Indian startups haunted by funding setbacks as war rages

The world is looking at the West Asia crisis with certain helplessness. It seems nobody knows how it will end and when. While these are being hotly discussed and debated, most nations of the world have been affected adversely. For India, the repercussions of the conflict are many. It’s like entering a house on fire. With 85 per cent of crude oil & LNG imported from others, the country’s energy security is now at stake. Additionally, the West Asian region has close to one crore Indian workers, whose remittances help the economy. Importantly, the strategic collaboration between West Asian economies and India has grown manifold over several decades now.

From the oil and gas sector, technology, infrastructure, aviation, hospitality to healthcare and pharma, among several other sectors, West Asia has been a growing market for Indian businesses. The economic coupling is so high presently that the ongoing war is going to leave a deep scar in both economies for years. When engagement levels are so high, the startup ecosystem is bound to feel the pinch.

In recent years, India has emerged as the third largest startup ecosystem in the world. Many innovative startups in both B2B and B2C have emerged in the last two decades. These startups usually see the West Asian region as the natural geography to expand after India. Zoho, In-cred, Policy bazaar, Nykaa, Urban Company, upGrad, Unacademy, Ather Energy and hundreds others have a presence in the GCC region. Invariably, every AI startup will in the very first year of operation tap the GCC market for growth. Not only do startups count GCC as one the key markets, but also funding from the region has been one of the important contributors for the growth of the Indian startup ecosystem.

For instance, Abu Dhabi Investment Authority, Qatar Investment Authority, and Saudi Arabia’s Public Investment Fund have invested billions in several startups in India. Flipkart, Swiggy, Byju’s, and Reliance Retail are some of the big names where these fund houses have invested in recent years. Furthermore, many startups have established their second headquarters in Dubai, Abu Dhabi and Doha to tap the European market owing to the proximity to the European region. Therefore, the ongoing crisis in the Gulf region doesn’t augur well for the Indian startup ecosystem.

For several decades, the Gulf region has been one of the key geographies where Indians go and work. The profile of these workers has changed over the years. As Gulf nations diversify their economies from oil and develop their countries as technology hubs, Indian technology professionals are finding this region as one of the key zones for job growth. With immigration getting restricted in the US and several European economies, Gulf nations are welcoming Indian tech professionals to develop their economies and transform them as tech powerhouses. It must be noted that countries like the UAE, Saudi Arabia, Qatar and others are investing heavily to take an early bird lead in the AI (artificial intelligence) era.

For instance, Saudi Arabia has committed a funding of $100 billion to make the country an AI powerhouse. Similarly, UAE has partnered with OpenAI, NVIDIA, and Microsoft as part of its $40 billion investment push in the AI space. And these nations are seeking Indian tech professionals to man those AI operations given the talent shortage seen in those countries and the strength of Indian professionals. Against this backdrop, the West Asia war has several adverse impacts for startups and technology professionals. If the war doesn’t come to an end soon, Indian startups may end up as a casualty of the conflict.