What’s ailing Indian startups?

In life, things don’t always have to be either/or. Why can’t we have it all? Greedy, you’d say? I call it being ambitious. Recently, Union Minister of Commerce and Industry Piyush Goyal slammed the Indian startup ecosystem for its purported lack of innovation compared to Chinese startups. For the Indian corporate class, that usually stays mute on all matters, this jab was too close to home. From startup founders to investors, everyone had something to say, and before long, Pandora’s box was thrown wide open!

In my opinion, I thought it was brilliant that the minister kicked off this critical conversation that sparked debates and discussions. Of course, not everything is hunkydory; not with the startups nor with the regulatory structure in our country. But I’m elated that we are, perhaps after a very long time, having an open, honest deliberation about building new business in India. There are multi-levels to this matter; let’s see if we can address some of them.

Firstly, no matter what kind of startup it is (gaming, creator economy, or delivery app), we must give full marks to all founders, those who succeeded and even kudos to those that failed. It’s no cakewalk to build anything, and that too in a country that doesn’t often make it easy. There have been numerous reports that compare, for example, the time and money taken to start a business in India versus, say, Thailand or China. Similarly, the number of steps, processes, forms, and inspections can be countless in India compared to other nations. The Indian government has improved the ease of doing business and in many areas, the advent of digitisation has quickened processes, reduced corruption, and removed hassles. Today, in India, several licences can be availed and compliances met with a click of a button. But while we have taken significant strides, there is a lot of road left ahead. Last week’s chatter has shone a light on many such issues that continue to harass entrepreneurs prompting some to give up and some to flee the nation (remember angel tax?). In this scenario, if second generation billionaires are running fancy cookies or ice-cream businesses, then good for them! While we can’t praise them for being pioneers, at least they are not dunderheads, and some of those ice-creams are quite delish.

Next, let’s talk about jobs. The honourable minister asked if the destiny of India’s youth is to be delivery boys and girls. It would be presumptuous to thrust the onus of the youth’s future on the startup ecosystem alone. Because even though they play an important role in India’s economy, they can’t be expected to lead in job creation, innovation, and skill development. What would then be the role of governments, public institutions, large corporations, education institutions, philanthropists, and so on? Jobless growth has been a nagging problem facing the country and the lack of quality jobs and even skilled graduates are an ongoing bone of contention. While our collective aim must be to create better employment opportunities for our youth, having delivery jobs is better than having none at all.

The most noteworthy aspect of the debate is India’s standing in deeptech. Of late this has been brought up several times. In a media interaction in India in 2023, OpenAI CEO Sam Altman had termed India’s chances of building a foundational AI model as “hopeless”. And then recently, China’s DeepSeek shook the world, catapulting the same sense of angst from many of us — where is India in the AI/chip manufacturing/quantum computing race? The truth is we are barely there, which is better than the “nowhere” that we had been in for a long time. At least we seem to be leading in AI adoption (as per Altman) and programs such as IndiaAI Mission can help bridge a bit of the gap. But it’s naive to deem this as the startup ecosystem’s fault. This lacuna is a legacy issue.

Indian IT services boomed and therefore, opportunities in the IT services space prospered further creating jobs and wealth for both the founders and the nation. But we have missed a decade or more when it comes to innovation and research and development (R&D). Our top talent scurries to overseas institutes chasing better grants, opportunities, and standard of living. India has never been a hub of innovation and R&D, lacking in both encouragement and infrastructure. We spend only 0.64 per cent of our GDP towards R&D compared to 3.4 per cent and 2.68 per cent by the US and China respectively. These nations have kept up their devotion to R&D for decades and remained committed even during the pandemic and economic slowdowns. Investors too will continue to pour money into sectors that give x-times return on investment (RoI) and do so in record time.

Mud-slinging or blame games will not help our nation; neither will it cause a situation created by generational apathy to change overnight. Here’s what we can do immediately — draw attention to the deeptech, biotech, electric vehicle, AI, and other innovation-driven startups that are already in the fray — and trust me when I say that there are many. Whether they are biotech startups such as Eyestem Research and NKure Therapeutics, or energy startups like Exponent Energy or water utility focussed startups like Boson Whitewater — I have witnessed from close quarters the pioneering solutions and path-breaking innovations being built from India for the world. The government needs to provide enhanced support to such innovators, while more investors and philanthropists must proffer patient capital. A sizable portion of our GDP should be dedicated to education, innovation, and R&D; our educational institutes must nurture and incubate a new generation of innovators and inventors, that choose to stay back in India not despite the system but because of it. Indian entrepreneurs can be ‘dukandaars’ (shopkeepers), drive gig economies, and also be exceptional innovators. Why can’t we have it all?

The writer is an author and media entrepreneur. Views expressed are personal