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A COMPARATIVE STUDY OF STARTUP ECOSYSTEM OF INDIA, US AND CHINA

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

9
A COMPARATIVE STUDY OF STARTUP ECOSYSTEM OF INDIA, US AND CHINA

CHAPTER
Dr. Nakshatresh Kaushik 1, Ms. Stuti Gautam 2, Ms. Medha Khenwar 3
ISBN: 978-93-92917-78-3 | DOI: 10.25215/9392917783.09

Abstract
In the contemporary landscape of business and economic growth for any nation, it is the set-up of the startup
and entrepreneurial mindset owing the utmost importance in the growth of nations. All across the globe all
the nations are working towards developing and promoting the entrepreneurial mindset. The government
with the help of various educational institutions and societies are working full-fledged to achieve this
objective.

In a country like India with the size, scope, and socio economic challenges the government is trying hard
to channelize the people towards entrepreneurship. The word start-up came into fashion five years back
with an assumption that promoting this will help our country‘s economy to boost up. The process of setting
the startup becomes quite difficult for the entrepreneurs due to the stringent policies and regulations.
However, with the improvement in the policies regarding documentation work, banking facilities and other
relaxations initiated by the government of India, the startups have surged in the past few years.

This article is a descriptive research and the data gives an overview of the comparative study of the Indian
start-up ecosystem with various other developed nations like US and China and their startup ecosystem.
We have also tried to find out how easing the process of setting up a startup in India has given us exponential
growth and to look for the leftover complicated procedures and regulations that should be studied and
resolved as soon as possible.

Key Words: startup, ecosystem, entrepreneurial mindset, unicorn, venture capitalist, angel investor

Introduction:

A
ccording to DPIIT figures, India has grown to the third-largest startup ecosystem in the world, with
around 92683 recognized startups across 670 districts as of Feb 28, 2023. [ET Now Digital, 2023].
The startups that have come up are found in 56 diverse industrial sectors with 13% from IT services,
9% healthcare and life sciences, 7% education, 5% agriculture, and 5% food and beverages. [Indian
Unicorn Landscape - Startups, Growth, FDI, Investors, n.d.]
In the last few years, the word start-up became a common name after it was first addressed by our
honorable prime minister on 15th August 2015. We have seen multifold growth in various aspects related
to startups like funding, number of investors and incubators, etc.
● Total funding of startups has grown up to 15 times
● The number of investors has increased by 9 times
● Number of incubators has risen by 7 times
The government of India introduced the campaign Startup India with the objective of initially
developing more than 75 startup support hubs in the country. The program was finally launched on 16th
January 2016 with the objective of promoting and supporting start-ups in India by providing finances
through various institutions.

1
Associate Professor, Department of Management Studies, Lloyd Business School, Greater Noida
2
Assistant Professor, Department of MBA, G.L Bajaj Group of Institutions, Mathura
3
Assistant Professor, Department of CSE, G.L Bajaj Group of Institutions, Mathura

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

A synchronized set of entrepreneurship organizations and factors that are informally and formally
amalgamated to govern the accomplishment of the entrepreneur environment is known as a startup.
In a nutshell, a startup is a young business that has only recently begun to operate, is developing
and growing, and is typically sponsored by a single person or a small group of people . Thus we can say
that a startup would be identified by the following features [Garag.n.d]
• Incorporated for three years or less
• At a funding stage of Series B or less
• An entrepreneurial venture/a partnership or a temporary business organization
• It engages in the development, production, or distribution of new products, processes, or services
• It is established new and existing for not more than five years
• Revenue is up to INR 25 cr.
• It is not formed through splitting or restructuring

Technology based startups Non-Technology based startups

E-commerce - 33% Engineering -
17%
B2B - 24% Construction- 13%
Consumer Internet - 12% Agri products- 11%
Mobile apps - 10% Textile - 8%
SaaS - 8% Printing & Packaging – 8%
Other – 13% Transport & logistics - 6%
Outsourcing & support – 5%
Other – 32
Table-1: Sector Wise distribution of startups
Source: (Startup/grant_thornton-startups_report.pdf. (n.d.). [Dataset]

Start-up Ecosystem
A startup Ecosystem consists of a group of people who formed it or interacted as a system to create
a new startup (The Startup Ecosystem, n.d.). Research, inventions, and innovations are a few of the elements
that make their contribution to the startup ecosystem. We can say that there are many things taken into
consideration while starting a startup and making it successful. The entities that are required to run the
business are teamwork, finance, consultancy, some new ideas, and the potential to run the business.
Whereas, an ecosystem of startups involves various stages and miscellaneous locations of the
organization. To encourage entrepreneurship and innovation, it can be proclaimed that the ecological
community expects a series of strategic choices to a knowledge-based one.
A functional way of promoting the startup is to develop a thorough surrounding for proposing new
innovations and ideas because the quality of life and highly guaranteed jobs can be provided by
entrepreneurship. Emerging startups can generate new jobs as defined by the product of the number of
startups by the months. Startups’ growth is based on different measures such as discovery, validation,
efficiency, scaling, sustenance, and conservation.

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

Fig: 1 Components of Startup Ecosystem

Source: (Paayel & Paayel, 2021)

Startup financing life-cycle

One of the most important aspects for building a successful startup are undoubtedly the funds.
Startups frequently look for funding at every stage of developing a business, from the conception of an idea
to a potential IPO offering. In India, startup funding has largely followed the Anglo Saxon model, which
promotes entrepreneurship through funding from private and venture capitalists, as banking institutions
deem venture capital and private equity to be too risky. Venture capital and private equity funding are not
regulated in India in the same way as in Europe. Initially, funding is provided through friends and family,
followed by seed and angel investors, and then VC and PE funding. Once the company has become
established, it can absorb debt from banks and closed-end funds and investment banks as they are prepared
to absorb late stage investments, and gradually move towards listing an IPO (Initial Public Offering).[ET
Now Digital2023]The figure below indicates the different stages from initial seed funding to startup
launching in a public market.

Fig: 2 Stages of funding in a life cycle of a Startup

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

Funding Type (Avg US$ Startup Stage Investor Type and Nature of Funds
Value in India) Raised
Angel funding (10K‒1M) Early/idea stage: seek funds for Individual/ angel investors who
developing prototype of product/ provide mentorship to founders
service and early access to markets
Seed Funding (10K‒1M) Early/idea stage: test and Individual investors and VCs
develop the idea and require focused on seed funding to
R&D funding (e.g., for patents) further support startup until it
generates revenue
Pre-Series A (10K‒1M) Early stage: with some market Bridge between individual and
traction looking for individual- institutional investors focused on
bridge round smaller cheques
Series A (1M‒5M) Early stage: demonstrated First round of institutional
traction ready to expand investors with existing individual
operations and uses funds for investors and may include
capex, working capital, corporate venture arm of large
expansion corporations
Series B (3M upwards) Early stage: established with Second round led by institutional
demonstrated traction and needs investors, can include existing
to scale after demonstrating individual investors, and venture
product market fit capital funds
Series C, D (6M upwards) Growth stage: established and Institutional investors including
successfully running at scale and large/late stage VCs, Pes, hedge
poised to expand using funds for funds, and banks come in, buy
capex, organic, or acquisition out early investors, often with
growth handsome returns
Series E, F, and beyond (15M Growth stage: well established Institutional investors including
upwards) and successfully running at scale large/late[1]stage VCs, Pes,
and maybe poised for IPO hedge funds, and banks fund
further expansion or increase
valuation before IPO

Table 2: Nature of Funds at different stages of startup

Source: [David et al., 2021]

Literature review:
According to the Economic Survey 2021-22, India ranks at third position in the start-up ecosystem
in the world after the US and China.[ David et al., 2021] The number of start-ups rose from 733 in 2016-
17 to 14000 in 2021-22 which indicates the exponential growth, and this total number of recognized start-
ups in INDIA surpassed 61,400. This growth was seen all over across the country as there were121 districts
in 2016-17 having at least one start-up and by 2021 which grew to be 555 districts with at least one start-
up.
Unicorns are firms with a valuation of more than $1 billion. In 2021, India experienced a record 44
startups becoming unicorns, making it the third largest economy in the world, after the United Kingdom
and China, which each accounted for 487 and 301 such companies respectively. As of January 14, 2021,
India had 83 such companies with a combined valuation of USD 277.77 billion. The majority of these
companies are active in services, which account for more than half of India's Gross Domestic Product
(GDP).

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The economy all over the world was disturbed with the outbreak of covid-19 during the first quarter
of 2020. The government across the world was forced to put restrictions on businesses and trade to restrict
the movement of people to control the spread of the contagious disease. This led to the central banks to
open their liquidity taps as the banking system was flooded with liquidity.

It was observed that the countries like India became the emerging markets overflowed with
investors, typically getting higher returns of investments. Private market investments have also risen like
public market investments since then. According to the study by VCCircle The year 2021 was marked by
the emergence of all the Unicorns, which raised a total of USD 12.7 billion, as well as the listing of many
startups and Unicorns, particularly those in the emerging technology sector. Between April and November
2021, a total of 75 Initial Public Offering (IPOs) were launched, raising a total of ₹ 89.066 crore, which
was the highest in any decade to date. In order to foster a culture of entrepreneurship, the government has
extended the period for filing tax returns until 31 March, 2022, through the Finance Act 2021. Additionally,
the capital gains exemption has been extended. A global consortium of more than 500 researchers has
declared India to be one of the five easiest countries to launch a new business in the world, in its latest
investment in startups exemption, valid until 31 March 2022.

As per the GEM report India stands on top amongst low income economies in terms of
Entrepreneurial Framework conditions such as entrepreneurial finance, Government policy, support and
relevance etc. Dr. Sreevas Sahasranamam one of the authors of the GEM report stated that government
initiatives such as Start-up India and Make-in India have helped entrepreneurs to start the business in the
country which reflects that entrepreneurial ecosystem has improved but entrepreneurial intentions among
the general population and growth expectations are still muted. To overcome this challenge we need to look
over for a cultural shift around reducing the stigma of failure among the general public, and encouraging
the growth of new businesses.

All the statistics clearly indicate that the entrepreneurial ecosystem is becoming people friendly
and motivating the people to take up entrepreneurship as it is being promoted full-fledged leading to
sustainable economic growth and huge potential to create employment opportunities that leads to
entrepreneurship. The government has taken various initiatives to strengthen the startup ecosystem. Few
schemes launched to promote and motivate the entrepreneurs here in India are stated below
Top Schemes of Government of India Promoting Startups

Name of Description Category

Scheme

Pradhan The MUDRA initiative allows for loans up to INR10 lacs. Policy Dynamics
Mantri MUDRA( Micro units Development and Refinance Agency
MUDRA Limited) is an NBFC in India that helps small business owners
Yojana grow.

Software The Software Technology Park(STP) Scheme is a 100 Percent Technical

Technology export- oriented scheme for developing and exporting computer workforce
Parks Scheme software

Coir Udyami This is a credit -linked subsidy program for coir units with a Research and
yojana project cost of up to Rs. 10 lakhs plus one cycle of working Development
capital that does not exceed 25% of the project cost. Subsidies
will not be considered for working capital.

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

MSME Market International exhibitions/ fairs participation, Financial assistance Human Capital
Development for barcoding using Global Standards, Recognized the value of Investment
Assistance barcoding and sought financial assistance from the DC office
(MSME)
Table 3: Schemes given by govt. Of India to promote startup culture

Schemes for promotion of startups in China

Name of scheme Description Category

Innovation friendly policies The Chinese government was Technical workforce

instrumental in laying the
groundwork for innovation. The
open door policy, established by
Chinese leader Deng Xiaoping
in 1978 to allow foreign
enterprises to set up offices and
do business in China.

Academia and industry By the open door policy, Policy Dynamics

collaboration China‘s Silicon Valley has
become a beehive of innovation.
Since the 1980s, the district has
been known as “ Electronic
Avenue”

Market size speed and culture China's domestic market is large Research and development
enough that, unlike a small
country like Israel, Chinese start
up do not need to expand
overseas right away. Once a
company has established itself
as a leader in China, the amount
of finance and support that may
be recruited is enormous, further
propelling expansion.
Table 4: Schemes given by govt. Of China to promote startup culture.

Schemes for promotion of startups in US

Name of scheme Description Category

Making Government work for The government officials Research and Development
Entrepreneurs announce a national tour to
encourage people in removing
barriers to entrepreneurship. The
president has directed federal
agencies to identify outmoded or
too cumbersome business.

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

Connecting Mentors and The success of startups across Policy dynamics

Entrepreneurs America will be accelerated by
the Techstars Network: A
successful mentorship-driven
startup accelerator with locations
in New York city, Boston
Seattle.

PRIVATE SECTOR Top Business Leaders and Policy dynamics

COMMITMENTS ( Growing Entrepreneurs in America from
Entrepreneurial Ecosystem for New Alliance Top
the long run) entrepreneurs, venture
capitalists, angel investors,
businesses, and others have
joined together.
Table 5: Schemes given by govt. Of the US to promote startup culture

Relative Position of various startup promoting countries

The figure below shows the friendliest countries in the world for startups. With the highest ranking
of the United States with the score of 92, where India stands for the 5th rank with the score of 88. Human
Capital Investment, Research and Development, Policy Dynamics and Technical workforce are the various
factors taken into consideration for creating the ranking of various countries to assess their friendliness
towards the establishment of startups.

Figure 3: Positional mapping of startup friendly countries of the world

Source: [Ireland, 2021]

India China Israel Singapore Japan US

Total no. of 10,000 10,000 4,750 N.A. N.A. 83,000

startups

Tech-based 4,300 3,400 4,000 N.A N.A 48,500

startups.

Non-tech based 5,700 6,600 750 N.A. N.A. 34,500

startups

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

Set up a new 30 – 60 30 13 2 10 4
business (Days)

Corporate tax 34% 25% 26% 17%(100% 34% 39%

rate tax
exemption
for startups)

No. of Tax 33 9 TBD TBD TBD 11

payments by
businesses (p.a.)

Bank lending 10.3% 5.6% 3.9% 5.4% 1.2% 3.3%

rate

R&D spending 0.85% 1.90% 4.20% N.A. 3.40% 2.80%

% of GDP (Est.
2014)
Table 6: Comparative study of Indian startups with other nations
Source: World Bank, News articles, Gov. Sites

Growth of Startups in India

With 77,000 DPIIT-recognized firms spread across 656 districts, India has taken third place in the
world as a startup ecosystem, after China and the United States, which are in second and first place,
respectively. It is impressive how India has progressed since 2014 to achieve the position. With a funding
CAGR (Complex Annual Growth Rate) between 2014 and 2022 of 49% in India compared to 12% in China
and 33% in the USA, as well as year-over-year growth of unicorn in India by 300% between 2020 and 2021
compared to China with 267%, it is a source of pride that India has overtaken China in the global unicorn
race. As of August 29, 2022, this number was recorded, placing India first among developing nations in
terms of the quality of scientific publications and second in terms of innovation. In India, which ranks top
among developing countries in terms of the quality of scientific publications between 2014 and the first
quarter of 2022, 57,000 companies were founded out of which there have been 100 in the Unicorn club and
17 are listed.

Fig: 4 Growth of startups in India for period 2016-2022

Source: (India: Number of Recognized Startups 2022 | Statista, 2023)

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Maharashtra has the maximum number of startups in India but Bengaluru is recognized as the
Startup capital of India. More than 61,400 startups were recognized by DPIIT, at least 14,000 of which
occurred in the fiscal year 2022, according to the Economic Survey of 2021–22. This helps to provide a
growth forecast for GDP that examines the performance of various sectors and forecasts future movement.
It was observed that on an average of 555 districts, each has at least 1 startup in their area.
Startups in India have grown remarkably over the last six years. The number of new recognized
startups has increased to over 14,000 in 2021-22 from only 733 in 2016-17," the survey claimed [Kapoor
2022].

Fig: 5 State wise distribution of Startups

Source: startupindia.gov.in 21April 2022
Startups gaining Unicorn status
The term unicorn startups comes up with two terms Unicorn and Startups where the Unicorn is a
Business terminology which says when a startup has a valuation of more than 1 Billion Dollar. India
changes its ranking with the United Kingdom and takes the third position in the ranking of Unicorn list.
The data says that the US has 254, China has 74 and India has 44 number of unicorn startups. As of 31st
May 2023, India is home to 108 unicorns with a total valuation of $ 340.80 Bn. As the world becomes more
aware of the promise held by startups, the global startup ecosystem is changing. The era of unicorns is
gradually giving way to the era of decacorns. [Shikhachaudhary & Shikhachaudhary, 2022] A company
that has attained a valuation of more than $ 10 Bn is termed as Decacorn. As of 31st May 2023, 56
companies world over have achieved the decacorn status. India has four startups namely, Flipkart, BYJU’s,
Nykaa and Swiggy, added in the decacorn cohort. [Indian Unicorn Landscape - Startups, Growth, FDI,
Investors, n.d.]

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

Fig- 6: Number of unicorns worldwide as of November 2022

Sources: Crunchbase,Finbold, Statista

Comparison of the startup ecosystem of the top three nations globally

If we compare the nations across the globe in terms of the number of startups or its ecosystem the
top three players in each aspect are the US, China and India respectively. We have considered various
parameters to compare the startup ecosystem of these three nations.

1. Number of startups
Name of the country Number of startups

U.S 68893***

China 76792**

India 99,000 DPIIT-recognized startups as on 31st May

2023*

The Indian startups have emerged as the major player in the global startup ecosystem with the US
being on the top followed by China. India has been the home of 50,000 startups. The table below gives the
relative position of the three countries in terms of the number of startups.

Source :
*[Indian Unicorn Landscape - Startups, Growth, FDI, Investors, n.d.]
** [Tracxn, 2022]
*** [Arif & Arif, 2021]

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

2. Funding raised by startups

According to the report by Nasscom the Indian startups have shown 12% increase in funding in
2020 which is significantly quite low in comparison to other countries
Name of the country Amount of funding

U.S $67 bn

China $56 bn

India $ 9.3 bn
Source: [Kanakkupillai, 2023]

3. Sector Wise focus

If we see the sector wise emphasis we find that the countries like china and US have startups in
areas like cyber security and AI whereas India has entirely a different sectors.
Name of the country Sectors focused

U.S & China A.I and cyber security

India E- commerce, edtech, health tech, fintech, food

tech
Source: [Kanakkupillai, 2023]

4. Funding options
Considering this parameter it was observed that almost all the three countries were having a similar
kind of funding options but they differ only on how ease the task is to get funding for their startups
India US China

There have been numerous Angel investors, venture The same kind of financing
sources of funding, including capitalists, accelerators, options as in the US, but with a
government grants, venture crowdsourcing platforms, and stronger focus on government
capitalists, angel investors, and initial public offerings (IPOs) assistance and state-owned
crowdsourcing platforms are just a few of the available enterprises.
funding alternatives.

Even though the Indian With a greater cash reserve and In order to encourage innovation
government has taken steps to more venture capital firms, the and entrepreneurship, the
enhance the system, such as by US has established a more Chinese government has
creating a distinct startup fund, simple funding method. launched a variety of
the availability of finance still programmes and schemes that
confronts certain minor have aided in the development
obstacles making it difficult for of the startup ecosystem there.
many startups to raise capital.
Source: [Kanakkupillai, 2023]

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

5. Government Support and Policies

India US China

Simplified regulations, dedicated Government assists through For new businesses the
startup fund, tax relaxations to programs like the Small administrative regulations are
entrepreneurs. Business Administration which quite friendly especially in areas
offers loans and other types of like innovation
help as required.

Additionally, the government More evolved and relaxed The formation of a startup fund
has introduced initiatives like environment for funding with and initiatives like the Made in
Startup India and Make in India charge impetuses for financial China 2025 agenda have boosted
to promote industry and back and a huge pool of capital innovation and entrepreneurship.
innovation. accessible.
Source: [Kanakkupillai, 2023]

6. Cultural norms and the Ecosystem

India US China

Entrepreneurship is more It is deeply rooted in the culture Entrepreneurship is holding a

popular with young people. We where lots of people have a flair grip in China as young people
in India have a practice that for entrepreneurship. taking entrepreneurship are
today’s youth is more inclined increasing.
towards starting their new
ventures or joining their own
family business.

Startup culture is still at its early Large pool of capital along with The nation has a rich history of
stage and people face lots of supportive regulatory manufacturing and innovation, a
obstacles regarding the environment helpful government, and high
regulations and access to startup costs.
funding.
Source: [Kanakkupillai, 2023]

7. Ecosystem Components
India US China

However, over 300 incubators With a diverse range of Additionally crucial to China's
and accelerators have been incubators, accelerators, and ecosystem are incubators,
established in India, a mentorship programmes, the US accelerators, and mentorship
considerable rise from the has a well-established programmes, all of which the
previous year. The lack of high- ecosystem. range of high-quality Chinese government strongly
quality programming, however, choices. As on Dec. 23, 2022, supports. In 2019, there were
makes it challenging for there were 2301 Accelerators about 5000 incubators that
enterprises to utilise these and Incubators in the US supported startups in their early
resources. stages. There were 238
Accelerators in China as of
December 23, 2022.

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

India US China

Startup India and TIE ( The Score (Service Corps of retired -

Indus Entrepreneurs) are the executives) is the guiding
various effort of government of program designed to connect
India that help to connect the both new versus experienced.
aspiring founders with the
professional entrepreneurs
Source: [Kanakkupillai, 2023]

8. Resources and Infrastructure for startups.

India US China

In the past few years, there has The infrastructure and resources China have a large pool of
been a considerable available to startups are diverse. qualified individuals along with
improvement in the Here, the infrastructure is highly good infrastructure like US
infrastructure and resources advanced, offering cutting-edge
accessible to entrepreneurs. It is transportation networks, stable
still in the development stage electrical supplies, and high-
and has problems such as speed internet access.
unstable power supply and
inadequate transportation
systems.
Source: [Kanakkupillai, 2023]

9. Regulatory Environment
India US China

The regulatory framework in Relatively favorable regulatory Starting up a new business tends
India has slightly been relaxed in environment and a variety of to be a bit challenging, due to
recent times after the launch of Tax incentives and regulatory the ever evolving and complex
the startup program by our prime exemptions. regulatory landscape that exists.
minister Honourable Shri The country has a well- Although the number of policies
Narendra Modi. One of the developed legal system that are established to support
numerous initiatives is the single helps enforce contracts and innovation, creating new
window clearance procedure for protects the intellectual property technologies, tax incentives and
regulatory approvals taken to subsidies to encourage
promote entrepreneurship. But entrepreneurship.
we are still facing issues Startup
expansion is still hampered by
issues like bureaucratic delays,
ambiguous tax laws, and vague
regulations.
Source: [Kanakkupillai, 2023]

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 ADVANCEMENTS IN COMMERCE, ECONOMICS & MANAGEMENT: A RESEARCH COMPILATION

10. Tax Policies and Incentives

India US China

Tax Incentives: Through its Tax incentives: The Research Tax incentives: China offers a
Start-up India programme, India and Development (R&D) tax number of tax benefits to new
offers tax incentives to start-ups, credit, which enables start-ups to businesses, including a including
including a three-year income claim a credit of up to 20% of a corporate income tax rate to
tax exemption. Additionally, eligible R&D expenses, is one of 15% for high-tech enterprises
startups are eligible for many tax incentives offered by that meet specific criteria and a
exemption from capital gains the United States to new tax credit of up to 40% on R&D
tax, a reduced rate of income businesses. The United States costs.
tax, and tax on the sale of certain also offers eligible small Value-added tax (VAT):
assets provided their annual business shares held for longer Value-added tax (VAT) is a tax
revenue is less than INR 50 than five years a 100% capital that is levied in China on all
crore ($6.8 million USD). gains tax deduction. goods and services that are sold
Goods and Services Tax: All State-level incentives: In there. Startups can use a
products and services purchased comparison to other developed streamlined VAT reporting
and sold in India are subject to nations, the federal corporate tax system if their annual income is
the (GST) tax. New businesses rate in the United States is 21%, less than RMB 5 million
with an annual revenue of less which is quite low. ($770,000 USD).
than INR 20 lakhs ($27,000 Corporate tax rate: In Import/export tax incentives:
USD) are excluded from GST comparison to other developed China offers start-up businesses
registration. nations, the federal corporate tax a number of import and export
Research and Development rate in the United States is 21%, tax incentives, such as the
(R&D) tax credit: An R&D tax which is quite low. elimination or reduction of
credit of 150% is available to import tariffs and VAT on
startups recognized by the specific imported products
Department of Industrial Policy utilized for R&D.
and Promotion (DIPP).
Source: [Kanakkupillai, 2023]
11. Talent and Skill Availability
India US China

Large pool of talent: With a Highly educated workforce: A Large pool of talent: With a
population of over 1.3 billion large number of universities and workforce that is expanding
people and a burgeoning labor research centres that are pioneers quickly and a population of over
force, India has a sizable talent in the fields of science, 1.4 billion, China has a sizable
pool. The nation has a highly technology, engineering, and talent pool. The nation has a
developed educational system, mathematics (STEM) education highly developed educational
with numerous colleges and contribute to the highly educated system, with numerous colleges
technical institutions that workforce in the United States. and technical institutions that
annually graduate a sizable Strong talent networks: With annually graduate a sizable
number of students. several industry clusters and number of students.
Skilled in technology: With a innovation hubs that draw and Skilled in manufacturing:
focus on software engineering keep highly trained workers, the China is known for creating
and IT services, India is known United States has robust talent highly qualified individuals in
for creating highly qualified networks. the fields of engineering, design,
technical workers. High cost of talent: Despite and manufacturing.
having a highly qualified

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India US China

Challenges in retaining talent: workforce, the United States Language and cultural
Indian start-ups frequently frequently has trouble finding barriers: Although China has a
struggle to retain competent and keeping talent because of significant talent pool, start-ups
workers despite the country's the high cost of living and high there frequently struggle to
enormous talent pool because of compensation in particular attract and keep people because
competition from larger sectors. of linguistic and cultural
businesses and opportunities to difficulties as well as competition
work abroad from bigger businesses..
Source: [Kanakkupillai, 2023]
12. Skills and Expertise of the workforce
India US China

IT and computer Mathematics, science, Engineering and

programming: India is technology, and engineering manufacturing: There are
renowned for developing experts (STEM): In the United States, numerous Fortune 500
in software engineering and the labor force is composed of companies that are involved in
information technology. Every highly educated individuals, and manufacturing and engineering,
year, a large number of technical the majority of professionals in China is renowned for its
institutions and engineering possess a degree in a science, proficiency.
schools across the nation technology, engineering, or Information Technologies:
generate graduates. mathematics (STEM) field. This China's Information Technology
Engineering and expertise is particularly (IT) sector is made up of a large
manufacturing: Along with prevalent in the Silicon Valley number of enterprises in the
having a strong manufacturing region, which is home to a large fields of software development,
and technical base, India is number of technology hardware production, and
home to some significant companies. electronic commerce.
enterprises. Finance and business: In Cultural and language
Proficiency in English: It is addition, the US has a strong proficiency: Chinese
simpler for professionals from business and financial education professionals often possess a
India to communicate with system, with a wide range of high level of proficiency in both
partners and clients from all over experienced management, English and Mandarin. As a
the world because so many accounting and finance result, they are well-suited to
individuals in India know professionals. working in multinational
English. Diverse cultures and companies and collaborating
Exceptional at languages: The United States is with global partners.
entrepreneurship: Indian home to a diverse workforce Talented in research,
professionals are a good fit for composed of individuals from development and innovative
start-ups and small businesses various cultural and linguistic work: China has invested
because of their risk-taking backgrounds. heavily in R&D, and a large
attitude and entrepreneurial zeal. Adept at innovation: American number of personnel have been
professionals are excellent match trained in fields such as
to work in start-ups and research biotechnology, AI, and robotics.
and development (R&D)
initiatives as they are known
worldwide for creative and
innovative thinking.
Source: [Kanakkupillai, 2023]

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13. Education and Training opportunities

India US China

Technical institutes and Higher education institutions: Technical institutes and

universities In India, the The United States has one of the universities: With a wide range
education system is highly most robust higher education of technical institutions and
developed, with a wide range of systems in the world, with a colleges offering courses in
technical institutions and wide variety of universities and engineering, technology, and
universities offering courses in a colleges offering business, business, China has an extensive
range of fields, including engineering and technology educational system.
engineering, business and courses. Government-funded training
technology. Corporate training programs: programs: The Chinese
Skill development programs: Large US-based businesses offer government has launched a
In order to increase the their staff members thorough number of programmes recently
employability of its workforce training programmes to help to encourage the education and
through offering education in them polish their skills in training of workers in the
fields like information leadership, project management, manufacturing, logistics, and
technology, electronics, and and data analytics. information technology
manufacturing, the Indian Entrepreneurship centers and industries.
government has put in place a accelerators. Employees of Start-up incubators and
variety of skill development start-up organisations have accelerators: Employee training
initiatives. access to training and mentoring and mentoring initiatives in
Incubators and accelerators: opportunities at start-up centres entrepreneurship, marketing, and
Additionally, there are lots of and accelerators to improve their sales are offered by a large
incubators and accelerators for abilities in innovation, business number of startup incubators and
startups in India that offer staff growth, and funding.. accelerators in China.
training and mentorship chances
to improve their entrepreneurial,
marketing, and sales abilities.
Source: [Kanakkupillai, 2023]

14. Market Opportunities

India US China

India is one of the world's The largest economy in the The Chinese government has
fastest-growing economies, with world, the United States, is well taken numerous steps to foster
a rapidly growing middle class. known for being a centre for entrepreneurship and innovation
The Indian start-up ecosystem is global innovation and in the country, such as
also growing rapidly, with the entrepreneurship. It boasts a establishing special economic
number of successful startups robust start-up environment with zones and providing financial
increasing steadily over the past access to a variety of talented support to start-ups. China is the
few years. The government has individuals, funds, and top-notch world's second-largest economy
implemented a number of infrastructure.. Additionally, the and has a large consumer goods
initiatives to promote start-ups, US offers a range of government and service market, as well as a
such as the Start-up India incentives, including grants and rapidly growing middle class.
programme, which seeks to tax credits, to facilitate the Additionally, the country has a
provide entrepreneurs with growth of start-ups. strong digital infrastructure and
financial support, mentorship, Furthermore, the US has a large some of the most innovative
and other services. India has a consumer market and a high rate businesses in the world, such as

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India US China

vast pool of skilled and of disposable income, making it e-commerce, Fintech, and AI.
inexpensive labor, making doing an attractive destination for tech, Nevertheless, foreign businesses
business in the country relatively healthcare, and finance startups. may find it difficult to gain
cost-effective. However, the Nevertheless, the US is subject access to the Chinese market due
start-up ecosystem within India to intense competition and is to the country's intricate and
is still in its infancy, and generally more expensive to do unpredictable regulatory
entrepreneurs may face business in than other countries. environment.
challenges such as a lack of
infrastructure, limited access to
finance, and complex regulatory
frameworks.
Source: [Kanakkupillai, 2023]

15. Competitive landscape and consumer behavior

India US China

In India, the competitive The United States is home to a China's competitive landscape is
landscape is highly diverse and large number of multinational characterized by the dominance
fragmented, with a large number corporations, all of which are of large private enterprises and
of SMEs vying for market share vying for market share. The state-controlled enterprises. The
with multinational corporations market is characterized by a market environment is
and domestic giants. To remain focus on innovation, a high level characterized by a high level of
competitive, businesses must of quality, and fierce competition, with a focus on
focus on offering value for competition. Generally, scalability and cost-efficiency.
money. The government has businesses are well-served by a Foreign companies may
initiated a range of initiatives to broad range of incentives experience difficulties in
assist SMEs and promote provided by the government and entering the market, due to the
domestic manufacturing. the regulatory environment to intricate regulatory framework.
encourage innovation and
entrepreneurship.
Source: [Kanakkupillai, 2023]

Major startups hub in the top 3 nations of the world

The given below is a geographical map that describes the hub of startups in the top three countries.
India has its startup hub in Delhi, Bangalore. The USA has it at New York, Boston, and San Francisco and
China has it at Beijing, Shanghai, and Shenzhen.

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Conclusion
After carrying out the study on different parameters related to the startup ecosystem of the top three
countries of the world, it is observed that all three countries have a huge or remarkable system that is quite
pro towards startups, innovation, and entrepreneurship.
The studies have shown that India has shown a rapid expansion in the last few years. The government
has encouraged people to go for startups, entrepreneurship, and innovations by liberalizing their policies
and strengthening their infrastructure.
If we compare the startup ecosystem of India in comparison to that of the US and China it is seen
that these two countries are already on a very high standard be it either in terms of policy framework or
infrastructural requirements with the US being at the top of the list.
India has to go much ahead in order to compete with the top two nations in terms of policies, setting
up of incubators, accelerators, arranging of funding options, and many other things.

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