India's burgeoning startup ecosystem is increasingly fueled by homegrown entrepreneurs rather than returning members of the diaspora, according to a recent study. This research, analyzing 596 Indian high-tech startups established between 2016 and 2023, challenges the widely held belief that entrepreneurs returning from the U.S. and other countries are better equipped to build successful and lasting businesses in India.

The study, authored by AnnaLee Saxenian, a professor at the University of California, Berkeley, and Vivek Wadhwa, a tech entrepreneur and academic, reveals that domestic founders are now outperforming returning diaspora entrepreneurs in the long run. The research highlights that local founders lead in key metrics such as longevity, revenue, and valuation. This shift has been termed the "returnee paradox" by the authors.

The findings mark a significant departure from earlier research, including some of the authors' own previous work, which suggested that returning entrepreneurs would be pivotal in driving innovation in India. While overseas experience has proven valuable in other economies, it appears to play a diminished role in India's contemporary tech ecosystem.

The study's granular comparison of startup metrics reveals an unexpected structural shift in India's startup landscape. India's startup ecosystem, particularly its flagship firms in areas like AI, fintech, mobility, and enterprise software, has entered a phase where domestic founders are leading in commercial outcomes. Meanwhile, returning professionals are primarily adding value in specialized roles.

This "returnee paradox" suggests that India has successfully cultivated world-class entrepreneurs indigenously, even when many expected the diaspora to take the lead. The rise of homegrown talent can be attributed to several factors, including increased access to funding, mentorship, and a growing network of local investors. Furthermore, government initiatives aimed at promoting entrepreneurship and innovation within India have played a crucial role in fostering a vibrant startup ecosystem.

The increasing shift of India's consumer base to rural areas and Tier II and Tier III towns is further bolstering locally rooted enterprises, providing them with sustainable market access and strong community backing. These enterprises are becoming modern engines of grassroots prosperity, transparency and inclusivity.

While the diaspora continues to contribute significantly to India's economy through remittances and investments, the study highlights the growing importance of nurturing and supporting local entrepreneurial talent. This shift signifies a maturing of the Indian startup ecosystem, with domestic innovation and expertise driving growth and creating new opportunities.