Around 175,000 DPIIT-recognised ventures. More than 121 unicorns. An expected funding of $14-15 Bn by the end of 2025. That’s the world’s third-largest startup economy at a glance. 

While Bengaluru, Hyderabad, Mumbai and Delhi NCR have so maintained a lead in the numbers, a revolution has brewed up in some smaller cities, reshaping India’s entrepreneurial landscape and challenging the traditional startup hubs. 

Tamil Nadu is at the forefront in this league, with Chennai ranking 19th among the top 40 startup destinations in Asia. Known for its strong roots in industries like manufacturing, textiles and automotive, Tamil Nadu has, in fact, doubled down on entrepreneurship and inclusive growth. 

The number of DPIIT-registered startups in the state has jumped from just over 2,000 in late 2021 to more than 12,000. And, this growth has percolated to Tier II cities and smaller regions of the state as well. 

To support the growing ecosystem, the government has laid out the Startup and Innovation Policy 2023, with the vision of positioning Tamil Nadu in the global top 20 startup destinations by 2032. 

While a strong education system, industry connections, inclusive support programmes and a growing network of incubators have helped build momentum in the sector, regional innovation hubs, support from the Tamil diaspora and a Dravidian approach to development rooted in inclusivity are shaping a distinct model for growth. 

Inc42 spoke with StartupTN mission director and CEO,  Thiru Sivarajah Ramanathan to take a closer look at the hectic parleys at play in the state’s homegrown startup economy.  

In an exclusive interaction, the first-generation entrepreneur from Madurai explains how the founder-first initiatives of the Dravidian model have influenced the startup policy. 

Edited excerpts from the conversation to track what’s really happening on the ground… 

Inc42: The Startup and Innovation Policy 2023 sets an ambitious vision for Tamil Nadu to become one of the top 20 global startup destinations by 2032. How do you plan to achieve this goal?

Sivarajah Ramanathan: The policy envisions achieving its targets through a multi-pronged approach. With 30% of the top institutions in the NIRF Rankings located in Tamil Nadu, the state is leveraging this strength to build a large and affordable pool of intellectual talent. At the same time, it is working to instill trust and confidence among founders, ensuring they no longer feel the need to migrate to Bengaluru or Hyderabad in search of stronger support systems.

The state has seen a sharp rise in the number of startups since 2021, which has brought it on par with states like Maharashtra, Karnataka and Gujarat. This growth is supported by more than 40 initiatives, including funding schemes, mentoring, incubation and market access programmes. 

TANSEED, for instance, provides grants of INR 15 Lakh to women-led, climate focused, rural startups, while general startups get Rs 10 Lakh. TANFUND connects startups to a network of over 200 venture capitalist (VC) firms, having raised INR 130 Cr in recent months.

We are also addressing cultural and aspirational barriers among the youth. With many youngsters gravitating towards IT jobs, the state is encouraging entrepreneurship in them by reminding them of Tamil Nadu’s historical strengths in creativity, international marketing and business. To boost accessibility, StartupTN is developing new-age learning resources, including videos and training sessions in the native language.

This holistic approach of combining talent, funding, inclusivity, infrastructure, education and global connectivity is designed to help startups scale. 

Inc42: How are you incorporating inclusivity into shaping your startup policy?

Sivarajah Ramanathan: Inclusivity is the core to the mission. Under geographic inclusivity, 11 innovation hubs across the state are balancing startup growth beyond Chennai, where the share of startups dropped from 70-75% in 2022 to a more distributed model today. To firm up rural engagement, the Gramam Thorum Puthozhil Scheme plans to build startup ecosystems across 100 villages this year. Each village will form a local community linked to an incubation centre, corporate partner and diaspora network to motivate youth to build businesses locally, rather than migrating to other cities. 

The policy also leads in social inclusion. In fact, Tamil Nadu is the first state to launch an SC-ST equity fund investing up to INR 5 Cr in eligible startups, alongside dedicated programmes for women founders, transgender entrepreneurs, and differently abled initiators. The Periyar Social Justice Venture Lab was established to support business model development and facilitate investment and scaling. 

StartupTN also mandates that at least 25% of beneficiaries under its TANSEED grant schemes are led by women with additional safeguards to ensure meaningful ownership and leadership. Another dedicated initiative, TNRise, supports women entrepreneurs across all business scales, from nano to startup. Efforts are underway to establish women-friendly incubation centres with facilities such as counselling and childcare support. 

Inc42: The TANFUND portal connects entrepreneurs with investors. How do you ensure the quality of connections as the numbers grow?

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Sivarajah Ramanathan: The TANFUND portal has a top-down approach. Instead of passively waiting for startup requests, the StartupTN team engages with a range of VCs, mostly based in Bengaluru and Mumbai. The team builds relationships with VCs to understand exactly what kind of startups investors look for in terms of stage and sector, and then matches curated startups from Tamil Nadu.

Since we do not have a deep VC ecosystem, we invite investors to the state to meet the local startups directly. The upcoming Global Startup Summit, scheduled on October 9 and 10 in Coimbatore, will bring over 100 investors and 500 startups with an expected inflow of INR 100 Cr. 

Since many local startups prefer slow, sustainable growth over rapid scaling, we also work with banks for debt funding solutions. The startups typically show stable growth and low failure rates, which appeal to investors focussed more on consistent returns than high-risk, high-multiple gains. 

Finally, we are encouraging smaller, local angel groups to form micro-VC funds, diversifying funding avenues to better support the evolving ecosystem.

Inc42: Regional hubs have been set up in 10 cities across Tamil Nadu. What unique advantages or specialisations do they offer? 

Sivarajah Ramanathan: These regional hubs have multiple unique advantages. First, they offer 5,000 to 8,000 sq ft of infrastructure with training facilities, co-working spaces and meeting rooms staffed by local teams. 

Second, they help collaborate closely with the district administrations and local corporates to develop mentoring networks through MentorTN, which connects entrepreneurs with experts across marketing, finance, HR and technology.

Third, the hubs are designed to nurture the local angel investment ecosystem by educating high-net-worth individuals (HNIs) and facilitating their startup investments. Operating partly as physical and largely as virtual incubators, the hubs connect with existing incubation centres to support startups. 

Fourth, each hub adapts to the local industry strengths and needs. Given Tamil Nadu’s robust manufacturing base, many startups focus on advanced manufacturing and agri-tech. Alongside a growing number from the IT and D2C sectors, there are women-led ventures in food, cosmetics and lifestyle products. The hubs offer multi-layered support, including assistance in compliance, packaging, branding and marketing, to empower these diverse startups. 

By acting as an expansive virtual incubation network and fostering local investment, mentorship and market linkages, these hubs ensure startups across Tamil Nadu gain help unique to regional and sectoral contexts. 

Inc42: How are you leveraging Tamil Nadu’s traditional industrial strengths in manufacturing, textiles, and automotive to foster the startup ecosystem?

Sivarajah Ramanathan: We are doing this by encouraging deeper corporate-startup collaborations. Many large corporations from sectors such as automotive, where Tamil Nadu has the largest base, are rolling out innovation programmes or pilot projects to engage startups developing battery management systems, embedded software, and design solutions. StartupTN facilitates such partnerships, acquisitions, or investments. 

Many company leaders invest directly or through VC funds. While still at an early stage, corporate investment efforts tap into Tamil Nadu’s vast industrial base to foster innovation, driving both startup growth and R&D. 

To complement VC funding, StartupTN has also partnered with banks to address the unique funding needs of hardware and manufacturing startups. We have tie-ups with 10-12 banks and facilitated INR 40-50 Cr in bank loans. There’s a dedicated team to curate and analyse startup profiles to match them with suitable bank funding criteria.

Inc42: What role does the Tamil diaspora play in your global outreach strategy, particularly through the Dubai centre and your planned expansion in the US and Singapore?

Sivarajah Ramanathan: The diaspora, spread across the US, Europe, the Middle East and Singapore, includes many potential angel investors and HNIs. StartupTN has begun activating networks such as the American Tamil Fund and the UAE Tamil Angels. In fact, some early-stage investments are underway and a significant deal flow is in the works. 

The diaspora also plays a crucial role in mentoring and connecting. Many Tamil professionals in leading global tech firms, including giants like Google, are mentoring startups and facilitating market access. They also help bridge startups to global incubation centres, universities and VC firms, using their local networks. 

While the efforts are promising, building sustainable and active diaspora involvement remains a work in progress. 

Inc42: How do you address potential gaps between academic research and commercial innovation through initiatives like the StartupTN Technology Transfer Centre Scheme? 

Sivarajah Ramanathan: Tamil Nadu leads India in patent filing, but there’s a wide gap between academic research and commercial innovation. Most patents come from academic researchers and not from commercial establishments, which leads to limited translation of research into market-ready products. StartupTN connects researchers who aren’t interested in entrepreneurship with passionate founders seeking viable ideas to scale.

Unlike traditional technology transfer hubs that only maintain databases, StartupTN actively facilitates engagement by organising visits for entrepreneurs to universities, encouraging direct interaction with researchers. This collaborative model helps align commercial intent with research. 

To ease the transition, the government offers financial support covering up to 50% of technology transfer costs or INR 5 Lakh, whichever is lower. 

Inc42: How is StartupTN adapting to support startups dealing in emerging technologies like AI and quantum computing? 

Sivarajah Ramanathan: We have a dedicated incubation facility called, iTNT Hub, a joint initiative between the Union Ministry of Electronics and Information Technology (MeitY) and the Tamil Nadu government. 

It focuses exclusively on deep tech startups in AI, quantum technology and related fields, complementing StartupTN’s broader sector-agnostic programmes. StartupTN redirects deep tech inquiries to iTNT Hub, while startups also benefit from the ecosystem of IIT Madras, which is a major deeptech  hub. 

Inc42: What about collaborations with national bodies like Startup India and DPIIT to amplify your initiatives? 

Sivarajah Ramanathan: Until recently, StartupTN focused primarily on building Tamil Nadu’s local startup ecosystem with limited direct engagement with national bodies like Startup India. This year, we tried to firm up ties with key national agencies like Startup India, MeitY, Atal Incubation Mission, Biotechnology Industry Research Assistance Council (BIRAC), MSME and the Ministry of Social Justice and Empowerment.

StartupTN aims to become a state nodal centre for these initiatives, facilitating smoother coordination while using their resources for local startups. These collaborations are being formalised in phases, with many of them expected to be finalised in the next three to five months. Ten such agencies have put up pavilions at the upcoming Global Startup Summit, too. 

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