5 reasons why India is so attractive for startups

Today, India is much more than just an outsourcing center. The world's fifth largest economy is considered the fastest growing tech hub and has developed into the world's third largest startup ecosystem. German Accelerator lists the most important reasons for expanding to India.

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

1. rapidly growing consumer market While 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 expects the world's fifth largest economy to also be the fastest growing by 2023. 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. A further 30 million households will belong to the upper income bracket. These are two promising trends - for start-ups and established companies alike. This is 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 market should not be ignored."

2. digital-first economy India is driving digitalization forward, not least through initiatives such as Digital India. The program launched by the government promotes the development of a secure and stable digital infrastructure, the provision of online services by public authorities 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 processing system, the Unified Payments Interface (UPI), has seen explosive growth, even in rural areas. In the second quarter of 2022, UPI person-to-person payments accounted for 49 percent of all digital transactions, while debit cards accounted for only 5 percent and credit cards for 3 percent. The rapid rise in internet usage and the increasing digitalization of the country are also opening up great opportunities for German start-ups.

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 number of factors, including access to venture capital, a favorable regulatory environment and a strong culture of innovation. Bangalore has now found its own niche as an emerging technology hub in India.

India has been a global IT hub since the 1990s, and now the focus is shifting towards digital technologies such as cloud computing, artificial intelligence (AI) and the Internet of Things (IoT). The IT sector plays an important role in India's economy: it accounts for almost 8 percent of gross domestic product and is the country's largest private employer. When it comes to attracting tech investment, the subcontinent ranks third in the world and is in the process of becoming one of Asia's leading deep tech centers. For start-ups, this opens up exciting opportunities for cooperation 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. Skilled workers in particular speak good English and are very well educated. This is partly due to 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. This does not mean that all graduates of these institutions want to found their own start-ups. German start-ups in India also find specialists with professional experience in 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 the Indian think tank NITI Aayog.

5 Comprehensive startup support India has 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. However, the Indian government has also made a significant contribution. It has implemented numerous strategies to support local and foreign startups and create incentives for 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.

As part of Startup India, the government has also provided funding for startup promotion: 892.6 million US dollars since 2016. India-focused venture capital (VC) funds have raised a record USD 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 start-ups. What is particularly pleasing is that, due to regulatory changes by the Indian Securities and Exchange Commission, German start-ups can now also benefit from venture capital if they do not have a local presence or subsidiary.

Conclusion India has developed into a real tech hub over the last ten years 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. They not only get to know and understand the leading innovation hubs in the USA and Asia at a rapid pace. They also learn a lot about the optimal market access for their company. German Accelerator therefore offers various tailor-made programs to support the successful internationalization of start-ups in all development phases and from all sectors. Since its launch in 2012, more than 850 start-ups have successfully completed one of the programs and have received a total of 15.6 billion US dollars in funding to date. The German Accelerator is operated by German Entrepreneurship GmbH and financed by the Federal Ministry of Economics and Climate Protection (BMWK).