By Devesh Mishra, IIM Udaipur
For over a decade, India’s startup story was shaped by a familiar image, venture capital clustered in metropolitan hubs, founders building private limited companies, and innovation measured in valuation and exits. To be called a startup meant being equity-backed, investor-driven and structured for rapid scale. Corporate form defined entrepreneurial legitimacy.
The decision to include cooperative societies, both multi-state and state-registered, within the formal startup recognition framework marks a structural shift in that imagination. This is not a routine administrative extension. It redefines who qualifies as an innovator and formally brings the co-op startup ecosystem into a policy space once reserved for venture-backed enterprises.
Startup recognition carries tangible advantages: tax incentives, simplified compliance, access to incubation networks and greater policy visibility. Until now, this architecture largely excluded cooperatives, despite their scale and economic reach. India has more than eight lakh cooperatives operating across credit, dairy, fisheries, warehousing and procurement, including over 1.3 lakh Primary Agricultural Credit Societies forming one of the world’s largest grassroots financial networks.
Yet these institutions were historically viewed as service delivery bodies rather than innovation vehicles. Their inclusion alters that perception and redraws the boundary of the startup state.
By admitting cooperatives into the framework, policymakers are challenging the assumption that innovation must be equity-owned and investor-controlled. Member-owned institutions can also deploy technology, improve processes and create scalable impact.
The co-op startup ecosystem broadens the grammar of entrepreneurship by recognising democratically governed enterprises as legitimate participants in India’s innovation economy. This is conceptually significant because it expands the ecosystem beyond its urban and corporate core, potentially making it more geographically and socially inclusive.
For years, India’s startup ecosystem and its cooperative sector functioned in parallel silos. Startups spoke the language of valuation, burn rates and exits, while cooperatives operated under statutory oversight, often constrained by legacy compliance systems and state registrars.
One attracted capital and global attention; the other quietly managed local economic systems. Inclusion bridges this divide. If implemented meaningfully, cooperatives can access incubation networks, technology partnerships and policy platforms that were previously out of reach. At the same time, the startup ecosystem itself becomes more institutionally diverse.
However, expanded eligibility does not automatically generate innovation. Many cooperatives face governance weaknesses, political interference, opaque accounting practices and limited professional management. Startup recognition alone cannot resolve these structural challenges. There is a legitimate concern that broad inclusion may dilute the meaning of “startup” without improving cooperative performance. The reform will carry weight only if recognition is tied to governance benchmarks, digital transparency standards and professional management criteria. Inclusion must be accompanied by discipline.
The move also compels a deeper conversation about capital. Venture-backed startups operate within equity models where investment translates into ownership and exit potential. Cooperatives follow a one-member-one-vote principle, where control is democratic and not directly linked to capital contribution. These frameworks do not align easily.
By integrating cooperatives into the startup ecosystem, policymakers implicitly acknowledge that innovation need not rely exclusively on traditional equity logic. Over time, this may require hybrid financial instruments that preserve democratic governance while enabling structured investment flows. Such adjustments would reshape not only cooperatives but the startup ecosystem itself.
More broadly, the inclusion signals a shift in policy thinking. For years, startup policy privileged a specific organisational form aligned with venture-led growth. As the ecosystem matures, its boundaries are widening.
Recognising cooperatives suggests a willingness to democratise innovation policy and accept that entrepreneurial experimentation can emerge from collective ownership structures. India’s experience with large-scale cooperative successes has already demonstrated that professionally managed member-owned institutions can compete effectively. The question now is whether that spirit can be embedded within the formal innovation architecture.
The policy door has opened, but execution will determine its significance. If implemented with seriousness, the co-op startup ecosystem could widen India’s innovation geography and social base, allowing grassroots institutions to participate in the same policy framework that nurtured unicorns.
If reduced to a formal notification without structural reform, it will remain symbolic. The true importance of this shift lies not in the number of cooperatives that seek recognition, but in whether India’s definition of entrepreneurship has permanently evolved beyond corporate ownership to include democratic enterprise as a central pillar of its startup future.