India is one of the most promising startup markets in the world.
Over the past decade, the Indian market has transformed into a genuine tech hub. With its massive population and growing digital economy, India has experienced a corresponding rapid rise in startups, investors, and unicorns.
Here are five reasons that make the Indian market a major untapped opportunity for German startups:
1. An Evolving Consumer Economy & Digital Adoption
Got strong sales but only a small market? Welcome to India!
Did you know the entire population of Germany is equal to an average state in India? India is the perfect market to scale up your business.
India is the world’s largest open internet market with 846 million active internet users. As a result, Indian consumers are getting easier access to digital services.
Accelerated by the pandemic, this digital transformation is happening across all business domains and industries. This staggering rise in internet adoption opens huge opportunities for German tech startups.
Source: Redseer, Inc42, International Labour Organization
The Undisputed Payment Champion
Digital payments are a great example of India’s digital transformation.
The Unified Payments Interface (UPI), a real-time payment system, supercharged mobile payments by merging multiple bank services under one app.
In 2021, India accounted for the largest number of real-time financial transactions (48.6 billion), threefold that of the People’s Republic of China.
The Big Gets Bigger
By 2030, there will be 140 million households in India’s middle class, and another 30 million in the high-income bracket. These groups are expected to spend 2-2.5 times more on fast-moving consumer goods (FMCG), transport, and housing. They’re also predicted to spend 3-4 times more on healthcare, education, and entertainment. Nearly 40% of the Indian population is aged 13 to 35 years old. These Millennial and Gen Z consumers significantly shape the consumer market with their preferences, such as: • Authentic content • Brand loyalty • Value-driven pricing
2. A Growing Hub for Tech & Innovation
Growth for startups is ultimately defined by revenue. The Indian market is brimming with growth opportunities for tech startups. In fiscal year 2022, India’s tech industry crossed the US$200 billion revenue mark reaching a record US$227 billion. Rapid digitization and the pandemic both enabled the sharp growth of tech startups across various sectors. These include ecommerce, fintech, edtech, healthcare, and consumer tech. An upsurge in investments, a large talent pool, and a thriving innovation ecosystem are all helping tech startups break records in India.
A Cradle for Deep Tech
In 2021, VC investment into Indian tech startups hit a record US$675 billion. As a result, growth in this sector accelerated across AI, blockchain, and Internet of Things (IoT). More than 270 deep tech startups raised around US$2.7 billion across 319 deals in 2021, according to NASSCOM. Artificial intelligence and big data analytics saw the largest investments.
A Surge in Software
By 2025, the Indian software industry is expected to reach US$100 billion in value. In the past few years, SaaS companies in India grew exponentially surpassing their global counterparts. India is now the third-largest SaaS ecosystem globally after the U.S. and China. In 2022, India’s tech spending grew at 8.7%, the highest in the Asia Pacific region. The demand was highest for infrastructure modernization and business process automation.
3. The Rise of Startup Funding & Innovation Ecosystems
Did you know India is the third-largest startup ecosystem in the world?
Five out of ten cities in India are ranked among Top 10 Global Startup Ecosystems and host over 100 unicorns.
Key drivers of India’s startup ecosystem include:
• The steady rise of venture capital
• Technological advancements
• Supportive government policies
• Rising number of aspiring entrepreneurs
Record-Setting Venture Capital Funding
In the first half of 2022, India-focused VC funds raised a record US$14.1 billion in capital to invest in local startups. More than 9,300 investors have already engaged in funding deals in India, including VCs, angel investors, corporate investors, incubators, and startup accelerators.
Source: DPIIT, Inc42, NASSCOM
Alternate Funding Sources Also Heating Up
Apart from VC funds and angel investment networks, micro-funds and family offices also show an increasing propensity to directly invest in startups.
In terms of corporate venture capital (CVC), over 260 corporations are actively engaged with tech startups in India – for investment, M&As, and co-innovation per NASSCOM.
These corporate collaboration opportunities allow startups to better understand their most common use cases and to access a larger customer base.
Good News for German Startups
The influx of foreign investments into German startups has increased over the years, especially from the U.S. and Asia.
But India is quickly becoming another market for German startups to expand their business and raise capital.
Recent regulatory amendments by SEBI (the Securities and Exchange Board of India) allow VCs to invest in foreign companies without an Indian connection or local presence. This means German startups can now raise funds from Indian VCs without a local office or subsidiary.
4. A Global Powerhouse with Unlimited Potential
People are the number one asset in any business – especially for startups.
India is home to a young, growing talent pool of innovators and entrepreneurs. The country has the personnel German startups need in order scale globally.
As of today, startups in India have generated over 760,000 jobs. That number is projected to grow to more than 3 million in three years.
A Hub of Skilled Professionals and Startup Founders
Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs), and other premier institutions lead the country in producing skilled professionals that attract global companies.
In fact, 73 out of 100 unicorns in India have at least one founder from an IIT. Graduates from these institutions are ready to work for startups or become entrepreneurs themselves.
As the startup culture booms among this demographic, youth are also claiming their positions as board members in many Indian companies.
A Growing Number of Gig Workers
In the post-pandemic workplace, flexible working hours are preferred, and part-timers and gig workers are in high demand in India.
The Indian gig workforce is expected to grow to 23.5 million workers by 2030 – an increase of 200% from 7.7 million workers in 2022, according to NITI Aayog, a public policy think tank.
Talent for German Startups Going Global
The shortage of skilled professionals and English-speaking talent is one of the growing challenges for German startups undergoing an international expansion.
The Indian tech workforce already contributes to global companies. So, German startups can leverage the Indian talent pool for additional technical product development and support services.
5. An Open Regulatory Environment
Spurring on innovation at the national level isn’t always easy.
India allows startups to grow and scale quickly with an open regulatory environment.
The national government has launched various policies to nurture the country’s entrepreneurial spirit and encourage startup growth.
Fewer Regulations Attract Global Companies
The moderate cost of setting up a business, operations, and taxes makes India one of the preferred destinations for German startups.
In India, the tax structure is less complicated compared to other countries. Tech giants like Uber, Twitter, and other global innovators have set up business entities in India – increasing productivity and lowering costs.
The Startup India initiative also creates a conducive environment for startups, such as allowing 100% Foreign Direct Investment (FDI) to nurture startup growth.
Government Funding Sources for Startups in India
Under Startup India, the Fund of Funds for Startups (FFS) has committed US$892,600,000 (73.85 billion INR) to 88 Alternative Investment Funds (AIFs). These AIFs, in turn, have invested US$1,354,000,000 (112.1 billion INR) into 720 startups.
These FFS funds have recorded a compound annual growth rate (CAGR) of over 21% since the launch of the scheme. Different government ministries also offer numerous grants and funding programs for startups.
Industry-Specific Support for Startups
The Indian government has launched several schemes to support startups across different verticals.
The Electric Vehicles (EV) policy to boost EV adoption incentivizes electric vehicle owners. Battery manufacturing and charging infrastructure are also getting a huge push.
The National Logistics Policy was launched to make Indian logistics globally competitive. This policy reduces costs and consolidates 30 different transportation departments under one digital platform. This new policy also tackles the challenges in last-mile delivery.
Conclusion
There are numerous opportunities for German startups in India.
In fact, any German startup looking to scale their offerings globally will inevitably turn to the Indian market.
To recap, here are the five reasons why the Indian market is the next big frontier for German startups:
• A booming digital market
• A surge in deep tech innovation
• An increase in funding sources
• A growing professional talent pool
• An open regulatory environment
With the proper assistance from local partners, your startup will be ready to grow like never before in this exciting market.
Considering India as the next big opportunity for your startup? Apply now to the India Market Discovery program offered by German Accelerator to make your international expansion as smooth as possible.
