Q3 was a record-breaking three months for startups in India as they collectively raised $11 billion. This growth led many to believe that there was an overprice on Indian startups. After all, Indian startups in Q3 topped Q2 and Q1, which had already broken records. Moreover, India also saw a record-breaking IPO when Paytm went public and raised $2.5 billion. So, it's expected that this surge in investment gets people both excited and cautious. Except, there are a lot of reasons to think that this behavior will sustain itself. That’s what Paytm's CEO and founder, Vijay Shekhar Sharma, believes and I happen to agree with him.
First of all, although the past two years weren’t as exciting as 2021, India's growth in the startup sector is not new. There are several factors that we can adjudicate to this. First, of course, there's the pandemic and, before that, China was hogging all the attention.
However, recent policy changes in China led to less investment there and more attention to India and other countries. As a result, Indian startups focused on fintech saw four times more investment than their Chinese counterparts.
India itself changed policies to motivate foreign investors, applying a philosophy of minimum government, maximum governance. Actions like these have romanced big names, such as Softbank, as they see an easier path to investment. The Japanese giant has invested $3 billion in 2021 and has made it clear that it will invest $10 billion in 2022. So, in that sense, the future seems bright.
It's not a perfect horizon by any means. Indian startups still have plenty of areas to improve. For example, 50% fail within five years, and experts cite fundamental reasons, such as leadership and lack of passion. Then, there's the topic of where in India startups are growing. Again, it's growth that's localized, which leads to unequal development in the vast nation.
Bangalore has earned the reputation of India's startup hub, along with Mumbai and Hyderabad. The latter has become a favored destination for Middle-Eastern investment, but the rest of the country lags behind.
The startup world in India is worthy of recognition and, in my case, admiration. The country has put together all the necessary ingredients to continue growing. It’s far from perfect, there’s no denying that, but it will not slow down in the coming years.