India's Startup Ecosystem Calls for Strategic Boost in Budget 2025-26

As the Union Budget 2025-26 approaches, industry leaders are urging the government to continue its support for startups and venture capital with increased funding and strategic policies. Key areas of focus include MSME growth, deep-tech innovation, and bolstering the domestic VC industry, with an emphasis on easing ESOP taxation and enhancing capital access.

As the Union Budget 2025-26 draws near, leaders from various industries have expressed their hopes for sustained government backing, particularly in venture capital funding, MSME growth, and emerging technologies such as artificial intelligence and robotics. India's startup and VC ecosystem has experienced significant growth, thanks to proactive policies.

India has positioned itself as the third-largest startup hub globally with over 100 unicorns, creating a dynamic environment for innovation and entrepreneurship. This year, industry stakeholders seek increased government support, including sector-specific funds, MSME-focused private equity, and further development of the domestic VC sector.

Utkarsh Sinha, Managing Director of Bexley Advisors, underscores the importance of Fund of Funds for Startups (FFS) in bringing quality limited partner capital into India's VC ecosystem, amplifying total funds raised. He advocates for targeted sector-specific funds to support critical economic sectors, from early to late-stage investments.

The growth of India's MSME sector has reached a crucial juncture where equity funding becomes indispensable for further expansion. Sinha suggests significant mergers and acquisitions to elevate MSMEs to large and potentially global entities, alongside government initiatives to direct Alternative Investment Fund capital into non-tech MSMEs.

Apoorva Vora, co-founder of Finvolve, calls for policy interventions to support deep-tech sectors such as AI, robotics, and agritech, emphasizing streamlined regulations and capital access. These initiatives would not only spur startup growth but also position India as a leader in tech-driven innovation by attracting venture capital investments.

Archana Jahagirdar, Founder of Rukam Capital, raises concerns about the tax burden on early-stage employees exercising ESOPs, suggesting taxation should occur upon sale of shares. This adjustment would align tax obligations with employees' financial capacity. She also advocates for a sovereign fund to institutionalize risk capital in the startup ecosystem.

Rehan Yar Khan, Managing Partner of Orios Venture Partners, highlights the need to strengthen the domestic VC industry, noting that 95% of VC capital is foreign, posing risks. He calls for tax incentives to foster local VC participation and for unlocking capital from institutions like insurance and pension funds.

Khan supports past government initiatives such as the Rs. 1000 crore VC fund for space startups, urging similar programs to bolster the entire startup ecosystem in the upcoming budget. (ANI)

(With inputs from agencies.)