As part of its workshop on “Valuation & Fundraising for High-potential Start-ups”, TechSci
examines how location can be the difference between a struggling start-up and a
start-up riding the gravy train
India is
considered globally as the 3rd largest start-up system in the world.
It is home to nearly 5000 tech start-ups employing around 100 thousand people,
with 1400 new tech start-ups entering the $4 billion market every year. It is
big, it is highly competitive, and it is fascinating. People compete and
coexist side by side as they pitch ideas to attract investors, tinker with
management styles, try and attract top talent, all for the sake of become the
next big thing on the Indian horizon.
Entrepreneurship
and creativity in India seems to be reaching a new zenith every year. To salute
our entrepreneurs, both young and old, TechSci is hosting an event “Valuation & Fundraising for High-potential Start-ups”.
As part of the unfolding series culminating in the event, TechSci has decided
to get together some experts to discuss the value of a good location and what
role it plays in taking your start-up story from now to next.
India Start-Up Scene: A Vignette
Names such as HealthifyMe,
DocsApp, UrbanClap, EPS etc. have become household names at this point. There
footprint has been expanding at an impressive rate, given that India’s youthful,
internet oriented and relatively prosperous populace doesn’t mind shelling out
money for services or gadgetry, the two major sectors where start-ups are
really starting to make a difference.
Growing
awareness, increasing number of start-up incubators, renewed focus on ease of
doing business are just some of the reasons that play a major role in entrepreneurial
inflection point that we witness in the country today.
In terms of
number of start-ups, India lags behind the US (52 thousand-53 thousand) and UK (4900-5200).
Israel, with around 4500 and China with around 4200 fall slightly behind India
and round up the top 5.
At the rate at
which start-ups are growing in India, we are set to play host to over 10000 of
them over the next 3 years, if the trend holds. Total talent employed may rise
to 250 thousand people during the same time period.
Why Location Matters
Start-up
geographical clusters can be divided into three distinct categories: the
leaders, the emergent and the aspirants. Let’s today talk about the leaders in
start-up geographical clusters – Bangalore, New Delhi and Mumbai.
As of today,
around 70% of total start-ups are housed within these ‘leader’ hubs. There are
a wide variety of reasons for this. Better infrastructure, better access to
investors, who mostly reside in these cities, access to top talent from
institutions such as IITs and IIMs form a quantum of the reasons why these
cities are popular.
It is also
interesting to see how the culture and flavour residing in each city has
influenced the way the entrepreneurs of that particular city behave. Bangalore,
for example, has been a tech hub and has been called the ‘Silicon Valley of
India’ and has been the home for quite some tech start-ups that are taking the
country by storm.
Similarly, Mumbai,
home to Asia’s oldest stock exchange, is specializing in FinTech. Delhi, which
has since olden times served as a freight corridor is emerging as an eCommerce
hub. Over 30% FinTech start-ups and 30%
eCommerce start-ups are based in Mumbai and Delhi, respectively.
The geographical
leaders serve as a home to over 3300 of the total start-ups in India, Bangalore
with 1300+, Delhi with 1175+ and Mumbai with 800+. Moreover, the leaders also
dominate funding, with Bangalore ($1.2-$1.4 billion) leading Delhi ($0.95-$1.05
billion) and Mumbai ($0.65-$0.75 billion).
Thus, a good
geographical location doesn’t just come about by accident. It is important for
potential entrepreneurs to locate themselves at the right place to get the
right kind of reaction from the markets. A start-up location can potentially be
the difference between a run of the mill start-up and a bona fide gamechanger.
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