India’s startup scene is picking up speed again

Visitors to Bangalore, India’s tech hub, quickly learn why locals measure distances in minutes and not kilometres. The city’s clogged streets turn every outing into a test of patience. Other large cities in the country are just as bad. So it is no surprise that Indians are getting everything from biryanis and books to mangoes and mobile phones delivered straight to their doors—often in under ten minutes. “Quick commerce” is a booming business in India. Zomato, the largest company in the industry, is valued at $26bn; its share price has nearly doubled this year. Swiggy, its closest rival, is expected to go public on November 13th at a valuation of $11bn. Zepto, another competitor founded in 2021, is now worth $5bn.

India’s startup scene has had a difficult few years, as funding dried up and once high-flying firms crashed back down to earth. Yet quick commerce’s success may mark the start of a wider revival, fuelled by consumers’ growing appetite for digital purchases and by the country’s vast engineering workforce.

Back in 2021 investors poured $35bn into Indian startups, more than the amount in the previous three years combined, according to Tracxn, a research firm. That year minted 40 Indian unicorns (unlisted startups valued at over $1bn). But as interest rates rose, the money dried up. In 2023 investment by venture capitalists (VCs) in startups fell below $8bn; only two firms joined the unicorn herd. As companies focused on preserving cash, layoffs and bankruptcies became common, with over 35,000 startups shutting down in 2023.  The funding slowdown also exposed lax governance at some prominent Indian startups.

Although venture funding this year is on track to reach a level similar to last year, there are signs of a revival in India’s startup scene. One promising area is e-commerce. Online shopping currently makes up just 7% of India’s retail sales, but its potential is big. Redseer, a consultancy, projects that e-commerce sales in India will grow from $65bn in 2023 to $230bn by 2030. It helps that India’s affluent class—defined as those earning over $10,000 annually—is expanding. Goldman Sachs, an investment bank, predicts that it will swell from 60m in 2023 to 100m in 2027.

A second area of promise is the small but growing number of “deep tech” startups in India working in complex fields like space and robotics.  The final area of excitement in India’s tech scene is artificial intelligence (AI). 

Venture investors are betting that this new startup wave will fare better than the last, with good reason. Indian startups are now less likely to be Western copycats and more likely to be designed around the specific needs and strengths of their country.