Hello Bangalore! We're back on the 19th of July, and ready for the soaring Startup Scene.
Bangalore, also called the Silicon Valley of India, is our next stop on the Seedstars World tour. Before our Seedstars Bangalore event on the 19th of July, however, we look at some of the reasons why this Tier 1 city is top tier for startups in India.
India may have a bad reputation as housing several off-shored help lines of big IT companies, but few remember the flipside of the stereotype: India is just plain good at IT. STEM fields are not seen as a necessary burden, but a motor of the economy. Even once obtaining their degrees, developers will continue their education via online courses. While the result may be a long list of IT certifications on Indian LinkedIn profiles, it also means that you have a huge collective of self-improving developers that always want to stay on top of the newest IT trends. Naturally, the startups in India, especially those of Bangalore, gravitate towards ICT.
Mentality-wise, we are still witnessing a failure taboo, but in all blossoming startup scenes, one can expect that to change in the mid- to long-term.
Starting on Up
The first valuations have come in and things are looking good: India boasts several that are USD 200 million and up, and in case of Flipkart even head over the USD 500 Million mark. These success stories are vital and serve as a role model for other Indian entrepreneurs, who are often tackling their population’s problems. One of these is recruiting developers; with such abundance of IT skill, how do you find the best fit for your company? Seedstars Bangalore 2013 winner Hacker Earth is looking to fix this problem with online tests to prove whether a candidate is truly qualified. There are plenty of programs that support startups in India, amongst them Kyron, a global accelerator that is partnering with SSW for its Seedstars Bangalore event.
Caste is still alive and kicking
Indian consumers can be placed into three categories: the rich and well-traveled, who are rather price insensitive and want the newest and most exclusive luxury brands, the middle class, which is making mid-range brand buys like Nike or their first smart phone, and off course the poor, which need access to basic utilities and education. Entrepreneurs are often geared towards satisfying the needs of these classes, which are segregated not only by wealth, but also by the legacy of the caste system. Other entrepreneurs are focusing on the global market, looking to the West for their customers. Through its big business connections, Bangalore is the prefect jump off point for many of the latter projects.
The Big Bucks
A few years back, Indian startups were expected to be bought by global IT companies as a way for corporates to enter the Indian market. That bet failed, and VCs are still on the lookout for successful exits to justify expanding their portfolio. The consequent risk averseness has made it hard for seed stage startups to find the Series A investment they need, though many startups see boot-strapping as only a stepping stone towards investment. I believe that the capital crunch is only temporary, as several VCs are now opening in India and lots of Diaspora are shifting the money from the US to India. The issue that remains however, is that the size of the country makes it hard for one investment hub to build. While Bangalore might be a tech hub, there are plenty of other cities for startups in India, making it difficult to choose where to go, both for founding and funding.
Corporations are Causing a Scene
With a few exceptions (Facebook recently acquired a few businesses) most companies prefer being a supplier to startups rather than their buyers. This includes Microsoft, IBM, SAP and many others. If they are not actively participating in the startup scene, they are supporting it. The reason why is clear: B2B and software focused industries hope to find their next generation of loyal customers in the startup scene, with the strategy often being to get businesses ‘hooked’ on the product and upping their demand as they grow.
Those were five well-spent minutes, wouldn't you agree? Follow us on Twitter to get the newest updates on Startups, emerging markets, and where to invest.
(Seedstars World Travel Team)
Nellie graduated from University of Mannheim with an Economics Major and has lived in the USA, Germany, and Spain. After part being of the Deutsche Bahn’s Investor Relations team, she specialized in Innovation Management. Nellie has gained expertise in many aspects of the R&D process, thanks to her multi-million euro project assistance at the Helmholtz Centre Berlin, co-authoring a publication on German cities’ innovative behavior at the Center for European Economic Research, and working at the pioneering SAP Innovation Labs. At Seedstars World, she will pair her financial experience with tech savvy while organizing the 2014 tour as one of our scouts!
Connect with Nellie or follow her on Twitter @Nellie_Horn