Saturday, December 15, 2012

ENTREPRENEUR/STARTUP SPECIAL....India's Top Startup Ecosystems

India's Top Startup Ecosystems

Bangalore has consistently emerged as the best place to launch and nurture startups in the country. Access to a deep talent pool and risk capital has helped the city catapult to the top. But Delhi-NCR, Mumbai, Pune, Chennai and Hyderabad are catching up


Bangalore, closely followed by the National Capital Region, continues to lead the pack in nurturing and growing the Indian entrepreneurial ecosystem, even as risk capital looks to back a plethora of new businesses. The southern city has consistently topped the list of cities receiving the highest amounts of angel and venture capital in India. In 2012, Bangalore-based ventures have so far received investments of $130 million (about 708 crore), spread across 39 deals, while NCR has received an estimated $62 million in 29 transactions, according to data collated by research firm Venture Intelligence. Industry experts believe that an Indian city will break into the top-5 startup ecosytems globally in the next two years, and have placed their bets on Bangalore. But other cities like Chennai, Hyderabad, Pune and Mumbai are also close on its heels.


ENTREPRENEURIAL ROLE MODELS
“Bangalore will be one of the top-5 destinations in the world. That is because it has abundance of highly experienced and educated workers who are yearning to become entrepreneurs,” technology entrepreneur and academic Vivek Wadhwa said. The advantages held by Bangalore and NCR are highlighted by a recent industry report which states that of the 3,400-odd product companies set up in India since 1990, 51% are based in Bangalore or NCR. Separately, 58% of the ventures funded since 2005, are also from the same regions. Online retailer Flipkart, independent mobile advertising network InMobi and India’s largest bus ticketing company red-Bus bear testimony to the effectiveness of Bangalore’s startup ecosystem. “Bangalore has always had a far stronger tradition of starting up ventures than any other city in India,” said S Sadagopan, director of International Institute of Information Technology. “The traditional ingredients are all here.” The NCR—an area surrounding Delhi and covering four states—is yet to establish a consistent track record in incubating ventures seen as path-breakers. The notable exceptions have been travel portal Makemytrip.com and job search portal Naukri.com. Given that the country’s financial community is based in Mumbai, the country’s commercial capital has also made strides in reinventing itself as a startup destination. “We have seen over 125 startups coming up in Mumbai and Pune in the last six months, and over 400 over the last two years. A lot of them have been in spaces, including, travel, financial services and quick service restaurants,” said Kanchan Kumar, executive director with The Indus Entrepreneurs- Mumbai, a global networking forum.


HISTORICAL SUPPORT
Enablers of Bangalore’s startup ecosystem point out that the city has always had the necessary ingredients to nurture entrepreneurial talent. “The first wave of innovation probably started with HAL (Hindustan Aeronautics Limited) and the other defence establishments that cropped up in the 40s and 50s. Bangalore saw a large number of educated middle-class Indians settling here, which kind of laid the base,” Sanjay Anandaram, venture partner with Seedfund, an early-stage venture capital fund, pointed out. Bangalore has benefited the most after India liberalised its economy in 1991. However, the acknowledged catalyst was the formation of Infosys and Wipro –amongst the biggest technology services companies in India– in the late 70s and early 80s. “One of the prime reasons was that both companies needed access to quality engineers, something that Bangalore offered in abundance,” Anandaram said. The city’s institutions of higher learning, including the Indian Institute of Science and the Indian Institute of Management, Bangalore, have played a very active role as feeders to the city’s entrepreneurial community. “That is an advantage both Bangalore and Delhi share over the rest,” IIIT’s Sadagopan said.


COMPARISONS WITH SILICON VALLEY
The inevitable comparisons with Silicon Valley, often identified as the cradle of entrepreneurship, startups and incubation globally, have cropped up. Bharati Jacob, founder and partner at Seedfund, a leading early-stage venture capital firm, believes the lack of infrastructure in Bangalore, has actually helped the city’s startup ecosystem. “Entrepreneurs largely come out of emerging economies, where they aren’t as dependent on physical infrastructure. When was the last time you heard of any innovation coming out of major cities?” she asks. The consensus seems to be that the lack of infrastructure and continuing government apathy is an issue faced by all Indian cities, and startups have to work around them. “Both Mumbai and Pune have vast potential, but the former needs to get its infrastructure fixed, while the latter needs to get its education system right,” said Sasha Mirchandani, co-founder of Mumbai Angels, an angel network.

SOCIO CULTURAL SUPPORT
A recent report by global HR consultancy Mercer ranked Bangalore as the best city to live in India, given the quality of the city’s educational infrastructure, compared with the country’s other metros. Even as companies, including Yahoo, Cisco and Intel shifted their R&D operations to Bangalore, simultaneously looking to hire the best talent and cut costs, the decision saw quality Indian talent move back to the city. “The culture grew, and people started taking risks and pushing boundaries,” Anandaram said. It is the same risktaking ability that saw the formation of IT services behemoth Infosys as well as online retailer Flipkart two decades down the line. Other cities, including Mumbai and Delhi, have focused more on traditional, family-run businesses, leading to a lag in the promotion of the startup culture. “Entrepreneurship has had greater and quicker social acceptance in Bangalore than any other city in India, and that has counted for a lot,” IIIT’s Sadagopan pointed out.
Reporting by CR Sukumar, Biswarup Gooptu, Peerzada Abrar, Paramita Chatterjee and Radhika P Nair
BANGALORE
BANGALORE’S RISE AS THE preferred destination for technology start-ups took off more than 70 years ago when the foundation stone of a Hindustan Aeronautics Ltd engineering facility was laid in the city. The abundance of engineering talent, ecosystem of academia, multinationals and a professional class of managers has led to greater socio-cultural acceptance for high-tech entrepreneurship. This has helped the city leapfrog over more established commercial centres such as Delhi and Mumbai. Technology and tech-focused startups dominate the city’s entrepreneurial landscape and have had a positive impact on other sectors like education, healthcare, renewable energy and life sciences. This upward spiral has come despite the city’s creaking infrastructure and lack of sustained government support and is likely to catapult the city as one of the top-5 destinations globally for startups in the coming decade, say industry experts.
Leading startups: Flipkart, InMobi, redBus, Myntra
Leading investors: Sequoia Capital. Accel Partners, Helion Venture Partners, New Silk Route, Seedfund
Top sectors: e-commerce, technology and technology services and education services
Forecast: The expectation is that Bangalore will be the first Indian city to rank amongst the top-5 global startup destinations, driven largely by its brand, cultural and financial proximity to Silicon Valley and education infrastructure. However, what is required are greater government and regulatory support to foster entrepreneurship.
$131 million Amount of capital raised in FY 2012 (YTD) 39 deals

CHENNAI
PAYING LESS FOR TALENT,
space and living costs is what makes Chennai attractive to entre preneurs. Over 500 engineering colleges in the state provide a steady stream of new hires, while major anufacturing and automobile companies provide a customer base for enterprise-tech ventures. Startups, however, suffer from a paucity of networking events and risk capital. It also suffers from frequent power cuts.
Leading startups: Bharat Matrimony, Perfint Technologies, Freshdesk, OrangeScape, ChargeBee, Shopo
Leading investors: Chennai Angels, VenturEast
Top sectors: Enterprise technology for auto, healthcare, retail, shipping and freight management; healthcare, education
Forecast: Risk capital is getting easier to access, as global funds like Accel and Nexus invest in city-based startups. This bodes well for Chennai.
$36 million Amount of capital raised in FY 2012 (YTD) 9 deals

HYDERABAD
IN THE LAST THREE YEARS,
capital for young startups has risen dramatically, though it is not as abundant as in mature markets like Bangalore. Outreach and networking has picked up due to the presence of the Indian School of Business and International Institute of Information Technology.
Leading startups: Edutor Technologies, Gharpay, Mojostreet, TalentSprint, Apalya Technologies Leading investors: Hyderabad Angels, VenturEast Top sectors: Education, enterprise software and mobility, IT Services, pharma and bio-tech Forecast: City-based incubators and accelerators set to kickstart growth that could catapult the city to the number two spot
$24 million Amount of capital raised in FY 2012 (YTD) 8 deals

MUMBAI
THE INHERENT
entrepreneurial culture, coupled with the availability of risk capital, has made the city an ideal location for startups. Startups here focus on finance, retail and consumercentric businesses that address a local customer base and also gain from access to a wide pool of mentors. Dampeners are high cost and lack of engineering talent.
Leading startups: Pubmatic, Netmagic, Suvidhaa, CarWale, Games2Win, FreeCharge, Goli Vadapav, MyDentist, Ola Cabs, Meter Down Leading investors: Mumbai Angels, Kae Capital, Blume Ventures, Nexus Venture Partners, Sequoia Capital, IDG Ventures, MyFirstCheque, Seedfund, Matrix Partners Top sectors: Retail, F&B, finances Forecast: Poor infra and high costs are stopping Mumbai from having India’s best startup ecosystem. This is unlikely to change dramatically in the near future
$36 million Amount of capital raised in FY 2012 (YTD) 28 deals

DELHI
•NCR
THE CLOSEST COMPETITOR TO
Bangalore, the region wins due to superior infrastructure and lower costs. Startups in education, IT, manufacturing, retail and healthcare have chosen NCR due to easy access to capital, customers and talent. The city has also seen the emergence of online retailers because of access to warehouses, network of distributors and good transport infrastructure.
Leading startups: Snapdeal, Yebhi, Akosha, Reverse Logistics Co, Mettl
Leading investors: Indian Angel Network, SAIF Partners, Canaan Partners, Lightspeed Venture Partners
Top sectors: Retail, education, technology, manufacturing and healthcare
Forecast: With startup and networking activity picking up, Delhi-NCR can become the top hub in the country. Cheaper power, better infrastructure and security are needed to drive growth
$62 million Amount of capital raised in FY 2012 (YTD) 29 deals

PUNE
AWAY FROM THE SHADOW OF Mumbai, the city is mounting a credible challenge to Bangalore. Pune has a ready pool of high-quality technology talent and access to capital and market. However, critics say entrepreneurs focus on technology-focused start-ups. Poor infrastructure and power supply are other disadvantages.
Leading startups:
Dhruva Software, Faaso’s, Shopsocially, ReliScore, Social Web Factory, Quick Heal, Persistent Systems
Top sectors: Technology and engineering
Forecast: It is Pune’s infrastructure that is holding the city back. Otherwise it can become the primary technology startup hub
$19 million Amount of capital raised in FY 2012 (YTD) 9 deals
ET121207

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