India has secured the fourth position worldwide in terms of scaleups, which are startups that have received more than $50 million in disclosed venture capital investments, as highlighted in the inaugural Scaleup Report by Startup Genome. In this ranking, India follows the United States, China, and the United Kingdom. Notably, India outpaces tUK in total venture capital (VC) investments in these scaleups, as well as in the cumulative tech value investment of these scaleups. The report reveals that India is home to 429 scaleups, backed by $127 billion in VC investments and boasting a total tech investment value of $446 billion.
The Scaleup Report is a comprehensive study that delves into the factors contributing to the success of scaleups, specifically addressing what behaviours, resources, and characteristics differentiate startups that achieve valuations of $50 million and higher within four to eight years from those that do not. Startup Genome, an advisory and research firm specializing in innovation policy, conducted surveys across more than 80 cities in over 40 countries, examining more than 60 metrics to compile this report.
One notable finding in the report is that India has startups with more than 50 per cent of their customers located outside of their continent and exhibits the highest scaleup rate. This can be attributed in part to startups that tailor their products and services to cater to truly global markets, expanding their potential customer base significantly beyond their country and even continent.
In contrast, startups based in large countries (except for the US) experience higher scaling rates when they initially concentrate on their domestic market. The immense size of their domestic market often justifies delaying or forgoing global expansion. India is a clear example of this trend, where B2C startups can attain unicorn status and billion-dollar exits without venturing beyond the country's borders.
The report also underscores the importance of local connectedness. It reveals that startups with a local connectedness index score of 6 or higher achieve a scaleup rate of 5.1 per cent, compared to 3.8 per cent for those with a score of 2 to 4—a 34 per cent boost. The local connectedness index measures the size, density, and quality of a startup's local network. Early-stage startups with a higher local connectedness index experience revenue growth twice as fast as those with a lower index.
Furthermore, the report emphasises that the likelihood of scaleup success significantly increases with global connectedness. Startups that establish a strong global network have a 3.2 times higher chance of scaling compared to those with a limited network. Ecosystems that maintain strong connections with top global hubs, such as Silicon Valley, New York City, and London, witness a notably higher rate of global expansion among their startups, showcasing a 66 per cent correlation between these variables.
For founders seeking to enhance their chances of scaling successfully, the report advises offering stock options for all employees, establishing more than five global connections to top ecosystems, and having at least three advisors for their startup. These strategies can significantly contribute to a startup's growth and success in the competitive global landscape.