5 reasons why India is so attractive for startups

India today is much more than an outsourcing center. The world's fifth largest economy is considered the fastest growing tech hub and has become the world's third largest startup ecosystem. German Accelerator lists the most important reasons to expand to India.

With its cultural treasures and natural beauty, India has long been considered a dream destination for vacationers. But the subcontinent has also become a top location for German startups considering expansion abroad. There are numerous reasons for this. German Accelerator has compiled the 5 most important ones. The funding program advises and accompanies the most promising German startups in their expansion to Asia, the USA and South America.

Whilethe population figures in Germany and Europe are expected to stagnate or even decline - and with them the number of consumers - India presents a completely different picture: The Indian central bank assumes that the fifth largest economy in the world will also be the fastest growing in 2023. Yet India's middle class is already as large as the middle class of the entire European Union. Moreover, according to estimates by management consultants Bain & Company, 140 million more households will join the middle class by the end of the decade. Another 30 million households will belong to the upper income bracket. These are two promising trends - for startups and established companies alike. Because consumers will very quickly spend considerably more - especially on everyday goods, transportation and housing, as well as health, education and entertainment. Claus Karthe, CEO German Entrepreneurship Asia and Managing Partner German Accelerator Asia, emphasizes, "In addition to the huge potential, Made in Germany has an excellent reputation among Indian consumers and companies. This is a market that cannot be ignored."

2. digital-first economy India is driving digitization strongly, not least through initiatives such as Digital India. The government-launched program promotes the development of a secure and stable digital infrastructure, the provision of online services by government agencies and the digital literacy of the population. Among other things, rural areas are to be connected to high-speed Internet. Two examples show that India is on the right track: The country is now the world's second-largest Internet market after China, and the number of Internet users is expected to rise to one billion this year.

Digital payment solutions are also in high demand. India's unique real-time mobile payment system, the Unified Payments Interface (UPI), has seen explosive growth, even in rural areas. In Q2 2022, UPI person-to-person payments accounted for 49 percent of all digital transactions, compared to debit cards at just 5 percent and credit cards at 3 percent. The rapid rise in Internet usage and the increasing digitization of the country also open up great opportunities for German startups.

3. hotspot for technology and innovation Virtually all German high-tech companies have their research and development centers in India, including Bosch and SAP. Many of them are based in Bangalore, which is known for its high concentration of technology companies. The megacity is already being compared to Silicon Valley. Its success can be attributed to a variety of factors, including access to venture capital, a favorable regulatory environment and a high culture of innovation. Bangalore has now found its own niche as an emerging technology center in India.

Already a global IT hub since the 1990s, India is now shifting its focus toward digital technologies such as cloud computing, artificial intelligence (AI) and the Internet of Things (IoT). The IT industry plays an important role in India's economy, contributing nearly 8 percent of GDP and being the country's largest private employer. When it comes to attracting tech investment, the subcontinent ranks third in the world and is emerging as one of Asia's leading deep-tech centers. For startups, this creates exciting opportunities for collaboration in many fields.

4. qualified talent pool In India, 4.75 million people enter the workforce every year. This makes the country one of the few with a surplus of talent. The skilled workers in particular speak good English and are very well educated. The reasons for this include first-class educational institutions such as the Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs). 73 percent of Indian Unicorns were founded by at least one IITs graduate. Which is not to say that all graduates of these institutions want to found their own startups. German startups can also find professionals with work experience in India for technical product development and customer support. In addition, the number of short-term freelancers, so-called gig workers, is expected to rise to 23.5 million by 2030, according to Indian think tank NITI Aayog.

5. Comprehensive startup support India boasts more than 82,000 startups, including 108 Unicorns and 5 Decacorns. When asked what has made India the third largest startup ecosystem in the world, the strong entrepreneurial spirit, open business culture and mature financial system are often cited. But the Indian government has also contributed significantly. That's because it has implemented numerous strategies to support domestic and foreign startups and incentivize international investment. The Startup India initiative, for example, helps founders with many entrepreneurial issues - from trademark and patent law to tax issues and government tenders.

Under Startup India, the government has also provided funding for startup support: already $892.6 million since 2016. India-focused venture capital (VC) funds have raised a record US$14.1 billion in the first half of 2022 alone. In addition to VC funds, angel investors and corporate investors, micro funds and family offices are also showing an increasing willingness to invest directly in startups. Particularly encouraging: due to regulatory changes by the Indian Securities and Exchange Commission, German startups can now also benefit from venture capital if they do not have a local presence or subsidiary.

Conclusion India has developed into a true tech hub over the last decade and is one of the most promising startup markets in the world.

India is a serious growth market not to be overlooked for anyone looking to expand their global presence. Its cultural diversity and highly skilled talent pool offer tremendous opportunities in terms of resources, knowledge and competition. Of course, there are obstacles to overcome, but our team of experienced mentors and experts can provide the guidance and support needed to overcome these challenges and help companies succeed in the Indian market.

Claus Karthe

About German Accelerator German Accelerator supports the most promising German startups in their global expansion. In the process, they not only get to know and understand the leading innovation hubs in the USA and Asia in a rush. They also learn a lot about the optimal market access for their company. In order to provide targeted support for the successful internationalization of startups at all stages of development and from all industries, German Accelerator therefore offers various customized programs. Since its launch in 2012, more than 850 startups have successfully gone through one of the programs and received a total of $15.6 billion in funding to date. The German Accelerator is operated by German Entrepreneurship GmbH and funded by the German Federal Ministry of Economics and Climate Protection (BMWK).