Research

The ever-evolving startup story in India

Rising requirement for office space seen as entrepreneurs seek their own headquarters.

January 27, 2023
Contributors:
  • Rohan Sharma
  • Anita Subramanian
The story so far

Over the last decade, the startup landscape in India has seen unprecedented growth, so much so that the country has become the third-largest startup ecosystem in the world. From just ~700 startups recognized by DPIIT in FY 2016-17 the number now stands at over 82,000.

This means that in the last seven years, there has been 9x increase in the number of investors and 7x increase in the total funding. Now, India is home to 107 unicorns, with 65 unicorns added over just the last two years. These unicorns are valued at over USD 343 bn and have raised USD 94 bn in funding to date.

In terms of capital inflow, investments in Indian startups grew at a compound annual growth rate of 49% from 2014-2021. It is believed that with a collective effort by all stakeholders within the startup ecosystem, India can become the second largest start-up ecosystem by 2025.

The rising number of startups has also resulted in an upward spike when it comes to their real estate needs. In the first half of 2022, Indian startups leased 28% of the 24.8mn sq ft of office space leased to companies.

These companies included those in the manufacturing, IT/ITeS, e-commerce, BFSI, telecom, healthcare, biotech and many other sectors.

With most evolving business adopting an agile style of working, flex spaces have become the choice of office for most startups. In fact, startups have been among the biggest movers for flex offices.

So what comes next?

With digital adoption and the rise of e-commerce, particularly during the post-pandemic time, more and more startups are looking to set up their business in corporate spaces.

But today, the office is no longer just a workplace. Offices now have adapted to become hubs of collaboration and conversation that encourage innovation. Flexibility in working has helped foster a new organizational culture and employees are preferring to work in spaces where they not only grow professionally but also personally.

As a result of this, office space providers too are adapting real time, so that they can cater to the needs and preferences of startups and offer customized solutions. From office design to managing everyday operations, technology has become a part of daily work life. In addition, flexible leases and lower security deposits have also become a game-changer for many such spaces.

How does a startup scale up?

When it comes to setting a new office, many parameters need to be considered. Entrepreneurs must take several decisions that will impact employees, partners and clients.

The first office of any startup serves as the identity of the company; an extension of its vision and the epicenter from where all the action happens. It’s the place that encourages high productivity from employees.

But the first office also needs to be a space that expands with the company’s growth. As an entrepreneur, it, therefore, becomes mandatory to plan not just for today but the future too. With growth, the company will need more employees. More employees and business means more space.

So, in the process, a number of questions will arise. These could range from the location of the startup, the office design to what would fit the company’s budget and is the office space future ready.

The first question to be answered is in which city should the office be set?

Over the years, metros have been the preferred hub for most startups leasing their first office. However, smaller cities like Pune, Jaipur, Ahmedabad, Coimbatore, Indore among others have also seen a steady increase in leasing. With a larger talent pool available to work from anywhere, lower cost of living, government incentives and reduced capital spends, smaller cities have proven to be an easier mode to get into the market directly.
 

The need for an office space is also dependent on which stage the startup is in.
Stage (funding) Business activity Suitable workspace
Pre-seed (Bootstrapped, self-financed, or funds borrowed from friends and family) Founder(s) working together. Basic requirements: Laptops, internet connection Home, self-owned space, seats in friends’ or relatives’ office
Seed stage (incubators, bank or government loans, angel investors, or crowdfunding) Few employees work towards establishing proof of concept. Basic requirements: Desks, laptops, internet connection Co-working
Venture capital (Series A) Formal launch of a product/ service. Basic requirements: Desks, reception area, laptops, internet connection Co-working, flex space, or a leased office
Venture capital (Series B, C, etc.) Focus is on growth, scaling the business and establishing offices at multiple locations Leased offices or managed offices for headquarters. Could need regional offices in other cities
Exit stage (M&A or IPO) The business is mature but still growing. The focus is on efficiency and synergies and being close to customers’ location Headquarters with multiple floors in a building or a company campus. Bigger regional offices

Once the location and office requirement is in place, the next question to answer is:

What type of design should the office have?

When designing a startup office, one has to take into consideration, the lifestyle it portrays. The design has to seamlessly integrate fast-evolving work styles and the collaborative workforce. Based on this, there are many design types, including:

  • A flexible office design – where spaces can be changed as dynamically as the office requirements
  • Activity based design – offering a variety of environments for employees’ comfort
  • Technology enabled spaces – innovative solutions to ensure a touchless yet all-encompassing experience

To manage all of this, and to ensure daily operations run smoothly, an experienced and competent facilities management team can be included.

Starting up sustainably

Most companies today are also looking to minimize the negative impact their office and work processes could have on the environment. This happens by adopting innovative green methods, including designing a biophilic office that uses energy-saving technology, sustainable materials and recycling.

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A startup’s guide to office space