What is behind this unprecedented funding spree?
Experts have many answers. One explanation is the $3 trillion Covid-relief fund pumped in by the US government in its economy, also called quantitative easing. This in turn is finding its way into the Indian startup sector, as investors pump in money on behalf of Americans who made a fortune during Covid.
It is not just QE and Americans; with China hounding its own tech behemoths like Ant Financial, DIDI and its entire edtech sector, there is a case for an even higher flow of funds in the Indian tech economy.
“Money supply has increased. And that is playing out in the early-stage Indian startup ecosystem, where the risk is very high and so is the return,” said Sandeep Aggarwal, CEO and founder of Droom and an angel investor.
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“I don’t think it’s a bubble waiting to burst but I will say that the market is frothy and rich and will correct in the next one or two years.”
Apart from foreign money that’s fuelling the Indian tech economy, Indian corporates have opened their purse strings as well.
So far, Mukesh-Ambani owned Reliance industries and the Tata Group are the frontrunners in startup acquisitions. While Reliance’s strategy focuses on acquiring companies that add to the infrastructure of its Jio-universe, Tata on the other hand is focussed on acquiring consumer internet companies, in the hope of turning around its group’s fortunes, which for decades has relied upon its IT company TCS for generating positive cash flow.
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Are we then seeing a true democratization of entrepreneurship in India?
“Much of the new hi-tech startup entrepreneurship is focussed on valuations and exits and is not about long-term organic growth. In any case, this is scarcely a democratisation of entrepreneurship in any meaningful sense,” said Jairus Banaji, corporate historian.
Most experts point to the fact that emerging startups are mostly tech-driven which escapes India’s complicated systems of permissions and clearances.
As India zeroes in on ease of doing business, here's hope that ground realities would improve beyond rankings.
