Indian Startup Ecosystem Continues to Be on the Rise According to New Report

The Indian startup ecosystem is on the brink of massive expansion, and 2025 seems poised to be a pivotal year for entrepreneurs and investors alike. With innovation on the rise and a booming digital landscape, India is emerging as one of the world’s most dynamic startup hubs. 

According to the new report “Exploring India’s Dynamic Start-up Ecosystem”, published by KPMG in December last year, India’s start-up ecosystem with more than 100 unicorns, ranking third globally, continues to rise due to a mix of positive factors driving innovation and entrepreneurship. 

The report identifies five major factors (p.3):

• Robust support system of incubators and accelerators to mentor and connect startups
• Increase in venture capital funding, accelerating growth of existing startups and promoting overall ecosystem growth
• “Startup20” engagement group institutionalised under India’s G20 presidency is stimulating innovation among stakeholders
• India’s diverse market and growing middle class create a favourable ground for startups and innovative business models
• Vast pool of tech talent, advancements in technology, increased internet and smartphone penetration have created a large, connected audience

A Thriving Environment for Entrepreneurs & Investors

India’s startup ecosystem has evolved rapidly over the last decade, and 2025 is expected to witness even more acceleration. One of the key factors contributing to this growth is the country’s young, tech-savvy population. With over 1.4 billion people, a large portion of India’s population is under 30, presenting a vibrant talent pool for new companies. Coupled with widespread internet penetration and increasing smartphone use, the potential for innovative solutions and digital services is at an all-time high.

Moreover, the government has been proactive in supporting entrepreneurs. Schemes like “Startup India” and tax exemptions have helped create a more favourable environment for new ventures. In addition, various state and federal initiatives have made it easier for startups to flourish, from financial backing to regulatory support.

The authors also highlight the positive impact of an increasing number of international collaborative initiatives between India and the U.S.: “India and several countries have launched collaborative initiatives aimed at boosting the Indian startup ecosystem. One notable programme is the ‘Innovation Handshake’ agenda, part of the India-U.S. Commercial Dialogue. This initiative brings together startups, VC firms, corporate investors and government officials from both countries to foster connections between their innovation ecosystems,” the report states (p. 13).

Another catalyst behind the growth of the Indian startup ecosystem is the influx of venture capital. In recent years, India has attracted substantial investment from global investors, with large-scale investments pouring into the country’s technology, agritech, cleantech, fintech, edtech, and healthtech sectors. 2025 will likely see even more interest from domestic and international investors eager to tap into the country’s fast-growing markets.

Innovation is a major driver of startup growth in India. The country is home to some of the most forward-thinking entrepreneurs tackling challenges across various sectors. From AI and blockchain to sustainable energy solutions and healthcare, Indian startups consistently push the envelope.

Fintech, for example, is booming in India, with companies offering digital payment solutions, lending platforms, and investment tools that cater to millions of underserved people. Similarly, health tech startups are revolutionising healthcare access and quality, particularly in rural areas.

The combination of technological advancements and growing demand for digital solutions is expected to fuel India’s startup ecosystem in the years to come.

Looking Ahead: Challenges and Opportunities

While the outlook for Indian startups is promising, there are still challenges to overcome. Infrastructure gaps, regulatory hurdles, and access to skilled talent in non-metro cities can pose obstacles for entrepreneurs. Taking a closer at potential risks for foreign investors, the report underlines the need for a thorough due diligence process as a key component in assessing the viability of Indian startups, specifically hinting at the complexity of the Indian legal and regulatory systems, including intellectual property rights-specific regulations, among others.

Along these lines, and looking at startup-specific risks, it is essential for investors to closely collaborate with the startup to ensure they have solid IP protection and management systems in place and to seek the support of local legal experts to help navigate the complex Indian IP landscape.

Moreover, as the startup ecosystem matures, the focus shifts toward building sustainable businesses with long-term viability rather than short-term profits. This shift in mindset could lead to more stable and scalable companies, benefiting entrepreneurs and investors alike.

Looking forward, the growth of the Indian startup ecosystem in the future is expected to be fuelled by three major factors: the continued rise of digital innovation, increasing investment from global players, and a thriving entrepreneurial spirit.