India's Start-up Boom: Building from Scratch

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In the mid 2000s, the idea that an Indian graduate might turn down a salaried job at Infosys or Tata Consultancy Services in order to build a company from a rented flat was close to unthinkable. Two decades later it is ordinary. India now hosts one of the largest concentrations of venture backed companies in the world, most of them clustered in a handful of neighbourhoods: Koramangala and Indiranagar in Bengaluru, Cyber City in Gurugram, HITEC City in Hyderabad, and the office parks of Powai in Mumbai. The government's Startup India programme, launched in January 2016, has since recognised well over a hundred thousand firms under its official definition. That number flatters the picture, because recognition is a light administrative test rather than proof of a working business, but the underlying shift is real and it has changed how a generation of educated Indians thinks about risk.

The plumbing that made it possible

Three pieces of public and private infrastructure arrived close enough together to compound. The first was cheap mobile data. When Reliance Jio launched commercially in September 2016 it gave away data for months and then priced it at a level that collapsed the market rate across every operator. India went from being an expensive place to use the internet to one of the cheapest, almost overnight. The second was identity. Aadhaar, the biometric identification number issued by the Unique Identification Authority of India from 2010 onwards, gave companies a way to verify a customer remotely instead of collecting paper. The third was payments. The Unified Payments Interface, released by the National Payments Corporation of India in 2016, let any app move money between any two bank accounts instantly and at no cost to the user. A start-up no longer had to build a payment system, a verification system, or a customer base that could afford data. It could assume all three.

Capital followed. Between roughly 2014 and 2021, foreign investors including SoftBank, Tiger Global, Accel, Sequoia Capital India (now operating as Peak XV Partners) and Prosus poured money into Indian consumer internet companies at a pace that had no local precedent. The defining moment for the sector's self image came in 2018, when Walmart bought a controlling stake in the Bengaluru retailer Flipkart, founded in 2007 by Sachin Bansal and Binny Bansal, for around sixteen billion United States dollars. It proved that an Indian company built by two former Amazon engineers could produce an exit on a global scale. Every pitch deck written in the following three years cited it.

The reckoning after 2021

The peak was 2021. Zomato, a food delivery company, listed on the Indian exchanges in July that year to enormous demand. Nykaa, a beauty retailer founded by the former investment banker Falguni Nayar, listed in November and briefly made her one of the wealthiest self made women in the country. Paytm listed the same month in what was then the largest initial public offering in Indian history, and its shares fell heavily on the first day of trading and kept falling. That contrast, huge private valuations meeting sceptical public markets, set the tone for what followed.

When global interest rates rose through 2022, the flow of cheap foreign capital slowed sharply and Indian founders began speaking of a funding winter. Companies that had been rewarded for growth at any cost were suddenly asked about gross margins. Layoffs ran through the sector. The most damaging episode involved Byju's, an education technology company from Bengaluru that had become the highest valued start-up in the country and had sponsored the Indian cricket team's shirt. Its accounts were filed late, its auditor and several board members resigned, and a series of legal disputes with lenders and investors followed. The collapse was not simply a matter of a bad market. It exposed how little independent oversight sat over founders in companies where governance had been treated as an afterthought.

What the boom actually built

Strip away the valuations and a durable layer remains. Zerodha, a Bengaluru stockbroking firm founded by Nithin and Nikhil Kamath, took no outside investment at all and became consistently profitable by charging flat fees on trades. Zoho, based near Chennai, has built enterprise software for decades from campuses in rural Tamil Nadu while explicitly refusing venture funding. A quieter cohort of businesses in logistics, insurance distribution, business to business commerce and manufacturing software now serves customers in cities that never featured in the original consumer internet story. Space technology firms including Skyroot and Agnikul, both incubated in Indian institutes of technology, have launched rockets since private space activity was opened up in 2020.

Policy has moved with the sector, sometimes clumsily. The so called angel tax, a provision of the Income Tax Act that allowed authorities to treat investment above a company's assessed fair value as taxable income, was a long standing grievance among founders and was finally abolished in the Union Budget of July 2024. Several companies that had incorporated their holding entities in Singapore or the United States for investor comfort have since redomiciled to India, a manoeuvre the industry calls reverse flipping, with the payments company PhonePe the best known example.

How much of this has changed the wider economy is genuinely contested. Supporters point to hundreds of thousands of direct jobs and to services, from same day delivery to instant credit checks, that did not exist a decade ago. Sceptics note that much of the consumer internet sector serves the roughly top tenth of the income distribution, that gig work in delivery and ride hailing offers weak protection and unpredictable earnings, and that counting companies valued above a billion dollars is a poor measure of whether an economy is producing anything new. Both readings can be defended from the same evidence, which is a fair sign that the story is still unfinished.

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