Unleashing the Potential: A Plea for Strategic Policies to Boost Startup Investment Ecosystem in India

Building upon the themes discussed in my previous article regarding Government Startup Policy, I extend another appeal to the government. This time, my focus shifts towards a deeper exploration of the angel investment ecosystem in India.

In the vast expanse of India's startup landscape, a disheartening reality lurks beneath the surface. Despite a burgeoning community of approximately 1.5 lakh startups, only a meagre 5000 have successfully secured funding, so I am told by a player in Startup Ecosystem. This glaring gap between potential and reality underscores a pressing concern in our startup ecosystem.

Delving into the statistics, the presence of around 15,000 angel investors in India might seem substantial. However, a closer examination reveals a more nuanced truth. A mere 1000 to 1500 serious angel investors, as noted by Shri Mahavir Pratap Sharma , Chairperson of Tie Angels and former Tie Global President, are actively engaged in systematic investments in startups.

Considering India's vast pool of approximately 800,000 High Net Worth Individuals (HNIs) with a net worth exceeding US$ one million, the paltry number of angel investors becomes particularly perplexing. If each of these HNIs were to invest a modest sum, say Rs. 5 lakhs, the startup ecosystem could witness an unprecedented boom, injecting thousands of crores of rupees into early-stage ventures. Such an influx of initial seed capital could elevate countless startups from their initial struggles, fostering innovation and economic growth.

The question that looms large is: Why do we have such a scarcity of angel investors in India?

One significant factor contributing to this shortage is the lack of awareness among HNIs regarding startups as a viable asset class. Here, the influence of Chartered Accountants (CAs) cannot be overlooked. HNIs often rely on the advice of CAs when making investment decisions, and the lack of understanding among CAs about the intricacies of startup funding becomes a bottleneck.

Startup funding is indeed a complex science with its unique mathematical considerations. Regrettably, a considerable number of CAs seem unfamiliar with this domain. While startup investments entail inherent risks, the potential for high returns should not be overlooked. It's crucial to bridge this knowledge gap, encouraging HNIs to explore smaller investments in startups, such as Rs. 5 lakhs, thereby diversifying their investment portfolios.

To facilitate this, my earnest appeal to the government is to introduce some policy that incentivize HNIs to invest in startups. A policy that could serve as a catalyst, opening floodgates of seed capital and nurturing a robust startup ecosystem. This not only aligns with the current government's vision of national development but also addresses the pressing issue of unemployment. Every new entrepreneur signifies one less burden on unemployment, and each individual hired by a startup contributes to further reducing unemployment rates.

In anticipation of the upcoming budget (post election), the startup community hopes for measures that will stimulate growth, foster innovation, and contribute to the nation's progress. The creation of a conducive environment for HNIs to invest in startups could be a game-changer, propelling India into a new era of entrepreneurial vitality and economic prosperity.

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Narendra Modi Nirmala Sitharaman Piyush Goyal Rajeev Chandrasekhar Devendra Fadnavis TiE India TiE India Angels Startup India Invest India Bombay Industries Association (BIA) Anil Goyal