“Silicon Valley of the East,” “tech capital of Asia,” “most livable city in India,” Bengaluru (or as most people know it, Bangalore) is the media’s new darling. But are these titles just PR gimmicks or is there substance beneath the surface? Why should you, the entrepreneur, pack your bags and shift base - no matter where in the world you are based? And when is the right time to make the move?
Globally, VC funding is at a historical high, with more than 110 privately held startups valued at more than a billion dollars. Their cumulative valuation stands at more than $400 billion. Among countries, India received the third highest VC funding ($4.6 billion) after the US ($58.9 billion) and China ($8.9 billion). And the pace is accelerating as India saw the funding grow threefold in the first four months of 2015, compared with the same period of 2014.
57% of India’s funding was cornered by Bengaluru ($2.6 billion) which also came in fifth in a list of cities globally that received the most venture capital in 2014. According to Crunchbase, San Francisco led the global list with $13 billion of VC investments, followed by Beijing ($6.4 billion), New York ($5.7 billion), Palo Alto ($3.2 billion) and Bengaluru.
So what makes Bengaluru, well, Bengaluru? Through research and speaking to entrepreneurs, 3 major reasons have come together to cement Bengaluru’s position as a startup hub and why every entrepreneur needs to give their geographic location a serious re-think (if not in Bengaluru already):
Shift from Dotcom Era to Mobile Era
From the invention of printing press to telephone to internet to mobile, the cycle of technological change has become shorter. Each time the same distinct pattern has emerged :at the beginning of each cycle, inventors and techies are in demand followed swiftly by the marketers. The emergence of Bengaluru as an IT hub in late 90s attracted tech talent from all over India (1.5 mn. engineers graduate every year from India’s 3,345 engineering colleges). These engineers were able to hone their skills during the Dotcom boom and thereafter with some of the best MNCs and Indian corporations. Today, with the emergence of mobile first/only era, these engineers have hit their stride and have begun launching their own startups to challenge their former masters. This pool and the best of 1.5 mn. engineers who are attracted to Bengaluru every year represent the critical talent pool one needs to succeed in a mobile era. With the ubiquity of mobile and communication, most businesses don’t need to be based near their customer or source of production. Hence, location will be decided by the availability of talent.
Run a Tight Ship
To use proxies for setting up and running a business, the cost of registering a startup ranges between $300–500 (from sole proprietorship to private limited) while commercial rentals are <$1 per square feet per month in Bengaluru. With comparable commercial rentals for Silicon Valley ($4–5), Beijing ($6–7), Mumbai ($1.5–2), Delhi ($1.2–1.7), and Gurgaon (<$1) being higher than Bengaluru, a startup can achieve significant savings from day 1. Even if one does not rent commercially, co-working spaces and coffee shops have become a beehive of activity. The other major cost of hiring junior tech talent begins at $10,000–20,000 per year (comparable cost in west is 3–5X). While the cost differential has reduced over time, the quality of talent available has also matured significantly. Bangaloreans are also more willing to accept ESOPs/equity stake in exchange for lower/no salaries compared to 5 years ago.
Show me the Money
According to Harvard Business Review, building your startup in Silicon Valley reduces the lead-time for raising funds, increases your chances of being bought, and enhances your odds of success. To extend the same logic to Bengaluru wouldn’t be wrong. Early success of startups based out of Bengaluru along with the above factors has brought the investors to the city. Of the about 80 active PE & VC funds in India, almost 30 are based out of Bengaluru. Every major fund worth its salt has offices in Bengaluru. In early stage investment, one of the better ways to convert potential investment into actual investment is first-hand experience. Being in Bengaluru increases one’s chances of meeting/showcasing their startup to potential investors in person. While this by itself is not a guarantee of investment, it surely increases your likelihood of investment and ultimate success.
Going by anecdotal evidence, there is a very good reason why startup poster boys like Ola, Freecharge, Quikr, and InMobi have shifted their base to Bengaluru. Isn’t it time that you thought about it too?