State of Indian Startup ecosystem

In past of couple of months, I attended quite a  few industry events/meetups. Apparently the development of startup ecosystem in India has gone a long way. Bangalore remains the epicenter of Indian startups. The number of startup related groups has increased, although few remain relevant.  The strength of many of these groups has increased manyfold as new entrepreneurs are born and added to the fleet.

The other major change that has happened over last year or two is on the investment side. There  has been a flood of not just (so-called) early stage investment firms but also incubators and accelerators. Some of the newly born Seed/Angel funds that I have met/come across – Ventrue nursery, GSF accelerator, TLabs. Vinod Khosla seems tempted by Indian growth story and seems now mulling investments beyond the silicon valley. Khosla labs has already setup a lab in India although no word on investing in India yet but I would expect that pretty soon. One of the most promising incubators that I’m looking forward to is the Startup village, Kochi. It is quite an ambitious project  with a 100,000 sq.ft. campus. Kris Gopalakrishnan is the chief mentor at the 100 crore public-private project. Microsoft started its first batch of accelerator program in India this year. Microsoft does not invest any money in companies and neither takes any equity stake. The program is medium of promoting its Azure cloud platform and other products. One of the most significant developments in investments is the entry of 500 startups in India- a US based early stage seed fund. In the first year of its existence in India, it has already invested in about whopping 10 companies.  That just goes to show the promise that India holds. In one of his presenations, Paul Singh of 500 startups emphasizes just this point.

Apparently the rise of incubators and accelerators is not restricted to India but happening all over the world. Interestingly, I met several foreign nationals  who have landed up in India (including Valerie of ZipDial, one of the companies which got funded by 500 startups) to setup businesses. So not just the investors but the founders too seem tremendously bullish on the scale that India offers. It just remains to be seen how best Indians themselves are able to exploit the opportunity of the homeland. On the non-IT side, Tata Elxsi has launched an incubator this year. That is a very bold move and I’d say, first of its kind in India but exactly the need of the hour.

A significant departure with respect to previous decade or so that seems to have happened is the rise of technology product companies. This is not just the result of the availability of investments and resources. This can be attributed to a whole new generation of entrepreneurs trying to replicate the success of the valley.  The success of dozens of startups who have been able to build truly global product companies from India have boosted the growth. I came across several such startups and it is just phenomenal what they have been able to achieve in just over a couple of years. It would be unfair to name just a few. Although services remain a significant bulk of Indian software industry. This, in addition to the fact that many of the early stage investors including 500 startups invest only in product companies.

Although the point that is emphasized again and again is that now money is chasing the startups and  its the investors who need to find and chase promising founders, the fact remains that early stage funding is no easy task especially in India. From all of this buzz, it is important to understand that it is not the investments and incubations that make this scene exciting, it the scale and opportunities. And founders would be better-off focusing on that.