Mohandas Pai Highlights Domestic Funding Gap Hindering Indian Startups

Mohandas Pai, industry veteran and Chairman of Aarin Capital, has highlighted that Indian startups face significant challenges due to a lack of adequate domestic investment caused by restrictive government regulations. Despite India being the world's third-largest startup hub with 165,000 registered startups and 121 unicorns, local capital investment remains low at $160 billion, with 80% coming from overseas, compared to China’s $835 billion and the US’s $2.32 trillion investments between 2014 and 2024. Pai emphasized that unlike the US, where insurance companies and university endowments are major startup funders, Indian policies prohibit endowments from investing in startups and insurance companies are hindered by incomplete regulatory reforms. He called for policy reforms to allow insurance companies to participate in fund-of-funds, suggested expanding the government’s fund-of-funds program from Rs 10,000 crore to Rs 50,000 crore, and encouraged pension funds to adopt less conservative investment approaches. Additionally, Pai stressed the need to substantially increase R&D funding in Indian universities and urged organizations like DRDO to make technologies accessible to the private sector to boost innovation. Without these changes, he warned that India risks falling behind in the global innovation race.