Wednesday, June 18, 2025
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NER start-ups get only 2% of the VC funds: Why?

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By K N Kumar

India’s startup game is on fire. In 2024, venture capital (VC) funding skyrocketed by 43% to a whopping $13.7 billion, making India the second-largest startup hub in the Asia-Pacific. That’s huge! But here’s the catch: most of this cash flows to places like Bengaluru, Mumbai, and Delhi. Northeast India is barely getting a trickle. Between 2016 and 2023, the region had just 1,400 recognized startups compared to North India’s 37,500, South India’s 33,200, and West India’s 30,800. That’s roughly 2% of the total startups and about 2% of the funding. It’s a glaring gap in India’s startup story.
The NER is struggling to shift from a farming mindset to an entrepreneurial mindset. For years, agriculture has been the main source of income for many in the region. While farming brings a lot of local knowledge and ways to manage resources, it often suffers from poor productivity due to issues like floods, droughts, soil erosion, and lack of access to modern technology. Besides this, the NER has some real issues with geography and infrastructure. Being remote makes it hard for investors and business partners to get to, and problems with transportation, internet access, and logistics make it tough for startups to grow. Plus, there aren’t many incubators, accelerators, or co-working spaces around, limiting the support and guidance for new businesses. Big startup events, investor meetings, and pitch competitions don’t happen often in the Northeast, which means founders miss out on chances to connect with potential investors and partners.
As of December 2024, Assam leads the Northeast in startups – 1,487, followed by Manipur with 179, Tripura with 141, Nagaland with 85, Arunachal Pradesh with 47, Meghalaya with 62, Mizoram with 41, and Sikkim with just 12. This totals only 2,054 startups across the region. Despite this growth, the actual venture capital influx remains low. For example, Northeast startups received less than Rs 50 crore in VC funding in 2022, accounting for under 1% of India’s total. Assam, the most active state in the region, mainly relies on government programs like the North Eastern Development Finance Corporation Ltd. (NEDFi) and the North East Enterprise Development Scheme (NEEDS) for support, rather than private investors. Other states, such as Nagaland, have experienced a rise in startup registrations—from just one in 2016 to 22 in 2023—but still struggle to attract significant private investment, depending on state programmes instead. This starkly contrasts with major cities that attract thousands of crores in VC funding and host far more startups than the entire Northeast combined.
But not all of it is gloom: the Northeast is a goldmine just waiting to be tapped. Between 2018 and 2023, the region experienced a 12.7-fold increase in recognized startups—the highest growth rate in India! That’s a clear sign of entrepreneurial energy ready to explode. Additionally, the Northeast’s location makes it a natural gateway to Southeast Asian markets like Myanmar and Bangladesh. With initiatives like the Act East Policy enhancing connectivity, startups here have a unique opportunity to expand beyond India’s borders—something their counterparts in other regions cannot even dream of.
The Government of India is sensitive to this issue. They’ve rolled out programmes like Startup India, with special schemes for the Northeast, including funding and simpler regulations. But here’s the thing: government funding can only stretch so far. To thrive, the region needs private investors to step up. Without their confidence and market-driven decisions, nothing much will happen.
Investors are usually interested in startups that can grow fast and reach big markets. The Northeast has a smaller and more spread-out population, which can be a turnoff for businesses focussing on consumers. Many NE startups are based in agriculture, crafts, and eco-tourism, areas that big-time investors typically overlook, as they lean toward tech and internet companies. This mismatch makes the region less appealing to them. Investor biases also come into play. Most venture capitalists are based in major cities and don’t understand the unique challenges of the Northeast. Political issues, border concerns, and a history of unrest add to the idea that the region is riskier, which pushes investors toward safer bets in more established startup areas. There’s also a talent shortage. A lot of skilled young people from the Northeast move to bigger cities for better education and jobs, which drains local talent. This means there aren’t many experienced founders or mentors around to help new startups with fundraising and growth. On top of that, different states in the Northeast have varying support for startups, and bureaucratic red tape is often tougher compared to friendlier states like Karnataka or Maharashtra. There aren’t many local venture funds or angel networks focussed on the Northeast, making it harder for startups to find early money.
This funding gap means that many promising NE startups struggle to survive or scale, despite innovative ideas and strong local relevance. The lack of capital limits their ability to develop and market products, hire skilled talent, expand beyond the region, and attract follow-on investments. As a result, the NE’s unique strengths—such as its biodiversity, organic agriculture, and cultural heritage—remain under-leveraged in the national startup narrative.
Here’s another piece of the puzzle: what startups in the Northeast are focussing on doesn’t always align with what investors are pursuing. In the NER, construction leads at 26%, agriculture at 23%, and IT services at 12%. Compare that to the rest of India, where IT and healthcare startups are the darlings of venture capital. Investors love high-growth, scalable tech companies—think fintech, health tech, or edtech. But agriculture and construction? They’re crucial for the Northeast’s economy, but they often require more time to yield results and don’t fit the “unicorn” mould VCs are hunting for.
What can change the game?
(1) First, infrastructure needs a serious upgrade—think better internet, reliable power, and smoother transportation. Northeast connectivity initiatives are a step in the right direction, but they need to move faster.
(2) Building local ecosystems by establishing more incubators and accelerators, and linking NE founders with experienced mentors from across India, can bridge the skills and knowledge gap.
(3) Governments can offer targeted incentives, tax breaks, grants, and easier compliance for NE startups, while also encouraging the creation of NE-focused VC or angel funds to provide much-needed seed and early-stage capital.
(4) Showcasing NE success stories and organizing investor tours and pitch events in the region can help VCs discover untapped opportunities. The NE’s strengths in organic products, eco-tourism, and handicrafts also align well with the global rise in sustainability investing, presenting a unique opportunity for VCs interested in ESG (Environmental, Social, and Governance) ventures.
That the NER gets only 2% of India’s venture capital doesn’t show its real potential for entrepreneurship. First things first, change the name of the Department of Commerce & Industries of Meghalaya into something more proactive and catalysing, not the sluggish and lethargic relic of the licence-permit raj. Maybe the government should create a Department to promote Private Investment on the lines of the Department for Promotion and Industrial Trade? The only document available on the website of the Department of Commerce and Industries, under ‘Reports’, is “Small Scale, Village & Cottage Industries” published in 1993. Need I say more?
The writer is a former member of the IAS.

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