19,400 Start-Ups in India, Exit Valuation Low: Survey

New Delhi: India may boast of being home to around 19,400 technology-enabled start-ups, but exit valuation for the investors looking to cash in on the initial funding still remains low, says an official survey.

Economic Survey 2015-16, tabled by Finance Minister Arun Jaitley in Parliament on Friday said the start-up sector in the country was witnessing “unusual dynamism”, focussed on e-commerce and financial services.

“Indian startups have raised $3.5 billion in funding in the first half of 2015 and the number of active investors in India has increased from 220 in 2014 to 490 in 2015,” the Survey noted.

It added about 2,000 start-ups have been backed by venture capital/angel investors since 2010, of which 1,005 were created in 2015 alone.

“It is important that startups too see ‘exit’, which could take the form of these companies being listed, allowing the original private investors to cash in on the initial investment and plough it back into other similar ventures. Exit valuations in India are still low,” the Survey said.

It added exit valuations are expected to increase as the impact of new policies by the Securities and Exchange Board of India (Sebi) on listings comes into effect and as equity markets, in general, revive from current low valuations, caused by a sense of gloom in the global economy.

The Survey said there were 19,400 technology-enabled start-ups in India as of January, of which 5,000 had been started in 2015 alone.

India is also the home ground for eight start-ups in the ‘Unicorn Club’ with valuations greater than $1 billion (as of December 2015).

The Survey said e-commerce in India is expected to grow at 21.4 per cent in 2015-16 to reach $17 billion.

“India home to a new breed of young startups has clearly evolved to become the third largest base of technology start-ups in the world. Within one year, the number of start-ups have grown by 40 per cent, creating 80,000-85,000 jobs in 2015. This emerging sector is set to get up a fillip with the Start-Up India programme,” it said.

Start-Up India is the flagship initiative of the government to build a strong ecosystem for nurturing innovation, driving sustainable economic growth and generating large-scale employment opportunities.

Apart from technology, the start-up movement is being extended to an array of sectors including agriculture, manufacturing, healthcare and education.

“Startup India will turn Indian youths from job seekers into job creators. It will encourage entrepreneurship, innovation and creation of revolutionary new products in India, that will be used by people around the world,” the Survey said.

ABKUnder the Start-Up initiative, various action plans have been proposed including self-certification to reduce the regulatory burden on start-ups, setting up Start-Up India hub to create a single point of contact, enable knowledge exchange and access to funding; as well as relaxing norms of public procurement to provide an equal platform to start-ups in the manufacturing sector.

The proposals also include legal support and fast-tracking of patent examination to promote Intellectual Property Rights (IPR), faster exit for start-ups and providing funding support through a fund of funds with a corpus of Rs. 10,000 crore.