Lack of investments, restrictive policies, and inadequate focus on research and development are hampering India’s start-up culture, opines Aarin Capital chairperson, Mohandas Pai. He called for policy reforms and increase in R&D funding to prevent the world’s third-largest start-up hub from falling behind in innovation.
“We have 1,65,000 registered start-ups, 22,000 are funded. They created USD 600 billion in value. We got 121 unicorns, maybe 250-300 soonicorns.
The biggest issue for start-ups is the lack of adequate capital. For example, China invested USD 835 billion in start-ups and ventures between 2014 and 2024, US invested USD 2.32 trillion. We just put in USD 160 billion, out of which possibly 80 per cent came from overseas. So local capital is not coming in,” Pai said.
Government restrictions on Indian endowments from investing in start-ups are a major hindrance, unlike the US, where insurance companies and university endowments comprise the major sources of start-up funding, he added.
Calling for regulatory changes to allow insurance companies to participate in fund-of-funds, Pai suggests expanding the government’s fund-of-funds programme from ₹10,000 crore to ₹50,000 crore.
India’s pension funds, with a corpus of ₹40-45 lakh crore, are unable to invest in start-ups because of conservative approaches and restrictive regulations, he said.
Observing that R&D spending in public universities is below international benchmarks, Pai suggests organisations like the DRDO to make their technologies accessible to the private sector.
“The problem in India is that all the big companies try to beat down the small start-ups and give them less money, and force them to sell the technologies and use them, and often don’t pay them on time,” laments Pai, saying we need to remove barriers for start-ups to sell business to the government and public sector units.
Follow us
