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 (see chart). 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. In January the banking arm of Paytm, an Indian fintech giant, was ordered by India’s central bank to stop all services owing to “persistent non-compliance” with its rules. Byju’s, an education technology firm once worth $22bn and now on the brink of bankruptcy, has faced allegations of aggressive sales practices and accounting irregularities (its founder denies the charges).
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.
E-commerce in India has so far been dominated by two American giants: Walmart, through its ownership of Flipkart, and Amazon. Recently, though, they have lost ground to local upstarts that are tailoring their services to the domestic market.
Quick commerce has proved especially popular in India’s densely packed cities, where drivers can deliver goods speedily to many customers living in close proximity to each other, making it cheaper than in cities elsewhere. Having first focused on food and groceries, companies such as Swiggy now sell everything from electronics to clothes as consumers have become more comfortable buying from them. Meanwhile, Meesho, an online marketplace that integrates with social media platforms such as WhatsApp, has found success in targeting India’s smaller cities. Morgan Stanley, another investment bank, estimates that the e-commerce firm now has more active users on its mobile app than Amazon does in India.
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. Saurabh Chandra, founder of Ati Motors, a startup that builds autonomous robots, says that access to a vast pool of cheap engineers gives firms such as his more time for research and development before they run out of cash.
The final area of excitement in India’s tech scene is artificial intelligence (AI). Some startups, such as Sarvam AI, are building AI models in various Indian languages. Sajith Pai, an investor at Blume, a VC firm, believes that a bigger opportunity for India will be to develop business software that incorporates the technology, drawing on the country’s long-standing experience of providing offshore IT services to Western companies. Tie-ups with Indian outsourcing giants such as TCS and Wipro could also help Indian AI startups sell their software overseas.
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. The road ahead for India’s techies is clearing, even if Bangalore’s streets are not.
To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter.