptional female-led businesses, She Capital extends financing to early-stage startups across all industries. A centerpiece of its mission is the “Together” event hosted by She Capital, which catalyzes collaboration and innovation among outstanding founders. With its vibrant atmosphere and picturesque setting, the event serves as a beacon for bright minds, paving the way for female founders in unconventional fields.
At the heart of the “Together” event are insightful discussions led by seasoned entrepreneurs, venture capitalists, investors, and thought leaders in futuristic technologies and AI. Through these engagements, She Capital remains steadfast in its commitment to championing female entrepreneurship and driving positive change in the startup landscape.
Conclusion
In summary, the landscape of venture capital funding for female entrepreneurs in India is experiencing a significant shift. The rise of specialized VC funds dedicated to supporting women-led startups reflects an increasing acknowledgment of female founders’ immense potential and capabilities.
These funds go beyond just providing financial support, offering valuable resources such as mentorship, networking opportunities, and tailored support systems to address the unique challenges faced by women in entrepreneurship. With a surge in capital investment in these initiatives and a heightened awareness of the importance of diversity in the startup ecosystem, India is on track to develop a more inclusive and dynamic entrepreneurial landscape.
FAQs
What are the main stages of venture capital (VC) investment?
The main stages of VC investment are Pre-Seed, Seed Funding, and Early-Stage Funding.
What are the key advantages of VC funding for startups?
VC funding offers no obligation for repayment even in business failure. It also provides valuable networking opportunities to aid startups’ marketing and promotion.
What is the gender gap in VC funding, and how are specialized women-centric VC funds addressing it?
Women-founded startups receive disproportionately less VC funding than male counterparts. Women-centric funds provide access to capital and supportive communities for female founders.
What are the key focus areas and investment strategies of some of the women-centric VC funds mentioned?
Women-centric VC funds have different key focus areas and investment strategies. For example, StrongHer invests in women-led tech startups, Saha is a global gender lens fund, AWE focuses on sustainability-driven innovations, Kalaari’s CXXO empowers female founders, and She Capital supports early-stage female-led startups.
The article has been contributed by Dhruv Kohli, Founder, Boba Bhai.
The startup ecosystem is emerging as a global powerhouse, and India specifically has witnessed unprecedented growth within the ecosystem. However, startups, in contrast to established corporations, encounter various difficulties and prospects that require a different approach to leadership. Launching a new business is like setting out on an exciting but risky journey. Within this ever-changing realm, leadership assumes a crucial role in determining the fate of startups.
The daily existence of a leader in a startup is characterised by a constant state of uncertainty regarding funding, market suitability, and expansion plans. To thrive within this environment, leaders must embrace the concept of ambiguity and display a willingness to undertake carefully calculated risks. Here are a few strategies aimed at overcoming challenges in the startup ecosystem.
In the fiercely competitive landscape of e-commerce, fintech, healthcare, and education, startups face formidable challenges in securing funding, acquiring top-tier talent, and captivating the attention of discerning customers. In this dynamic environment, merely possessing survival skills is insufficient; startups must employ intelligent and strategic approaches to thrive. A key fact of this strategy involves a deliberate focus on specific markets rather than adopting a one-size-fits-all approach. By tailoring their products or services to meet the unique needs of targeted markets, startups can carve out a distinctive niche and create a more profound impact.
In addition, exceptional service delivery is a linchpin for startups aiming to distinguish themselves amidst tough competition. Beyond just meeting basic expectations, providing outstanding service fosters customer satisfaction and loyalty. In an era where choices abound, positive customer experiences become a significant differentiator. Moreover, innovation plays a pivotal role in setting startups apart. By consistently introducing fresh ideas, pioneering technologies, or disruptive approaches, startups can not only address evolving market needs but also position themselves as industry leaders. Standing out goes beyond having a Unique Selling Point (USP); it necessitates effective communication to ensure that the uniqueness resonates with the target audience, fostering brand recognition and sustained success.
Encourage an Open System of Communication
Maintaining open lines of communication with team leaders is not just a leadership best practice; it’s a strategic imperative. Even when dealing with high-performing individuals, transparency and genuine connection remain paramount. By articulating the organizational vision with authentic passion, leaders create a shared sense of purpose that reverberates throughout the entire team. This genuine enthusiasm serves as a catalyst, not only deepening the bond between leaders and their teams but also fostering a warm and inclusive atmosphere that permeates the entire organization. As communication flows seamlessly from top to bottom, it forms the backbone of a cohesive and collaborative work environment where every team member feels valued and connected to the broader mission.
Team leaders, as the front-line representatives of the organization, play a pivotal role in shaping client relationships. Analogous to a mega-funnel, effective communication at the leadership level ensures a clear and consistent message cascades down to the frontline, resulting in enhanced customer satisfaction. This well-established communication channel acts as the secret recipe for not only strengthening existing client relationships but also fortifying them against the challenges of time. By empowering team leaders with a comprehensive understanding of the organizational vision and values, leaders cultivate a customer-centric culture that resonates at every touchpoint, solidifying the foundation for enduring client partnerships.
Soft Skills that Every Leader Should Have
Ensure Team Leaders Find Fulfilment in Their Roles
Ensuring that team leaders find fulfillment in their roles goes beyond merely meeting organizational objectives; it’s about fostering a work environment where each leader can harness their strengths and experience personal and professional satisfaction. Leaders should proactively engage in open conversations with their team, encouraging an ongoing dialogue about job satisfaction and potential areas for improvement or realignment. By creating a culture that values individual growth and fulfillment, leaders can uncover hidden talents and aptitudes within their teams that might be underutilized in their current roles.
Recognizing that individuals may have strengths extending beyond their designated responsibilities, leaders can empower team members to explore diverse skill sets and roles. In doing so, leaders not only contribute to the personal and professional development of their team but also create a more versatile and adaptable workforce. For example, identifying a tech expert with strong client service skills may open up opportunities for cross-functional collaboration or role adjustments, enhancing overall team dynamics. This proactive approach not only mitigates potential dissatisfaction but also transforms challenges into opportunities for growth, reinforcing the ethos of continuous improvement within the organization.
Setting the Tone: Founder’s Impact on Startup Culture
In the startup ecosystem, the founder’s impact on the company’s culture is pivotal, as leaders shoulder a level of responsibility that surpasses that in well-established organizations. Founders are not just figureheads; they are the architects of the startup’s cultural framework and ethical standards. Leading by example isn’t merely an optional leadership style; it is an indispensable requirement. The values and work ethic embodied by a founder serve as the cornerstone, setting the tone that reverberates across the entire organization. This emphasis on cultural leadership ensures that the startup’s ethos aligns with the founder’s vision, fostering a cohesive and inspiring workplace.
The startup leader assumes a multifaceted role that transcends traditional managerial responsibilities. Beyond being the captain steering the ship through uncharted waters, they serve as the chief navigator, diplomat, motivator, and problem solver. In this dynamic environment where uncertainty is the norm, the startup leader plays a crucial role in orchestrating the diverse talents within the team. The potential for innovation and impact is unparalleled, making the journey more than just about building a business; it becomes an opportunity to shape the future. Embracing the exhilarating roller coaster ride of startup leadership, with its unique blend of challenges and opportunities, requires an unwavering passion and drive to bring about transformative change in the entrepreneurial landscape.
The article has been contributed by the QuickCompany’s team
India has secured the 3rd most prominent position in the world as an ecosystem for startups with a strength of 77,000 DPIIT-recognized startups across 656 districts, while China and USA hold the second and first positions, respectively. Since 2014, it is remarkable how India has climbed up to secure the place. It is a moment of pride that India has left China behind in the global unicorn race, with funding CAGR(Complex Annual Growth Rate) between 2014 to 2022 of 49% in India against 12 % in China and 33% in the USA; as well as year on year growth of unicorn in India by 300% between 2020 and 2021 in comparison to China with 267%.
This count is reported as of 29th August 2022, making India rank 2nd in innovation quality and 1st in the quality of scientific publications, as well as in the rate of universities among developing economies. Between 2014 and the first quarter of 2022, 57,000 startups were launched in India, out of which 100 have entered the Unicorn Club, and 17 are listed.
Bengaluru is known as the startup capital of India, whereas Maharashtra has the highest number of startups in India.
Indian States and Union Territories Contributing to the Startup Ecosystem
The innovations are expanding beyond the specific sectors, unlike a few years back. The recognised startups in 56 industries are divided into 13% from the IT industry, 9% from pharmaceutical and health care, 7% from ed-tech, 5% from professional and commercial services, 5% from agriculture and 5% from food and beverages.
According to the Economic Survey of 2021-22, DPIIT recognised more than 61,400 startups, of which at least 14,000 were recognised during the fiscal year 2022. This contributes to a growth projection to put forward a GDP examining the performance of several sectors and suggests future movement.
On average, 555 districts of India had at least one new startup, which makes it evident that India has remarkably encouraged the startup mindset over the past six years, mainly in IT and knowledge-based sectors.
Top 4 Indian States Bagging the Funding
“Startups in India have grown remarkably over the last six years. The number of new recognised startups has increased to over 14,000 in 2021-22 from only 733 in 2016-17,” the survey claimed.
2022 has been marked as a significant year for startups, as it has witnessed the crossing of milestones of 100 Indian startups to enter the Unicorn club. Until October 2022, IT and Fintech showed the highest number of entries, whereas blockchain and consultancy showed the lowest.
Industry-Wise New Membership to Unicorn Club in 2022
A huge announcement is made by BITS Pilani, allowing students and faculty members to take time off for up to 1 year to start their ventures with a target to encourage and nurture entrepreneurship in India.
Moneycontrol had reported earlier that at least one founder of over 73 of India’s more than 100 unicorns came from one of the country’s 23 IITs. According to Tracxn Technologies data, BITS Pilani alumni have founded over 900 startups, with over 13 making it to the list of Indian unicorns, including Zeta, MPL, Swiggy, BigBasket, and Groww. Hari Menon of Big Basket, Sriharsha Majety of Swiggy, and Phanindra Sama of redBus are all alumni of BITS.
As of now, 22 startups have joined the unicorn club in 2022. Here are the top five among them:
Top Indian Unicorn Startups in 2022
The other Indian unicorn startups of 2022 are:
Fractal Analytics
LEAD School
Darwinbox
Livspace
Xpressbees
Hasura
CredAvenue
Amagi
CommerceIQ
Oxyzo
Open
PhysicsWallah
Purplle
LeadSquared
OneCard
Tata 1mg
Molbio Diagnostics
Conclusion
Over the past two years, India has witnessed the inflow of extra cash that resulted in drawing massive investment to Indian startups, including some making the IPOs launched exceedingly profitable. As growth-stage investors such as Tiger Global, Coatue, and Softbank have quit the market, startup values have fluctuated at a high speed. Several startups were valued based on price rather than vision, and now it is a challenge to contend with the harsh realities of the natural world, which values businesses based on free cash flow.
This scenario is likely to persist for the next 12–18 months until the economy begins to reset to a new normal. Meanwhile, the challenge to startup CEOs is to focus on achieving quantifiable achievements and genuine business payoffs, making the time engrossing for the Indian startup ecosystem.
FAQs
Which Indian city has the most number of startups?
Maharashtra has the highest number of startups in India.
Which Indian startups entered the unicorn club in 2022?
As of September 2022, 22 Indian startups have entered the unicorn club, including Fractal, Uniphore, LEAD, CredAvenue, Open, Amagi, Games24, DealShare, Xpressbees, and PhysicsWallah.
How many startups are started by BITS Pilani alumni?
According to Tracxn Technologies data, BITS Pilani alumni have founded over 900 startups, with over 13 making it to the list of Indian unicorns, including Zeta, MPL, Swiggy, BigBasket, and Groww.
A layoff is an involuntary separation from work through no fault of the employees. It is initiated by the employer for economic or business reasons. The global break-out of the Covid-19 pandemic spelt a disaster for the economy as 2020 saw severe lockdown restrictions for more than half the year.
Hence, unfortunately, it came as no surprise when companies – startups as well as large corporations – laid off staff in a bid to save their business operations from folding. The grim economic scenario of that year saw as many as 12,951 startup employees lose their jobs in India.
Why Layoffs in Google, Apple, Microsoft, and Twitter Could Be Good for India?
Layoff Statistics
Number of Employees Laid Off by Indian Startups as of June 2022
Global statistics reveal that since April 1, 2022, more than 43,000 employees from 342 startups and tech companies have been laid off worldwide out of which 13% are from India. Employees of big tech companies like Microsoft and Meta have also not been insulated against job loss.
Since the beginning of the pandemic, India has seen more than 25,000 employees lose their jobs and more than 11,500 employees have been fired this year. This unfortunate scenario has been dominated by ed-tech platforms like Unacademy which has laid off 1,150 employees, BYJU’S which has laid off 550 employees, and Vedantu, which has laid off 624 employees. In fact, two ed-tech companies, Udayy and Lido Learning, have closed their doors completely.
Among other sectors, ride-hailing platform, Ola laid off close to 500 employees, MFine, the healthcare startup laid off 600 employees, and pre-owned cars platform Cars24 laid off 600 employees. Other Indian startups and unicorns that have laid off employees are Meesho, MPL, Innovaccer, LEAD, Trell and Blinkit (now owned by Zomato).
Reasons for the Layoffs in Startups
Reasons for the Layoffs in Startups
The year of 2022 has been rocky for the public and private sector equity market. Stock markets across the world reacted negatively and plummeted due to the global sell-off pressure. This impacted the new age tech stock as listed startups struggled. This was followed by the fall in the private markets as well.
India is the third largest startup ecosystem in the world in terms of unicorn companies created. 2021 was the year when the startups experienced soaring valuations which slowly dropped and began experiencing a cash crunch this year as investors became wary of higher startup valuations.
This led to a funding crunch and by the second quarter of 2022 Indian startups were able to raise only USD 6.83 billion. This was down by 42% from USD 11.83 billion which was raised in the first quarter of 2022.
By July 2022, Indian startup funding had reached its lowest in over 17 months as the total startup funding value stood at only USD 1.16 billion, further dropping to USD 1.1 billion in August 2022. Investors took on the role of advisors to startups, giving instructions on survival techniques. There were various reasons that led to startups laying off their employees in quick succession.
Cost Reduction
As funding resources dried up, startups found it difficult to sustain existing business operations, much less expand. Compounding this was the slow market that was affecting sales figures, impacting the company’s profits.
Staff Redundancy
Companies underwent modifications, often merging internal functions or even shrinking business operations. This led to positions being scrapped, leading to staffing redundancies.
Relocation
Many companies either shifted business operations areas or even shut down some business locations. This led to massive employee layoffs, affecting the economy of the community.
Mergers and Buyouts
Many startups, which showed promise in terms of their product portfolio, were merged with larger corporations or were outright bought. This also led to employee layoffs as new management had their own plans and goals.
As bleak as the scenario has been in the last seven to eight months regarding layoffs and funding, the overall numbers are now beginning to rise. As per India’s largest human resource firm, TeamLease, Indian corporates have seen a 7% increase in their intention to hire. This number is estimated to reach as high as 70% in the coming few months as per their Employment Outlook Report for the period July-September 2022.
This upward trend is driven by the various initiatives announced by the government which are aiming at bringing the private sector back to its pre-pandemic levels. The market, post-pandemic, is driven by automation. Hence, it stands to reason that employees acquire the latest industry-specific knowledge and technologies.
As per Shantanu Rooj, CEO TeamLease – “Businesses are looking for digitally conversant, highly adaptive and multi-skilled people who can be moulded into any kind of role. Employees will need to develop not only adjacent skills but also diametrically opposite skills – combinations like technology, and creative, technology and psychology is becoming commonplace.”
Conclusion
In times of financial crisis, many companies take the easy road of layoffs, citing reasons of cost-cutting, staff reduction, mergers, buyouts, etc. This move is disruptive to individual lives. However, such times are cyclic in nature and beyond individual control. As the Indian economy rises and the situation gets better, so will the employment scenario.
FAQs
What is a layoff?
In simple terms, a layoff refers to the termination of employment for reasons other than the employee’s performance. It is mainly initiated by the employer for economic or business reasons.
What are the reasons for layoffs in startups?
The following are some of the major reasons for layoffs in startups:
Cost Reduction
Staff Redundancy
Relocation
Mergers and Buyouts
How many employees have been laid off by Indian startups?
Since the beginning of the pandemic, India has seen more than 25,000 employees lose their jobs and more than 11,500 employees have been fired this year (2022).
StartupTalkyinterviewed Kunal Chowdhry, Global Angel Investor to know about his investment mantras, investment methodology, and how he judges founders and startups to make an investment decision. Get insights into his journey of Investment in Startups.
Tell us about your background and how you got to where you are today. What keeps you motivated at whatever you do?
I was born in India and spent the formative years of my life in Singapore. I graduated from the University of Cambridge and returned to Singapore after completing my MBA at Harvard University. I have worked in both consulting and the financial services industries and now run Apollo Singapore Investments, a multi-asset-oriented family office. Apollo invests in a range of different asset classes including startups in India and South-East Asia, particularly SaaS companies in the areas of HR Technology and Blockchain.
I come from an entrepreneurial family, with my father being one of the founders of the HCL group so I have lived and breathed the ups and downs of an entrepreneurial journey since I was young with exposure to new technologies as they were being developed.
I am married with three kids – a girl and two boys. I love keeping abreast of new trends and enjoy interacting with young people because they generally have their pulse on the ground and are able to offer a fresh perspective. Keeping this in mind, I believe in a mentorship-based model of investment, whereby I make mentoring a key component of my investment methodology. I also mentor University kids from the perspective of both career and life advice and I have to say that I find them very inspiring. The desire to constantly learn and refresh myself intellectually is what truly motivates me. For example, I spent the first year of the pandemic educating myself about crypto, an area I knew nothing about previously. I am inspired by a number of entrepreneurs who started companies in areas of business they knew nothing about but were able to learn on the job and ended up creating products and services that changed the world. You don’t have to look beyond Elon Musk as an example of such a visionary.
I am passionate about travelling and collecting art. My wife and I have travelled to almost 45 countries and we usually pick up art pieces/souvenirs which are representative of the country. One of my favourite pieces is a small statue made of lapis lazuli, which is emblematic of the large statues on Easter Island, Chile. I also love tennis and you can usually find me at a Grand Slam tournament with my daughter as she is also a fan of the sport. Thanks to my kids, I am also a big fan of K-pop and have seen BTS, EXO and Blackpink in concert!
How did you start your professional journey and what do you do now?
I started my career as a consultant with Accenture in London and even spent a year in Spain which has been one of the highlights of my life thus far! I love Madrid and even learned Spanish during my time there as my entire team was Spanish and I had no choice!! After graduating from Harvard, I moved to Singapore to work directly for the CEO of DBS Bank on special projects in Singapore and around South-East Asia.
I now run my family office from Singapore. As a full-time investor, I am responsible for obtaining good returns from all our investments across a range of asset classes and geographies. This allows me to take a macro view. It feels great doing what I do because I simply love to join the dots between macro events, politics and their impact on investing.
Share any story on a tough day at work and how you pushed through.
A tough day for me would be waking up to see that my portfolio returns have dropped significantly due to a major market event. I am currently living through this as we speak, as the combination of war in Ukraine, high inflation globally and monetary tightening by central banks globally has made things really tenuous from the point of view of an investor.
The one and the only thing to do in such a situation is to stay calm. It’s important as an investor to plan for contingencies but you can’t always plan for ‘black swan’ events such as Covid. While it’s important to stick to a plan, it is also imperative to be able to pivot should the key assumptions underlying your strategy turns out to be invalid in a new market scenario.
If one day I wake up and be you, what are the things that I will do?
If you were to one day wake up and be me, you might have a bit of a shock as I am usually woken up by 3 large Labradors every morning who seem to know when my alarm is just about to go off! I generally wake up at 7 am to see my kids off the school. I spend the next several hours reviewing global news and responding to emails and reviewing business pitches and investor updates. I work out at least 3-4 times a week before lunch and generally schedule meetings post-lunch until early evening. I tend not to work between 7-9 PM as I eat dinner with my family and enjoy putting my kids down to bed. Post-dinner, I spend a couple of hours on calls with Europe/US before unwinding by watching Netflix before bed!
How and when did you start your Investing Journey?
I am passionate about startups, given my entrepreneurial upbringing and always knew that I would be part of the startup ecosystem. I have worked as an intern in start-ups while I was an undergrad in the UK and also during my MBA in the US but I always felt that my forte lay in investing. I have been an angel investor since my late 20s so almost 15 years now! When the Indian Angel network was first founded, I had the opportunity to join and it ended up becoming my first exposure to the world of startup investing. Since then, I have invested in close to 50 start-ups in India and South-East Asia. I am always on the lookout for new business opportunities and most recently invested in a coffee cart business in London.
What kind of startup do you invest in? Are you a sector or geographic agnostic? What is your typical investment horizon, return expectation, and timeline?
I am always on the lookout for that one idea than fulfils the need of any big community as a whole. An idea that can better the lives of many because of its practicality or its use. I primarily focus on HR tech and blockchain start-ups. However, that said, I also invest in other industries such as FinTech, Consumer retail, Internet, and deep-tech analytics. My typical investment horizon would be 5-7 years. My return expectation is to always aim for 3-4 times my initial investment but that’s easier said than done as an early-stage seed investor!
What is your investment mantra? Please share the metrics you track and why those are key according to you. What do you look for in a founder?
My investment mantra is simple – know the founders’ purpose and understand their motivations. Also, it matters to me whether the business philosophy can be easily explained to any layperson. As such, I don’t tend to invest in overly complicated businesses such as biotech as I don’t have a background in this industry. I would, however, not be opposed to investing in a biotech fund, run by experts who understand the space well.
I have five metrics that I usually go by:
customer growth
top-line revenue
core operating expenses/cash burn
runway
alignment with the founders’ strategic vision.
What and how do you judge the Founding team before writing a cheque? What are the key challenges you face as an investor before you sign the cheque?
I love founders who are confident, focused, clear, strategic, and yet versatile enough to turn things around or pivot when their ideas are not working. Not just the founders, but the founding team is also very important. I look at the entire team to examine the competencies of senior leadership. As such, I always insist on meeting not just the founder but also the entire team before making any investment decision.
What are a few signs which make you trust a founder and find him/her Competent? What are the signs? How much does a degree from Tier I college matter?
Education is not as important as vision. Education definitely opens the door, but at the end of the day, it’s the founder’ innate strengths and vision which carry the day.
I love founders who put their own money into their start-ups, no matter how small the amount is. This shows that the founders believe in themselves, which is a key criterion for success in my book!
What is a warning sign for you when investing in a startup?
Some red flags would be inflated expectations of performance without evidence to back it up. For example, a financial projection of $100M in revenue by Year 3 when the company is making $100,000 in Y1! And yes, I have seen many pitches with these numbers!
I believe in a mentorship-based model of investment, where I meet with the founding team on a monthly basis to review key metrics and discuss strategic decisions. I have often been asked to help vet potential candidates for senior leadership positions in some of my portfolio companies. Also, I have developed a strong network over my two decades of professional experience so I am able to make connections and warm introductions to other investors, potential customers or even potential partners in other markets.
Please share a couple of learnings which make your professional life easy and productive.
Learning from experience, I find things are easier if we just go directly to the top and not waste time with middle management. For example, earlier in my career, I would try and connect to someone at my level in a company so as to “not go over anyone’s head”. However, I have since found out that decisions are rarely taken by anyone in middle management and sometimes the message just gets lost in translation.
This is especially relevant in the Asian context, where words from senior management carry more weight and gain more attention. If you can get a message sent down by the CEO, you’d be amazed how quickly action is taken!
Another life hack which I learned a long time ago is to just ask because the worst that can happen is that you will be told “no”. But if you never ask, the answer will always be “no”. I learned this as a teenager whenever I would ask the check-in manager at the airport for an upgrade from economy to business class. Most of the time it wouldn’t work, but I did end up having a success ratio of almost 20% which is pretty good, especially as one of them was on a 17-hour flight from Santiago to London! This is equally valid in the business world. e.g. asking for more time to pay or asking for an additional discount.
When do you think it is the right time to raise investment for a startup?
In my experience, the fund-raising runway takes about 6 to 9 months. The best time to raise funds is when you have at least one year’s of runway left. In my opinion, if you leave it too close, you may end up securing financing at too high a cost – in terms of interest, equity or even loss of control of your company.
How can we support/ enable entrepreneurs in Tier II and Tier III cities?
We are seeing more and more startups from Tier II/III cities but they need the right platform to showcase their capabilities. We can tap into our collective networks and link them up to investors, customers and markets not just in India, but across the world.
Some specific actions that can be taken include:
Mentoring the founders thereby enabling them to better their businesses
What are the things that can help the founder retain maximum equity while negotiating with an investor?
I would suggest that in the early stages, particularly for seed rounds, founders should take investments in the form of convertible notes, rather than direct equity. This ensures that founders retain control for as long as possible, as usually in the later stages of funding, founders would have to give up a percentage of their equity stake.
What is one thing you wish Indian founders and VCs understand which will make the Indian startup ecosystem a much better place for startups?
I have seen inflated valuations in the ecosystem for some time, particularly in the last 5 years. Founders’ valuation expectations have become unrealistic. They are too eager to have a $ 20 million valuation based on 4 pages of a PowerPoint deck but there are insufficient revenue and customer numbers to back the valuation. I am of course referring to brand new startups which sometimes don’t even have an MVP (Minimal Viable Product) yet are asking for a $20 Million valuation!
One learning that you would like to share with founders who are looking to raise funds?
Raising funds in an economically volatile market is challenging. Investors are more cautious with where they put their funds and usually impose more stringent terms and conditions, compared to a bull market where financing is more readily available with fewer strings attached. Adverse economic conditions will have an impact on fund-raising initiatives. It not only takes longer but also entails several rounds of negotiations.
What are a few sectors you think would be hot in the upcoming year?
Web3 incorporating Metaverse, gaming and blockchain are some interesting sectors not only for the upcoming year but also for the next 3-5 years.
How do you keep track of what you have to do? What are you currently reading, or what do you recommend?
I like to stay abreast of current events because they provide crucial information for all my investment decisions. I read not only more traditional publications such as The Wall Street Journal, Financial Times and the Economist but also spend a lot of time on Twitter as it gives me access to information across a range of my areas of interest – from crypto analyst research to movie box office numbers, from macro data on the economy to the latest events in sports. I truly believe that the world of investing is very interconnected with lessons that can be drawn from a range of industries. And sometimes, it’s fascinating to realise that hype doesn’t always result in good business performance. Take a look at Netflix for example – just 8 months ago or so, everyone was talking about the TV show “Squid Game” and how it was proof that Netflix’s high-cost content acquisition strategy was working. But here we are a few months later and the share price is down 70%.
The article is contributed by Mr. Dhiresh, (Co-Founder & C.E.O.), Neem Tree Agro Solutions.
The fresh wave of Startups and young Entrepreneurs has started in India, which has resulted in the average age of Entrepreneurs in India to keep reducing by every passing day. Youngsters have stepped up for these initiatives with sheer will and confidence. Therefore, the enthusiasm may be high but industry experience is nearly non-existent. This makes managing legal compliance a strenuous task to carry out.
Startup word is usually more related to freshly churned out ideas and innovative discoveries and less towards legal bindings, security and proper documentation. Due to lack of resources or maybe just deficiency of proper knowledge, they tend to skip the legal compliance issues. Ideal model should be framed in such a way that it compliments the entire process keeping the legal compliance as the premise, because the lack of it confines you and causes scaling issues, which isn’t good for any startup that is looking to grow and expand exponentially.
On the other hand, even after learning about proper legal compliance techniques it is tough to maintain regulatory compliance such as reporting the GST and seed licensing returns, which prove to be too expensive for a startup. Furthermore, as India is a Union of States, compliance varies from state to state, particularly in the agriculture industry, which is a subject of state government rather than the Union government.
One of the first things that comes to mind is that you need to get yourself a lawyer in case something goes south, one needs to consider the monetary license which one has access to. Due to likely issues with money it is sensible to look at certain online facilities available which helps startups get through initial blues, they can be vague and generic but might help you in gaining some knowledge alongside with a different perspective.
Certain skills, such as verifying the term sheet, are perfected over time. Legal compliances also play a huge role during the fundraising process. So, the first and most important step is to keep your documentation and paperwork in order if you are looking for funding. You should follow all legal rules and regulations set forth by the government and stay up to date with them.
Lack of human resources is a very pertinent problem among all the newly emerged startups, due to which they often lack in getting things updated, but you need to keep in mind that you should cover all the moral, ethical and legal grounds. Knowing your obligations as an employer, such as adhering with all necessary labor laws, is a crucial part of beginning a business. This involves obeying salary payment, provident fund, and gratuity rules, as well as workplace sexual harassment, maternity benefits, and other policies. If your company is registered with the Startup India programme, you can sign a self-declaration and be exempted from inspection for the first year from the date of incorporation or partnership registration for some laws.
Internal legal agreement is also an essential part of the legal compliances. It is an arrangement if there are more than one founder, and if somebody decides to leave or join, they should do it in a complete legal manner which is in full agreement of the other founders. Another agreement that plays an important role is the Intellectual property agreement. This agreement should include confidentiality responsibilities for the company’s information, as well as a current assignment to the company of any intellectual property that the person has developed or may develop in the future (while working with the company).
The lack of proper licensing can also lead to difficulty in running your Startup. As stated earlier, each state may have its own set of licenses and even different industries adhere to different rules set by the state governments or government declared regulatory committees, such as, Import-Export laws, FDI Policy, SEBI/RBI regulations, etc.
Approval of financial accounts, declaration of dividends, appointment of auditors, and other special business agendas are on the AGM’s regular business agenda. The AGM must be held in the jurisdiction of the company’s registered office. The first annual general meeting (AGM) must be convened within nine months of the end of the first financial year. In the event of a subsequent AGM, it must be convened within six months of the financial year’s end. Every year, there shall be one AGM, with a maximum gap of 15 months between two AGMs.
Ignoring these difficulties can impede your fundraising efforts, and certain litigations may be brought against your company. When someone invests in your vision, he will look to see how solid your legal foundation is. Your balance sheets must be kept up to date, and your transactions must be clean and traceable. Since resources are limited, it is not an easy task but if you work on it properly, the rest of the process will go smoothly.
Startup India has taken several noteworthy steps to make the startup process easier. Under the several schemes introduced by the government, it can be seen that they want the number of startups to go up and want the youth to come up with exciting ideas. This shift that is being carried out will result in increased employment, better economy, people becoming independent and many other positive effects. On the other hand, the government needs to work more to reduce the legalities that exclusively apply to startups. This will be a big relief for new startups, as well as a motivator for others.
Mr. Amit Ratanpal is an alumnus of Harvard Business School with over 20 years of experience across private equity, capital markets, asset management, and investment banking with large organizations like Birla Sun Life and ICICI Group. He has also set up various domestic and global funds, through which he invested and managed ~INR 300 Cr with multiple successful exits. Leveraging his experience and strengths, he co-founded BLinC with his partner RK Rangan, to support entrepreneurs and invest in EdTech and FinTech sectors in India.
Here is an excerpt of the interview withMr. Amit Ratanpal, Founder & MD, BLinC Invest on Indian Startup Ecosystem.
How was the year 2021 for you as an investor/VC?
It was definitely a high-momentum period as private investments touched new peaks and multiple unicorns emerged throughout the year from all sectors. 2021 was a milestone year for BLinC – we had successful exits, launched our INR 100 Cr BLinC Fund II, and also made our first investment from the Fund in an InsurTech company named Vital.
How often do you bet on the entrepreneurs and not on the ideas? And when/if you do that, what quality of the entrepreneur usually makes you do that?
As an investor, I always strive to find the perfect balance between the quality of the promoter and the scalability of the business idea. We at BLinC work very closely with the promoters of our portfolio company, and hence, alignment with the promoters plays a key role in our investment decisions. It is always great to work with experienced and honest entrepreneurs who are good at business execution, organization development, and fundraising.
What is a warning sign for you when investing in a startup?
I prefer investing in startups whose key management team is execution-focused and takes a hands-on approach to the business. Another red flag is when promoters do not have a clear understanding of what problem they are trying to solve for their customers and how significant it is.
What are some common biases you find in the Indian Startup ecosystem?
One of the most common biases in the Indian startup ecosystem is “growth over profitability”. Businesses today adopt a high-burn-high-growth strategy without focusing on profitability. However, high growth does not necessarily lead to profitable unit economics. On the other hand, there is a general bias towards funding entrepreneurs coming from top-tier educational institutions.
What are your views on the SharkTankIndia Episodes until now?
I believe the show will surely motivate all the aspiring entrepreneurs, which will further amplify the existing entrepreneurship wave in the country.
We are seeing many startups exiting with IPO, what’s your opinion on that? How is it going to change the ecosystem?
Exits, especially through IPOs, are a great sign of success for both entrepreneurs and investors. IPO exits also generate a good amount of liquidity for the investors, who can further invest in other startups in the ecosystem, thereby, improving the liquidity in the market. I believe this phenomenon is only going more prominent over the coming years. On the other hand, the increasing number of IPOs also serves to indicate the maturity of the investors in the market, especially with regards to the acceptance of new-age business models that are yet to turn profitable.
More than 42 unicorns in 2021. What do you think caused this wave? Is the valuation justified according to you?
It is the changing consumer mindset that has enabled these Unicorns to grow. Today’s consumer prefers convenience, is very open to try new products, and is less risk-averse than the consumer of the previous decade. Most of the unicorns have tapped into this changing consumer mindset to identify and solve unique problems for their customers. For example, Licious has completely changed the way consumers order meat. I believe the valuations are steep, and there is a bubble. However, like everything, good businesses always come at a higher price.
How can we support/enable entrepreneurs in tier2 and tier 3 cities?
Entrepreneurs in Tier 2 and Tier 3 cities suffer from lack of access to quality resources. One of the most effective ways to fill this gap is to set up incubation centers in these regions in partnership with colleges, to provide access to top quality mentorship and industry experts.
What do you look forward to as an investor in the year 2022?
Budget 2022 has focused significantly on leveraging technology to penetrate deeper into the Tier-2 and lower cities in India. I expect technology-led businesses to gain significant market traction and attention from the investor community, giving rise to new unicorns in 2022. At BLinC, we are looking forward to deploying our Fund across various whitespaces identified through our internal research.
What are a few sectors you think would be hot in the upcoming year?
Education and Financial Services sectors have been very resilient through the pandemic. Companies in these sectors have a large potential to leverage technology to drive deeper penetration, and I expect these sectors to continue growing at an accelerated rate in the upcoming year.
One learning that you would like to share with founders who are looking to raise funds?
It is all about execution, prioritization, and defining the short-term and the long-term focus. Early-stage startups should have a detailed understanding of their target market, competitive landscape, and the target customers. It is critical to think from the customer’s perspective and solve at least one real pain point of the customers. It is important to consistently prioritize and make efforts to achieve the product development milestones and the targets of the business plan. While pitching to the investors, it is important to give comfort to the investors around your market understanding and your execution capabilities.
A startup ecosystem is a creative environment to promote entrepreneurship and innovation. These days, startups are taking different approaches with a variety of innovative ideas and products to create Social Impact around the world. They are focussed towards creating social impacts on several sectors – Technology, Education, Health, and others.
Aspire Impact is a Delhi based Impact Rating & Certification initiative. The startup is focused on leadership and ecosystem development in social and environmental impact space.
StartupTalky interviewed Amit Bhatia, Founder & CEO of Aspire Impact to get insights on how he got the idea of building an Impact Rating Startup.
Here is an excerpt of Interview with Amit Bhatia, Founder & CEO- Aspire Impact
How did this idea of social impact come up which inspired you to make Aspire Impact?
In 2020, after concluding my term (2017-2020) as Inaugural CEO of G7’s Global Steering Group for Impact Investment, I was convinced that we will not nudge the Impact Movement past its tipping point unless we get the world to agree on a common standards-based impact measurement system. Whereas there were couple of efforts underway around the world, as former Founding CEO of India’s Impact Investors Council, I believed I could deliver a breakthrough by making Impact empirical and comparable between companies. I believed that if a standardised impact measurement system, which subsumes ESG & Sustainability ratings is created, we will contribute solutions for the apparently intractable challenges like poverty and inequity and make corporations a partner in the solution. It was with this inspiration we created Aspire Impact, a start-up with an ambitious and audacious goal of creating world and India’s first Impact Rating venture.
Do you think India has evolved and adapted the concept of social Impact?
The ESG, Sustainability & Impact Movement has already attracted $59 trillion worldwide, ~40% of global Assets Under Management (AUM) and is an unstoppable trend. Despite the pressing need to address social and environmental challenges, India has attracted only -1% or $51 billion of this global capital pool: $30 billion in Responsible or ESG Investments, $10.3 billion of sustainable or green investments, and, $10.8 billion of impact investments. The root cause is lack of corporate alignment with impact, as there is no mandatory Sustainability or Impact Reporting framework.
BRSR (Business Responsibility & Sustainability Reporting) for the top 1000 listed companies, India’s version of ESG, with >130 disclosures, requires much synthesis to be valuable. Moreover, the environment is opportune, and the need is clear, as a recent HBS publication of environment costs for top 250 Indian companies shows India Inc. is gravely uncompetitive in the global Impact economy:
Company (2018 or 2019 data)
Environment Cost ($mn)
Net Profit ($mn)
Company (2018 or 2019 data)
Environment Cost ($mn)
Net Profit ($mn)
Tata Power
126,389
365
TCS
4,101
118
Reliance Industries
7,503
4,797
Infosys
2,006
63
State Bank of India
145
99
Godrej Consumer
239
21
Indian corporations must therefore prepare for the era of Impact Accounting, beyond ESG and must adapt to the era of social impact assessment, ratings, and reporting.
What would be the social impact areas in 2022 in the Startup Ecosystem?
On the basis of historical evidence: Financial Inclusion, Renewable Energy, Agriculture, Health, Technology and Education have received the most impact investments over the last decade. However, in the decade ahead- the fastest growth will be delivered by Tech for Good sectors where technology intersects with traditional impact sectors like EdTech, HealthTech and AgriTech.
Since Aspire Impact has launched a few social impact reports recently, which sector do you think has huge potential and how?
We believe, India’s immediate goal should be growth with job creation and we have empirical evidence that Impact sectors create 10-14 x more jobs for each $1 mn invested. Therefore, India must focus on three areas:
Catalyse Tech for Good sectors – CleanTech, EdTech, HealthTech, AgriTech, FinTech & FemTech which promise steepest growth, from $65 bn to $177 bn market between 2020 to 2025;
Support specific investment themes. Our analysis of five sectors (Agriculture, BFSI, Education, Water/Waste & Disabilities) shows India can create ~50 million new jobs in 5 years in Dairy Farming (22 mn) Tech-enabled K-12 (3 mn); Digital Consumer Savings Products (1.3 mn) Supplemental & Extra-Curricular Education (1 mn); Student Housing Solutions (1 mn); Neo-Banking (0.6 mn); & Digital Lending (0.5 mn);
Promote Micro Entrepreneurship in rural India, i.e., job creators not job seekers as with small micro loans of INR 2-3 Lacs, a micro-entrepreneur can create self-sufficiency while creating 1-3 local jobs!
How are the key industry leaders supporting the concept of Aspire impact?
Indian leaders realise that to deepen and widen the Impact Movement in India, the leaders must do the following:
Enhance corporate alignment with impact, and in absence of regulatory Sustainability or Impact Reporting, voluntarily publish Impact Reports, to slowly but surely build an Impact DNA for an era of Impact Capitalism for risk management, brand building, fund-raising, future competitiveness and authentic citizenship;
Support research & knowledge, education & training, and, awareness & advocacy about the sector. Last year, 207 India Inc. leaders came together for co-authoring and publishing 8 Impact Future Project reports- a rare collaboration. This year, in 2022, another group will take the initiative forward; and,
Solve the missing piece of the Impact Economy jigsaw- i.e., a standards-based Impact Measurement framework. In 2022, along with partners like Capgemini & University of Chicago’s ESG Centre, 25+ CXOs will release a standards-based framework of Impact Measurement for India- another rare first!
