How Foreign Investments Propel India’s Innovation and Startup Growth

By Sunil Sonkar
2 Min Read
How Foreign Investments Propel India's Innovation and Startup Growth

India’s startup ecosystem has been growing rapidly. It now ranks third in the world with respect to numbers. The country has more than 125,000 startups. The growth is basically driven by a young, dynamic and tech-savvy population. Initiatives like Startup India has further supported the ecosystem. The startups are empowered and able to grow their entrepreneurial skills.


Apart from the governmental supports, it is also true that foreign investments have played a crucial role in the rapid growth of startup ecosystem. The overseas investments provide essential capital for expansion and also access to advanced technologies. The startups avail opportunities to enter global markets.

Foreign investments have accounted for about 36% of the total investments in India in the period of past one decade. Foreign venture capital (VC) and private equity (PE) firms have become vital players. Their role has evolved from being passive income sources to actively driving innovation.

PE investors typically take on a more involved role in company operations. They often secure a board seat and therefore take part in key decision-making processes. The involvement is crucial for aligning the interests of founders as well as investors. Investors aim to maximize their returns quickly. Founders aim to create sustained value in their campaigns. However, many companies have lately been noticed prioritizing valuation and customer acquisition and not profitability.

The 2008-09 financial crisis impacted significantly on global investment strategies. The US Federal Reserve’s Quantitative Easing policy increased the money supply and made borrowing cheaper. The policy allowed firms to prioritize growth over fundamentals. Investors could chase high valuations without fully considering growth and profitability. This led to an environment where business fundamentals were sometimes overlooked in favor of rapid expansion.

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