Fostering Startup Ecosystem in Maharashtra

India’s start-up ecosystem has undergone a tectonic shift over the past decade. Now, India has the 3rd largest startup ecosystem in the world and is expected to witness consistent annual growth of 12-15%. India has more than 50,000 startups of which more than 38,000 are recognized by DPIIT, Govt. of India. About 9,300 are technology led startups and in 2019 alone, about 1300 new tech-startups were born implying that 2-3 tech-startups are born every day.

Maharashtra being one of the most progressive state is always in the forefront on innovation and startup related activities. In the recently announced India Innovation Index-2020 by Niti Aayog, Maharashtra rank’s second in country while Tamil Nadu is the most innovative state of our country. However, detailed analysis of this ranking shows that Karnataka, Delhi/NCR and Tamil Nadu are preforming far better in terms of enablers and there is huge scope for Maharashtra to further tweak its policies to emerge as the biggest innovation and startup hub of our country. On ‘ease of doing business’ parameters, Maharashtra is also not performing well as per the report published by Department of Industrial Policy and Promotion (DPIIT), Govt, of India.  

 As far as startup ecosystem is concerned, Bangalore and Delhi/NCR are doing far better that Maharashtra. According to Global Startup Ecosystem Report, Bangalore and Delhi/NCR rank 26th and 36th respectively while Mumbai is not even in top forty.

In terms of investments, India is home to over 2,000 active investors, who invest in budding ideas and are nurturing startups. Highest number of these investors are based out of Mumbai but in terms of investment, Maharashtra receives only about 16% while Bangalore and Delhi NCR together corner more than 78% investments. Till date India has 44 unicorns (startups with more than 1 Billion USD valuation), of which 17 are based out of Bangalore while 16 are based out of Delhi/NCR region.

Mumbai being the financial capital of India, Maharashtra was the first state in India to announce the ‘FinTech’ policy to specifically attract Fintech Startups. A FinTech Hub was also established in Mumbia with a mandate to nurture the Fintech startups ecosystem, however the current data is not very encouraging. FinTech Hub’s initial target was to nurture 300+ startups by 2021 through its’ accelerator program but as per the data available of their website that number is less than 20.

If Maharashtra wishes to regain its pole position, then the state needs to take many proactive measures for attracting startups. Similar to Kerala, Maharashtra should actively explore the possibility of having its ‘Fund of Funds’ of Rs 500 crores for supporting startups through different VC funds. Government may invest Rs 100 crores while remaining 400 crores can be raised from private investors. This Funding should be only available for Startups based out of Maharashtra. I believe that this Fund of Funds will certainly help attract many startups to operate from Maharashtra. 

Also the government should encourage all its departments to modify their procurement policies with special consideration to startups. Each department may engage/evangelize 2-3 startups through a transparent selection process and the ‘Fund of Funds’ may even support these selected startups for scaling up.

Also, similar to Telangana Government which appointed Mr Phanindra Sama, Co-Founder of company ‘RedBus’ and serial entrepreneur, as the State’s ‘Chief Innovation Officer’, Maharashtra government should also create a similar position with rank of Minister along with separate budget to actively champion its’ Startup agenda. More importantly, the person appointed for this position should have solid experience in promoting Innovation and startup related activities like Shri Nandan Nilekani, Dr. Anand Deshpande, etc.

On ‘Ease of Doing Business’ parameters, currently Maharashtra it as 13th position as per the rankings released by DPIIT. Andhra Pradesh continued its ‘numero uno’ position, followed by Uttar Pradesh and Telangana. However, the recently announced single window clearance system ‘MahaParwana’ for FDI is certainly a positive step but currently this scheme is only applicable for investments of Rs. 50 crores and above.

Finally, Maharashtra needs to aggressively brands itself as best Startup Hub by showcasing its success stories and highlighting the schemes and efforts done by the state to attract and nurture startups. Also it needs to offer better alternatives to Bangalore and Delhi in terms of infrastructure, access to talent, pleasant weather, access to market with minimal civic and safety problem. Undoubtedly, Pune City is the best bet followed by Nagpur and Aurangabad.

As far as Pune is concerned, it has solid and one of the best IT and manufacturing base along with multiple research laboratories of international repute like NCL, IISER, NIV, DRDO, NCCS, NARI, CDAC, etc. Moreover, it has really fantastic startup incubators like Venture center, Science and Technology Park, etc. If marketed aggressively, Pune can certainly emerge as the best knowledge cluster of India having potential to generate innovative ideas resulting in world class startups, thus helping Maharashtra to regain its positions as the best state in the country to start and run businesses hassle-free and successfully.