NEW DELHI: Indian startups are struggling to grow due to limited domestic investment and restrictive government regulations, warned industry veteran and Aarin Capital Chairman Mohandas Pai, calling for urgent policy reforms and increased R&D funding to boost the ecosystem.He cautioned that despite India’s position as the world’s third-largest startup ecosystem, the nation could lose ground in global innovation if existing issues remain unresolved.“We have 1,65,000 registered startups, 22,000 are funded. They created USD 600 billion in value. We got 121 unicorns, maybe 250-300 soonicorns,” Pai said in an interview to PTI.“The biggest issue for startups is the lack of adequate capital. For example, China invested USD 835 billion in startups and ventures between 2014 and 2024, US invested USD 2.32 trillion. We just put in USD 160 billion, out of which possibly 80 per cent came from overseas. So local capital is not coming in,” he added.He further highlighted that while American insurance firms and university endowments significantly fund startups, Indian regulations prevent endowments from such investments, and insurance companies remain uninvolved due to incomplete regulatory framework.He recommended regulatory adjustments to enable insurance companies’ participation in fund-of-funds and suggested increasing the government’s fund-of-funds programme from Rs 10,000 crore to Rs 50,000 crore.Additionally, he noted that India’s pension funds, holding Rs 40-45 lakh crore, cannot invest in startups due to conservative policies and regulatory restrictions.Pai emphasised the need to increase research funding in Indian universities substantially and urged organisations like DRDO to share their technologies with the private sector.He indicated that current research expenditure in public universities falls considerably short of global standards.“We need to remove barriers for startups to sell business to the government and public sector units…even though the government has reformed it, it doesn’t work in actual practice. It must be opened up, and I think that has to be a mind shift,” the industry veteran continued.Pai further criticised the prevailing business culture in India, stating that, “The problem in India is that all the big companies try to beat down the small startups and give them less money, and force them to sell the technologies and use them, and often don’t pay them on time.”“This culture of hurting the small people should change,” Pai added.
