VC funded start-ups in India: Innovation, social impact, and the way forward

Abstract

Venture Capital (VC) is regarded as one of the most powerful financial innovations of the twentieth century. Although in the initial years, the VC-funded start-ups in India faced challenges of scaling up, off-late, both Initial Public Offerings and Mergers and Acquisitions have emerged as viable options for growth and international expansion. Given this context, this paper tries to understand the overall impact of the valuations and VC funding on the components of the entrepreneurial ecosystem—and its repercussions on the overall economic situation in the country. Specifically, the paper examines the recent state of start-up valuations, losses being carried forward, and proposes some long-term implications emanating out of the current practices. It further contemplates on the influence of current business models followed by the VC-funded start-ups on the society and labor market, as well as examines the impact of VC funding on wealth creation at the Bottom of the Pyramid and on innovation. Based on the review of the above critical issues, it proposes pragmatic next steps to be taken by the policy-makers and practitioners to ensure a much more inclusive and equitable growth of the sector and economy.