While just four States account for 55% of the total start-ups, the rest of India has a lot of catching up to do
The objective of the ‘Start-up India, Stand-up India’ call given five years ago was to inspire a movement for accelerating the creation of start-ups in the country to speed up economic growth. Much water has flown since then, and India today has become the third largest start-up economy in the world.
Data also show that the Start-up movement is concentrated in Tier-1 cities. These cities, comprising just the eight cities of Mumbai, Delhi, Chennai, Bengaluru, Kolkata, Hyderabad, Pune, and Ahmedabad, account for 60 per cent of all start-ups. Tier-2 cities, which consist of 64 cities, account for another 24 per cent of the start-ups. However, Rest of India, which is many many times larger than the 72 Tier-1 and -2 cities, has only 16 per cent.
The founding team plays a very important role in defining the characteristics as well as the success of start-ups. More often than not, start-ups with a founding team get priority over start-ups that have single founders. However, our data show that more than three-fourth of the start-ups that have been founded are single-founder start-ups. Less than 10 per cent of the start-ups have three or more founders. This is remarkably at variance with the investor preferences.
Women play a significant role in all areas of economic activity today. While women have increasingly come forward to join the workforce, the proportion of those involved in founding start-ups is very small. Less than 5 per cent of the start-ups have women founders. New interventions that can increase the percentage of women founded start-ups can be implemented on priority.
For early stage start-ups, the founding team plays a defining role in charting the progress. Two important parameters that characterises the founding team is the cumulative education and experience of the founding team. Start-up founder teams have been divided into quartiles based on their education and experience. Cross tab quartile analysis shows that in a majority of instances, education and experience complement each other.
Start-up founding teams having high education scores have lower experience scores and vice-versa. However, there are exceptions. The percentage of founding teams having top and bottom quartile scores for both education and experience, occupy the top two rankings in cross tab value.
(The writer is Professor, Centre for Research on Start-ups and Risk Financing, IIT Madras; Associate, Harvard Kennedy School, Harvard University)