Start-up city

Amit Sharma,one of those at the HSR Layout house,is a Delhi College of Engineering graduate with an MBA from the University of California,Los Angeles. Sharma chucked cushy jobs at Infosys and in Silicon Valley to start Go Untucked in 2011. He has received one early round of seed funding from angels and is moving for a second.

Sharma,who calls his move to entrepreneurship a “cultural shift”,says,“My father is a Central government employee. He worked in the same job for 25 years and starting a company was looked down upon. But now the notion of an entrepreneur has suddenly changed and become more respectable. After 2008,it has become cool for IIT and IIM graduates to do start-ups rather than join big companies.”

Sharma was doing grid computing,writing research papers and getting international patents in his name at Infosys for three years. “That’s when I began realising that if you talk about innovation,then sitting in a lab and doing things is like the beginning of the journey. The end of the journey is when you take it out to the market,” he says.

One of the reasons Sharma decided to take the plunge was his belief in India’s “consumption story”. “Originally it was about investigating the opportunity in the US but we realised India is a stronger story,” he says. “The cream in the technology sector doesn’t think that getting into an IT company is the coolest thing to do. They now want to do something on their own. As we go,we will see more people like Sachin and Binny Bansal of Flipkart or Naveen Tewari of InMobi.”

According to Mukund Mohan,41,a serial entrepreneur,engineer and angel investor from Silicon Valley who is now trying to put together the Bangalore chapter of the highly successful Mumbai Angels network,a spurt in the number of product start-ups is creating excitement.

He puts the total number of start-ups in India now at around 10,000,with 5,000 start-ups in Bangalore,followed by Mumbai,Delhi and Chennai. In Bangalore,in the product space alone—e-commerce,software services,mobile applications—there are 1,000 start-ups now,he says.

“What has changed dramatically in the last three years is that there are a lot more product companies. I now meet one or two new e-commerce companies a week. There is a 200 to 500 per cent growth in companies trying to build software and a 1,000 to 5,000 per cent rise in mobile applications start-ups,” says Mohan.

Subhendu Panigrahi,26,an IIT-Kharagpur alumnus and founder of a six-month-old Bangalore-based angel investment network,Innovation Angels,says the spurt in start-ups is because global companies have their R&D units in India. “There are more people who are risk-takers in the technology sphere because companies like Google and Microsoft have started research offices here. People who have worked on real products are opting for their own start-ups over cushy jobs,” says Panigrahi,whose network has invested in a peer-to-peer video-streaming company called Quikast run by fellow-IITians Saptarshi Biswas and Soumya Das.

“Today,some 20 to 30 per cent of people who would have joined technology companies don’t want to do so. They want to be on their own. They are not scared of failure,and money is available,” says Infosys board member and CFO V Balakrishnan.

The right ecosystem

Sharma,founder of Go Untucked,also doubles as the head of the Bangalore chapter of Startup Leadership Program (SLP),which twice a year teaches 20 to 25 promising founders of young companies the nuances of the start-up business. The programme,which began in 2010 in Delhi and Bangalore,is part of an initiative launched in the US four years ago to groom young entrepreneurs and has now spread to Mumbai,Pune and Hyderabad.

“SLP is a global organisation that has very high calibre entrepreneurs in it. We have many start-ups—300 at last count,which will double soon,” says Anupendra Sharma,a serial entrepreneur in the US,one of the founders of the SLP and a programme partner at Siemens Venture Capital.

Another key factor contributing to the new energy in the start-up ecosystem is the attempt to create angel networks comprising high-net-worth individuals and serial entrepreneurs.

On a suggestion by Infosys founder N R Narayana Murthy,who now runs a venture capital fund called Catamaran Investments,Sasha Mirchandani,the founder of the Mumbai Angels network,is attempting to build a Bangalore Angels network with his friends such as Mukund Mohan.

The Bangalore chapter of Mumbai Angels,still a small network of a handful of investors,invested $200,000 this March in an e-learning product company called CarveNiche,started by two former women employees of Infosys,and $10,00,000 in an unnamed 4G mobile services company.

“We believed there was a genuine lack of platforms for entrepreneurs in India. Without a vibrant entrepreneur ecosystem,no country can compete globally,” says Mirchandani,who has had success with seed investments in companies like InMobi,Myntra,Mobstac and Cnergyis.

“These are really exciting times. We are seeing the market evolve. When my friend Prashant (Choksey) and I co-founded Mumbai Angels in 2006,we were just one of two angel clubs. Now almost every city has its own angel club,” says Mirchandani.

Former Infosys CFO T V Mohandas Pai,who has a $50 million venture fund with the Manipal Group’s Ranjan Pai,is trying to bring techies and entrepreneurs together in Bangalore as angel investors.

“There is a community of angels coming together across India. Bangalore has a capacity of maybe 1,000 high-net-worth individuals in the technology sector who can be angels. But only 60 of them are angels. I am working to create angel networks in Bangalore. Mumbai may have some 500 and Delhi about 500. It’s very small but it is growing,” says Pai.

Besides angel networks,what is new on the start-up scene is the emergence of accelerators on the lines of Y Combinator in the Silicon Valley,where one of India’s most promising start-ups,InterviewStreet,was chosen for an incubation programme. “There is Sameer Guglani whose (accelerator company) The Morpheus is up and running. Then you have Shravan Shroff and Dr Ravi Kiran backing the accelerator VentureNursery,” says Mirchandani.

The emergence of incubators and accelerators across campuses such as IITs,IIMs and even private engineering colleges has also played its part in the start-up ecosystem. Recent start-up successes such as the library chain JustBooks or customer relations management company Capillary Technologies were incubated at IIM-Bangalore and an IIT respectively.

The government’s Department of Science and Technology (DST) has created as many as 200 technology business incubators around the country. Entrepreneurs are given a seed capital of Rs 15 lakh,with Rs 45 lakh in additional funding if innovators scale up by bringing in more funds.

“It’s only now that we are focusing on innovation-led entrepreneurship and on products. Until now,India was focused on service-sector industries—IT,BPO,or on improving products already existing in the market,” says Prof Shivaram Malavalli,who with his Silicon Valley-based entrepreneur brother,Kumar Malavalli,runs a mentor programme for start-ups called Cross Border Entrepreneurs and is a regional coordinator for DST’s technology business incubators in Karnataka.

While Bangalore remains the number one location in India for start-ups—as indicated by its ninth rank in a list of best start-up ecosystems in the world put out last month by the Silicon Valley-based Startup Genome Project—other cities are not far behind,say experts.

“For boot strapping,hiring talent and brainstorming on technology,Bangalore is ahead of other cities because the tech talent is in Bangalore. Also,if you are working in a start-up in Bangalore and if you have to leave tomorrow,there are opportunities all around if you are a good technology guy. Bangalore has mimicked Silicon Valley that way,” says Panigrahi of Innovation Angels.

“Bangalore is an old favorite and continues to be but Gurgaon has been very exciting in the last year or two. It’s a sign of the ecosystem falling into place. It also has better infrastructure than Bangalore,for example,” says Mirchandani of Mumbai Angels.

The missing links

There are many pieces still missing in the start-up ecosystem puzzle. To start with,there are few exit options for investors other than selling to venture funds. Angels such as the Mumbai network have had successes with companies such as InMobi by selling to second-stage investors.

Mumbai Angels,on an average,provides around $500,000 as seed fund but has in recent times done a couple of one-million-dollar investments. It has 40 start-ups in its current portfolio.

“For groups like angel networks,there are some exit options. But for growth-stage venture capitalists,there is a problem. We don’t have homegrown companies that will go and acquire start-ups,” says Panigrahi.

“In the US,I have invested in some 26 companies and have about six exits. Here in the seven companies I have invested in,I have not even got one in three years. Exits are non-existent in India. It’s a mindset issue,” says Bangalore Angels coordinator Mukund Mohan.

Things could however be on the cusp of change if some of today’s technology start-up success stories achieve scale in India,he says. “The signs are there. Flipkart is going to be fairly big. They will have the currency to buy companies in about a year or two if they go public. InMobi,Snapdeal,redBus,Cleartrip may all get big. MakeMyTrip acquired iXiGO,Komli Media are acquiring abroad and may turn to India,” says Mohan.

Another problem is the dearth of strong technology talent to fuel the dreams of founders.

Vishal Shah,30,a Cornell University MBA who was SLP’s ‘CEO of the year 2012’ and who is the founder of a social gamification start-up called Traffio in Mumbai,is moving his company to the US. He says his decision comes from a realisation that “I am trying to build an Internet product company in a market that does not want products’’. Shah says another problem he has encountered in India is the lack of brilliant coders who can be hired by start-ups. “The technology ecosystem currently breeds mediocrity. All the good hackers have either gone out or are starting their own companies,’’ he says.

* Subhendu Panigrahi

The 26-year-old IIT-Kharagpur alumnus is founder of Bangalore-based angel investment network,Innovation Angels,which has invested in a video-streaming company called Quikcast run by IITians Saptarshi Biswas and Soumya Das. “There are more people who are risk-takers in the technology sphere because companies like Google and Microsoft have started research offices in India,” says Panigrahi.

Start-ups grown big

Flipkart

Binny Bansal and Sachin Bansal started Flipkart in 2007 with an investment of Rs 4 lakh. Flipkart is now a $100-million-revenue online retail giant

InMobi

Naveen Tewari started

InMobi as an SMS-based search platform in Bangalore with initial funding from Mumbai Angels. It is now the “largest independent mobile advertising network in the world”

OnMobile

Originally incorporated in September 2000 in California under the name Onscan Technologies India Private Limited as a spin-off from Infosys,the company founded by Arvind Rao and Mouli Raman relocated to India and is now India’s largest value-added-service company.

The others redBus,Myntra,Cleartrip,MakeMyTrip,Komli Media,Snapdeal,JustBooks

* Vishal Shah

The 30-year-old with an MBA from Cornell University is founder of a social gamification start-up called Traffio in Mumbai. But he is moving his company to the US because of a realisation that “I am trying to build an Internet product company in a market that does not want products”.

* Sasha Mirchandani

Founder of the Mumbai Angels network,Mirchandani (pic above,right)is building Bangalore Angels,which invested $200,000 this March in an e-learning product company called CarveNiche,started by Saraswathy A and Avneet Makkar (L-R in pic above,left),both former Infosys employees. “Without a vibrant entrepreneur ecosystem,no country can compete globally,” says Mirchandani.

* Mukund Mohan

The 41-year-old is a serial entrepreneur,engineer and angel investor from Silicon Valley who is now trying to put together the Bangalore chapter of Mumbai Angels with Mirchandani. “What has changed dramatically in the last three years is that there are a lot more product companies,” he says.

* Amit Sharma

The 31-year-old chucked jobs at Infosys and in Silicon Valley to start a crowd-sourcing,e-commerce company called Go Untucked in 2011. “After 2008,it has become cool for IIT and IIM graduates to do start-ups rather than join big companies,” he says.

* Shivaram Malavalli

He is the regional coordinator for the Department of Science and Technology’s technology business incubators in Karnataka. With his Silicon Valley-based entrepreneur brother Kumar Malavalli,he runs a mentor programme for start-ups called Cross Border Entrepreneurs. “It is only now that we are focusing on innovation-led entrepreneurship and on products. Until now,India was focused on service-sector industries,” he says.