When the Government Becomes the Platform, What Should Founders Do Next?
In India’s startup story, disruption has always been the plot. But what happens when the biggest disruptor is the government itself?
Over the past decade, the Indian state has evolved from a regulator to a builder. Not just of policies, but of platforms. Not just of guardrails, but of rails themselves. From UPI transforming payments, to DigiLocker reimagining digital identity, and now ONDC challenging the hegemony of Amazon and Flipkart, public digital infrastructure is no longer just a backdrop, it’s the main stage.
For founders, especially those in fintech, logistics, identity, and e-commerce, this raises a fundamental question: What happens when your startup’s moat becomes a government utility?
Let’s be clear. India’s Digital Public Infrastructure (DPI) movement is a marvel. UPI processed over 14 billion transactions in June 2025 alone. Aadhaar has enabled real-time KYC for hundreds of millions. DigiLocker holds over 6 billion documents today. These aren’t pilots or policy experiments, they are production-grade platforms shaping everyday life.
What’s new is the state’s willingness to go beyond enabler to competitor. Open Network for Digital Commerce (ONDC), for instance, isn’t just interoperable e-commerce. It’s a direct challenge to the marketplace model. Sellers and buyers transact freely across apps.
Discovery, pricing, and logistics are unbundled. Margins are thinner. Power is decentralized. This is not about bureaucracy. It’s about infrastructure-as-product. And that flips the equation for entrepreneurs. If your startup’s core value lies in what DPI is now offering for free or at scale, you need to ask: What are we really solving for?
For years, startups could monetize friction: broken payments, identity verification hurdles, or opaque logistics chains. But as the state removes those frictions, the plumbing is no longer your edge. It’s public property.
This creates two challenges. First, commodification: If payments are instant and free on UPI, why would a user pay for an alternative wallet? If ONDC standardizes supply chain access, how do you defend a marketplace premium? Second, margin squeeze: DPI platforms run on public funding or long-term incentives like inclusion and access. Startups need profits. Competing on the same rails means tighter margins, and fewer defensible moats. The good news? Not all value is infrastructural. DPI levels the playing field. It doesn’t decide the game.
Here’s how founders are adapting. Differentiation on UX and vertical depth is key. Just because UPI exists doesn’t mean every fintech works. Razorpay built APIs that banks didn’t. CRED layered community and rewards. Similarly, ONDC is infrastructure, but the real opportunity lies in owning curation, trust, and vertical expertise. Think of what Licious does for meat or Nestasia for home decor. Discovery and loyalty still matter.
Service innovation on public rails is also gaining ground. Rather than compete against DPI, innovate on top of it. Aadhaar-enabled lending platforms, DigiLocker-based insurance claims, and ONDC-led fulfillment-as-a-service startups are examples. DPI gives you the base, what you build on it is still yours to design.
Trust as a product is another frontier. In sectors like health, finance, and education, users still crave trust, not just access. DPI might verify a user’s ID, but startups can verify their intent, history, or outcomes. Think of credibility as a service, a layer that makes public data meaningful.
Cross-border plays are emerging too. India’s DPI is ahead of many nations. Products built here, on these rails, can now be exported. Think IndiaStack for Africa, or UPI-style fintech in Southeast Asia. If the rails are public, the playbooks are portable.
It’s not a zero-sum game. A healthy startup ecosystem still needs risk-taking, experimentation, and capital. DPI should enable, not eclipse, private innovation.
This means the state must ensure stable APIs and fair governance. ONDC or DigiLocker can’t change rules mid-game. Founders need predictability. Clear boundaries are essential too. When does the state stop competing? And how do public platforms avoid crowding out fragile startup segments? Open participation is also critical. Just as UPI had National Payments Corporation of India and bank partners, future DPI layers should have startup co-creators at the table, not just users at the edge.
Founders don’t need to panic. But they do need to pivot. In a world where the state owns the rails, the next unicorns will be those who learn to dance on them, faster, smarter, and with better shoes.
The biggest threat is not DPI. It’s thinking like we’re still in 2016.
This isn’t the end of startup innovation. It’s just the beginning of DPI-native entrepreneurship.
Are you building for the next decade, or the last?
