Startup 2.0: Get set for a new phase of bottom-of-the-pyramid business
India’s socioeconomic pyramid features several strata with diverse characteristics, with the majority residing at the base—the rural and semi-urban populace. In the vast expanse of our economic landscape also lies a pyramid of opportunities, with layers that range from affluent urban centres to the grassroots of rural India. Traditionally, startups have been synonymous with urban innovation hubs, targeting upper-end consumer segments. However, the Startup Mahakumbh convened recently showed an evolution of the young entrepreneur’s view of the Indian market opportunity.
A key highlight was its emphasis on inclusivity, with a focus on fostering startups that cater to the unique needs of our nation. Amid the glitz of urban innovation, the event shone a spotlight on startups addressing micro-level problems in rural and semi-urban areas. This inclusive approach not only broadens the scope of entrepreneurship, but also underscores the importance of creating solutions that resonate with the diverse fabric of Indian society. In this Startup 2.0 phase, enhanced access to the digital economy—propelled by affordable internet usage and universal bank accounts, coupled with the convenience of payments via UPI— has incentivized startups to tackle complex issues, notably in agriculture and healthcare, catalysing innovation and inclusive growth. This should give Indian policymakers confidence in the participation of startups in critical frontier domains such as semiconductor manufacturing, drones, space applications and military technologies.
At the forefront of this transformation are four pillars. First, the technical architecture supporting artificial intelligence (AI) and machine learning (ML) integration. Second, newer avenues for capital. Third, greater confidence and participation in the manufacturing of critical hardware to compete in global markets. Fourth, access to diverse data-sets for training AI models.
The government’s commitment to allocate ₹10,000 crore towards the AI mission highlights the importance of leveraging cutting-edge technologies to drive inclusive growth. By providing support for AI research, the government is paving the way for startups to harness the power of AI to tackle complex challenges across sectors.
The initiative to open India’s mutual fund industry to small-ticket investments marks a significant milestone in financial inclusion and saving. By enabling individuals from diverse socioeconomic backgrounds to participate in wealth creation, the initiative has the potential to unlock a wave of entrepreneurial capital to empower startups.
The focus on fostering an ecosystem of semiconductor research holds immense promise for startups operating in critical deep-tech areas. By investing in semiconductor research and development, India can position itself as a global leader in cutting-edge technologies, providing startups with a competitive edge to build products that serve the interests of our rural communities. This would also help serve the needs of the Global South.
Moreover, the majority of AI models around the world are trained to cater to the needs of the top of the income pyramid, and in English. Indian startups have a special advantage with access to diverse linguistic data-sets to train AI models, which can make AI offerings accessible and relevant to bottom-of-the-pyramid customers.
Acting in conjunction, these pillars are creating fertile ground for startups to thrive, particularly in deep tech, micro-finance, credit aggregation and direct-to-consumer businesses. They are leveraging advanced technologies such as AI, blockchain and quantum computing to address complex problems in fields ranging from healthcare and agriculture to cybersecurity and environmental sustainability.
Micro-finance startups are using digital platforms and data analytics to extend financial services to underserved communities. Similarly, credit aggregation startups are leveraging alternative data sources and ML algorithms to assess creditworthiness and provide affordable credit to individuals and small businesses.
The rise of direct-to-consumer startups is reshaping India’s consumption landscape by bypassing traditional distribution channels and establishing direct relationships with customers. By leveraging digital marketing, e-commerce platforms and new branding opportunities, they are redefining the way products are marketed, while serving the evolving preferences of consumers.
New investments in digital public infrastructure, such as the Open Network for Digital Commerce, Open Credit Enablement Network, Bhashini and the Account Aggregator network, will accelerate the growth of Startups 2.0. These platforms facilitate seamless data sharing, interoperability and innovation, enabling them to scale exponentially and reach new markets.
Startup 2.0 represents a paradigm shift in India’s entrepreneurial landscape driven by technology, policy support and inclusive growth. By addressing micro-level problems, Indian startups will not only drive economic prosperity, but also foster social empowerment and environmental sustainability. With the government’s support and the collective efforts of entrepreneurs, investors and ecosystem enablers, India is poised to emerge as a global powerhouse of innovation and entrepreneurship for those at the bottom of the pyramid.
