Will Trump's Political Earthquake Shake Indian Start-Ups?

US Presidential Elections: With Donald Trump back as the 47th President of the USA, sentiments are high around the world about his new regime. 

Trump, whose base campaign has been heavily around the ‘Make America Great Again’ dream, addressed his voters after the win. He said that he will fight for the American people day in and day out with every breath in his body. 

Across the world, as the election results unfolded, discussions about how his tenure will impact different sectors increased. 

As immigration and tariffs became a constant discussion, the start-up sector in India had diverse views about his win. 

Let’s look at the investment from the USA in the Indian start-up ecosystem first. 

During Trump’s tenure as President last time from 2017 to 2021, the total funding that Indian start-ups received from the USA was $10.2 billion in 2017 and $9 billion in 2020. His tenure ended on January 20, 2021. Meanwhile, the number of funding rounds increased from 413 in 2017 to 711 in 2020. 

The data sourced from Tracxn is a YoY breakdown in Indian start-ups from January 1, 2017, to November 6, 2024, with at least one US-based investor. 

Meanwhile, during Biden’s presidency from 2021 till now, the funding has been consistent at $33.6 billion from 2021 to 2023. Additionally, in 2024, the funding so far has been $5.8 billion. This is a sharp fall from the previous month. 

Read: US Presidential Election Result: Modi Congratulates Trump on 'Historic Election Victory'

Now, if we look at the funding round, it increased significantly to 1136 in 2021. Following this, there was a decline to 985 in 2022, 516 in 2023, and 313 also in November this year. The overall data indicates that there has been an increase in funding during Biden’s era, with a particular increase in 2021. During 2021, the supportive monetary policies of the US that included keeping interest rates near zero where some of the reasons behind this boom.

Expressing optimism about Trump’s return to power, Somdutta Singh, founder and CEO of Assiduus, told Outlook Business earlier, “With Trump's win, the Indian startup ecosystem is definitely poised for significant changes. His pro-start-up policies are likely to attract increased US investment, similar to his previous term.” 

With regards to funding for Indian start-ups, some have expressed caution. “Funding for start-ups may become more cautious, with investors potentially wary of policy changes affecting international trade, immigration, or taxes. This could lead to a preference for resilient, locally focused ventures,” said Yasin Hamidani, Director, Media Care Brand Solutions. 

Meanwhile, certain areas of concern that remain include Trump’s strict policy on immigration, his love for tariffs, and his views on sustainability as a whole. Let’s break it one by one. 

Trump has time and again promised that his administration will work to deport undocumented immigrants. He also pledged to finish constructing the wall along the border with Mexico. Highlighting his stance, he said after his victory, “Immigrants are welcome, but they have to come in legally.” 

Experts indicate that his stance would make H-1B regulations more rigid. The H-1B visa is a temporary visa that allows employers to hire highly educated foreign professionals for specialized jobs, as per the American Immigration Council. 

“The potential for stricter immigration policies under Trump could impact the talent pool, especially for tech startups reliant on skilled foreign workers. Additionally, any shifts toward domestic-first policies might influence U.S.-India collaborations,” said Hamidani. 

Start-ups may need to strategise around these uncertainties, focusing on flexibility and risk management for sustained success, added Hamidani. 

Trump has also highlighted that he will charge high tariffs on goods coming from China and Mexico. On US imports of Chinese goods, he proposed a 60 percent tariff. For Mexico, he vowed to impose tariffs between 25 percent and 100 percent until the borders were closed with the USA. 

“A renewed emphasis on stricter immigration regulations could hinder the movement of talent between India and the US,” said Sandiip Bhammer, Founder and Managing Partner, Green Frontier Capital. 

He added that although stricter regulations may pose challenges for Indian professionals aiming to work in the US, India’s strong pool of skilled workers and entrepreneurs could help sustain growth within the Indian ecosystem. 

Further, the tariff on China might have an impact on India. A report by global investment and advisory firm says, “India’s exports to the US for items such as textiles/yarns/fabrics/readymade garments, IC engines/transport equipment, products of iron and steel, and granites outpace the imports from China in those categories, suggesting manufacturing value add and/or assembly in India.” Thus, if tariffs are imposed on China, this process would be disrupted and cause uncertainty. 

Sustainability Start-Ups Face Uncertainty with Trump’s Stance on Climate 

Another area of concern for the start-up ecosystem is sustainability. Environmental protection isn’t Trump’s favorite area. During his last tenure as president, 125 environmental safeguards were rolled back by Trump. 

Additionally, a report by Politico says that Trump would withdraw the US from the Paris Climate Agreement (an international treaty on climate change) again. In 2020, the US became the first nation to withdraw itself from the agreement, marking itself as the first nation in the world to do so. 

Trump has also dismissed concerns related to global warming. He reportedly said in September this year, “When people talk about global warming, I say the ocean is going to go down 100th of an inch within the next 400 years. That’s not our problem.” 

Rachel Cleetus, policy director at the Union of Concerned Scientists, told The Guardian, “The nation and world can expect the incoming Trump administration to take a wrecking ball to global climate diplomacy.” 

Considering the given scenario, it will be interesting to see how it will be for sustainability start-ups. “Start-ups involved in traditional industries, manufacturing, and infrastructure may experience growth, whereas those focused on technology and sustainability could face some hurdles,” said Bhammer. 

However, not all is gloomy. The overall sentiment in the start-up system is that Trump’s return to power won’t have a negative impact. Bhammer told Outlook Business earlier, “India is an ally of the US and has been a beacon of light growth-wise in an otherwise dull global economic environment.” 

Additionally, Elara Capital’s report highlights that India would be broadly positive. “However, among the list of countries that will likely benefit from the anti-China stance of Trump, India would be the one,” it says.