06 Sep 2022  |   08:03am IST

Start-ups, job creation and unicorns


For some years now there has been a rise in start-ups related to almost all sectors of economic activity. The start-ups are privately owned companies, typically at the early stages of development. Thanks to thoughtful decisions, and a good product, start-ups have flourished at a high rate and many have aroused real investors' interests.

Maybe that happens as there is a favourable environment, with a high density of technology companies and a good mastery of them by Indian specialists; great creativity associated with problem-solving; a high availability of capital to invest. It came mainly from Indian entrepreneurs with experience in the USA, California and other places of innovation, where they earned high training in foreseeing ideas that would become successful.

These start-ups are spread across a variety of sectors and have risen from insignificant values of less than 500 in 2016 to 73,000 in 2022 so far. Over 4,500 have been recognised in sectors such as the internet of things, robotics, artificial intelligence and analytics, etc. Around 12% are in the IT sector, 9% in the healthcare and life sciences domain; 7% in education; 5% in the professional and service business sector and 5% in the agricultural sector. 

To commemorate the 75th year of Independence, the total number of start-ups seems very good and with the experience acquired it could be accelerated in the future. Learning is a key factor in accumulating knowledge and wisdom to do better.

In all areas of economic activity, quantity and variety matter and not all new start-ups can be a success straight away. When there is quantity, variety is implicit and then, by a process of natural selection, quality stands out. With it, you can take safe steps to make such start-ups grow fast as desired.

Start-ups, unicorns and job creation

With the wide dissemination of the unicorn concept -start-ups valued at over $1,000 million, a destabilising factor may be introduced. To be good, with a consistent valuation, in many situations there will be a need to pass a long time of testing, improve details, and make them work, so the start-up shines in its fullness. 

In many cases, the quick growth brought difficult situations, which would have been absorbed in case the growth was less spectacular. Any mistake may shake the confidence of their leaders. In recognising value, with some artifice on the part of investors, there may be a certain nervousness of those who want quick appreciation, to take advantage of it. It seems advisable not to rush; better to maintain a serene pace and deep development, to give birth to something to work and last. 

The number of unicorns in India was over 80 at the end of 2021 and in the first two months of 2022, there were another 9. It was said that at the end of February there were 95 unicorns.

Over half of the USA’s start-ups (319 out of 582 or 55%) valued at $1 billion or more have been founded by immigrants. As the country of origin for immigrant founders in the US, Indians top the charts with 66 companies. Israelis followed suit with the second-highest number of billion-dollar companies at 54.   According to the 'The Indian Tech Unicorn Report 2021,' India will have 46 new unicorns in 2021, more than doubling the overall number to 90. With 90 unicorns, India is the third-largest unicorn hub after the United States (487) and China (301), and ahead of the United Kingdom (39).

When the brilliance of ideas is unusual, it will be desirable that there is no shortage of serious investors, to put money and make them prosper quickly. It can help launch an infrastructure that makes the first steps easier, without letting the young people feel overwhelmed by the difficulties of the beginnings, and willing to give up. The initial difficulties can be considered as a good filter to let through the good ideas and test the patience of the author to consolidate its worth.

The start-ups are not only developing innovative solutions and technologies but may generate good employment. The pity is that the number of jobs generated by the 73,000 start-up is much less than those needed to restore the jobs destroyed by the pandemic. Let’s hope that the resumption of economic activity post-pandemic brings an impulse in such restoring of jobs.

Environment for start-ups and innovation

It matters that the legal framework is friendly for those starting their business. It matters the ease of doing business, ease of raising capital and reducing the compliance burden for the start-up ecosystem in India. 

Through the ‘Start-ups Intellectual Property Protection Programme’, the government has simplified and accelerated the processes related to patents and trademarks.

The majority of the IIT and the IIM, in addition to several other outstanding higher education institutions, have their start-up incubators, where they provide space and basic services, and publish newsletters with the aspects of progress and achievements of those working in such institutions. This is the way for the business angels or other investors-to-be to follow the evolution. Such incubators of start-ups are a propitious environment for mutual stimulation, a broth of entrepreneurial culture, resulting from the exchange of ideas, and where some solutions are often caught loose in the air by people profoundly motivated.

For India, not having a past of developing start-ups, the current number of start-ups and unicorns seems good. There is a need to even foster the will of creating start-ups, without the obsession that only the unicorns matter. 

They will come later when there is ordered and demanding work already done.

Countries with a high percentage of people who want to undertake and are not comfortable working for others, under their command, are the ones that end up creating jobs and wealth. There must be a good atmosphere of acceptance for these people capable of having ideas, of putting them into practice, knowing that they run many risks and uncertainties along the way, that it is not comfortable. 

(The Author is Professor at AESE-Business School (Lisbon), at IIM Rohtak (India), author of The Rise of India)


Iddhar Udhar