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India's Startup Revolution Mounts a Challenge to China's Supremacy

Chinese Startup Hubs Slip, Indian Innovation Centers Rise in Global Startup Ecosystem Rankings

17 June 2023


Jayashri Ghorpade

India produced 3X more unicorns than China in 2022.png
  • According to the Global Startup Ecosystem Report 2023, Chinese startup hubs experienced a decline in their rankings, whereas Indian startup nerve-centers have made significant progress.

  • The report revealed that Bengaluru secured the 20th position on the global startup ecosystem index, with Delhi and Mumbai following closely at the 24th and 31st spots, respectively.

  • Highlighting India's strengths, the report emphasized the country's large working-age population and a staggering 1.4 billion people, which have contributed to the creation of the world's largest talent pool.

In 2014, Chua Kee Lock, the then and current group president of Vertex Venture, a subsidiary of Singapore's sovereign wealth fund Temasek, stated that the Indian startup ecosystem lagged behind China by at least 10 years.


However, as per The Global Startup Ecosystem Report 2023 by Startup Genome, the Indian startup ecosystem has made remarkable progress in closing this gap and is now competing not only with China but also other global startup hubs.


The report highlighted the decline of top Chinese startup hubs in the global rankings, while Indian startup nerve-centers experienced significant advancements. It noted that Beijing and Shanghai dropped in the rankings, while Bengaluru-Karnataka, Delhi, and Mumbai all climbed higher.


Bengaluru secured the 20th position this year, rising two places from the previous year. Delhi and Mumbai ranked 24th and 31st, respectively. Bengaluru's ascent was attributed to a 57% increase in exits above $50 million and the growth of unicorns.


The report also acknowledged the positive impact of relatively relaxed Covid-19 policies and initiatives like "Startup India" in catalyzing India's thriving startup ecosystem.


To formulate the rankings and the report, data from over 3.5 million companies across 290+ startup ecosystems worldwide were analyzed. Information from three prominent venture funds was also incorporated into the comprehensive framework.

The report attributed the slowdown in the Chinese tech ecosystem to the introduction of stricter antitrust and data protection regulations in 2021. In contrast, India received praise for its performance, with an increase in the number of unicorns produced. In 2020, India averaged seven unicorns compared to China's average of 28. However, in 2021, India surpassed expectations with 36 unicorns, while China had 57. The report noted that India closed the gap further in the last year, creating 24 unicorns compared to China's 27, benefiting from China's slowdown and India's growth. Currently, India is home to 108 unicorns.


Additionally, the report highlighted that China's share in global Series A deals dropped significantly from 21% in 2018 to 10% in 2022, while India's share doubled to 4% during the same period. The report also mentioned specific city rankings, with Pune improving its position and Guangzhou dropping in the rankings.

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The report further emphasized India's advantages, including a large working-age demographic and a population of 1.4 billion, resulting in the world's largest talent pool. It praised the Indian government's investment-oriented policies, infrastructure development, and reforms. The report also highlighted the Budget 2023, which focused on boosting entrepreneurship, simplifying the know your customer (KYC) process, introducing a unified filing system, and providing tax incentives for startups, aiming to improve the ease of doing business in India.


Bengaluru garnered significant attention in the report, emerging as a leading startup ecosystem in India. The city secured the fifth position among Asia's top startup hubs and ranked first in the continent for per capita venture capital (VC) funding.


In terms of funding, Bengaluru was ranked among the top 10 startup hubs globally, while its knowledge contributions positioned it among the top 20 worldwide, as per the report.


The study estimated Bengaluru's startup ecosystem value at an impressive $164 billion. This calculation considered the economic impact generated by the city and encompassed the total value of exits and valuations executed within the startup hub between the second half of 2020 and the second half of 2022.


During the mentioned period, Bengaluru's startup ecosystem value experienced a remarkable 59% growth, surpassing the global average of 47%.

Despite the challenges posed by the ongoing funding winter and global economic slowdown, Indian startups have shown signs of resilience. According to the report, while the pace of Series B+ deals declined in 2022, funding raised by Indian startups experienced a 15% month-on-month spike to $1 billion in May 2023, with the number of deals increasing by 31% to 80.


Investors remain optimistic about the Indian startup ecosystem, as evidenced by VC and private equity firms raising $3 billion in funds this year. However, industry experts advise a patient and selective approach to investing in India.


Although the funding winter and adverse market conditions have impacted capital availability, Indian startup hubs have contributed significantly to the country's resource base, generating direct and indirect benefits. The next challenge lies in sustaining the momentum and competing with global leaders like Silicon Valley, London, and Tel Aviv.


In summary, while the path to recovery may be long, the Indian startup ecosystem continues to display its potential for growth and innovation.

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