As we all know, the global economy has been drastically impacted, not only by the pandemic but also by major geopolitical events; the war crisis, the looming risk of recession, and rising global inflationary pressures, to name a few. In this period of economic headwinds, India stood out as one of the most resilient markets. From being a developing marketplace to being a leader of the G20, the last year saw the country outperforming global peers steadily while uncovering some new milestones.

Painting a realistic picture

To say that Indian companies, with startups playing a significant role, have been able to ‘bounce back’ and help fuel the economy to become one of the fastest growing in the world, is not a stretch.

• As per the 2022 Hurun Global list, India now ranks at Number 5, with 20 Indian companies featured among the 500 most valuable companies in the world, out of which 2 featured in the top 100.


• This year, the startup ecosystem witnessed the highest number of mergers and acquisitions in a year with 229 such deals, 9% higher than in 2021.


• At the same time, the number of startup registrations is further projected to grow at a CAGR of 25% between 2022 and 2027.


• Between 2017 and 2022, the total number of jobs created by startups grew at a CAGR of 78%, and this growth is expected to continue at a CAGR of 24% in the next five years.


• A total of 145 new VC firms were set up in India in the past two years — 123 in 2021 and 22 in 2022.

However, it is worth mentioning that 2022 was not without its challenges. We can all agree that 2021 was a banner year for Indian VCs and the startup economy. Records were broken and new benchmarks were set. A year later, this picture is slightly altered.

In the last year, we saw new-age companies battle with widespread layoffs, a funding crunch, and slower growth set in the backdrop of raging global inflation and increased tensions triggered by the geopolitical tensions war. We saw fewer funding rounds for late-stage startups—with fintech, retail, and edtech enterprises being among the worst-hit—and consequently, a sharp decline in the number of companies that entered the coveted unicorn club.

But here’s the silver lining: despite the funding winter, India is the third-largest startup ecosystem in the world. While only 22 unicorns were added to the list this year, there has been a significant rise in the number and valuation of companies set to be future unicorns (gazelles and cheetahs). Leading and emerging VCs are optimistic about India's growth story and continue to invest in startups, although at conservative valuations. The present funding challenges combined with the consistent growth in the number of startups have also led to micro-VCs gaining popularity in India.

What shall we expect in 2023?

Businesses have and will continue to face massive disruptions in the coming years. Yet, global challenges notwithstanding, there is enough reason for business leaders, entrepreneurs, and VCs, to believe that the growth momentum in India is set to continue. That said, the focus has shifted miles away from growing rapidly, and at any cost, to growing sustainably. Companies that will emerge from the shadows of subdued growth, will be ones that are strongly rooted in business fundamentals, demonstrating a level of self-sufficiency and readiness to accelerate the use of transformative technologies.

Along with technology, businesses will also have to ensure that ESG lies at the center of their business strategies. The responsibility for a sustainable future does not lie with large companies alone. Startups must also become a part of the solution. Investors are rapidly increasingly incorporating Environmental, Social, and Governance factors in their investment considerations and processes, customers and employees are holding companies, small and large, accountable for their actions. Aiming for long-term growth, every business must have clear goals and a solid plan that prioritizes climate action.

I believe, enormous opportunities await on the other side of 2022. The journey may not be smooth, but it will gradually get easier. Going forward, it will become progressively clear that companies consistently embracing innovation are more likely to thrive even in this era of bleak global growth.