Will Kejriwal’s Gambit take startups out of Bangalore

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Paytm, Snapdeal, Oyo Rooms, Zomato, Delhivery, Mobikwik, Lenskart… Do you know what these high value-added startups have in common? They were all founded in Delhi. In fact, Paytm was founded in 2010. Still, the National Capital Region hasn’t really become India’s startup capital. That crown still belongs – for all intents and purposes – to Bangalore. This is despite the AAP government’s emphasis on promoting startups since coming to power. In its latest initiative, Delhi has announced several tax and non-tax incentives to promote entrepreneurship in the state. This is in line with the stated ambition of the Kejriwal government to create 20 lakh jobs by 2027.

And despite the fact that Delhi added more than 5,000 startups between April 2019 and December 2021, compared to Bangalore which launched only 4,514 according to the Indian Economic Survey 2021-2022, the general consensus is that this does not mean much. However, in announcing the Delhi Startup Policy, CM Arvind Kejriwal seems determined to change that. The question is how.

Investor Preference

Bangalore’s biggest advantage is that it is a hot ground for investors – Karnataka accounted for 45% of total FDI investment in India in the first half of FY 2021-2022; most being in Bangalore. Delhi, meanwhile, only accounted for 13% of FDI inflows between October 2019 and December 2021, amounting to $15.8 billion.

“What Bangalore has done rather well is establish the translation of research into the market, which has resulted in the creation of many research-driven startups. The presence of various hardware and software vendors also makes Bangalore a step up in terms of innovation. Every startup needs to invest in technology and on that front Bangalore-based startups would be more ready than Delhi-NCR,” said Arpit Agrawal of Blume Ventures.

So one thing Delhi needs to do to attract more global investment is to become more tech-friendly. Also, because most startups are strongly driven by technology.

Cheap real estate

According to the “Startups Scale Up” report from Colliers and CRE Matrix, startups are expected to lease approximately 29 million square feet between 2022 and 2024, a 1.3x increase from 2019-2021. The report also states that Bengaluru remained the top startup hub with a 34% rental share in 2019-21, with Koramangala, HSR and Indiranagar being the preferred locations for startups.

As Delhi catches up and is among the fastest growing markets for startup rentals (according to the report), Bangalore’s cheap rental spaces are what propels it to the top spot.

To attract more investment, Delhi needs to up its game in property rentals – the availability of which is far greater than that of Bangalore.

Technological talent

Attracting the right kind of talent is both necessary and challenging for any business. For startups, it becomes more essential due to the limited resources they have.

According to a survey conducted by professional services firm Aon, one in four new offers made by new era companies were rejected by applicants in the last half of 2021, through January 2022. The survey, which s ended in January, covered around 700 new era companies in IT, e-commerce and startups.

One of Bangalore’s greatest advantages in its startup reign has been the concentration of its tech talent pool. “One of the main reasons why Bangalore is chosen by startup founders is because of the availability of tech manpower. Bengaluru has become a magnet for tech startups due to proactive government policies, a pool of technical, established private and public technology institutions, etc. says Padmaja Ruparel, co-founder of India Angel Network.

Diksha Pande, co-founder of Bengaluru-based Samosa Party, agrees. “As startups spring up all over Indian metros and elsewhere, we believe the quality of talent available in Bangalore is extremely high. Moreover, people staying in other regions are mostly willing to relocate to Bangalore.

In fact, Singapore-based financial analytics site ValueChampion ranked Bangalore as India’s most millennial-friendly city, with 37% of the population falling into the 15-35 age bracket.

Being an IT hub only adds to Bangalore’s advantage. Delhi, clearly, needs to make conscious efforts to attract the tech talent pool, with most offices now reverting to a hybrid model after the pandemic abates. It remains to be seen how the Delhi government can play a role in this area.

Well-developed ecosystem

Bangalore’s strength as India’s startup hub lies in years of development and focus on R&D, a feat Delhi may take time to achieve.

The city has R&D departments dedicated to startups, national and multinational companies, universities and industry, defense, products and user organizations. The impact of this technological evolution is visible in real figures. According to the Bangalore Innovation Report 2019, the city has recorded more tech startups founded since 2016 than Mumbai and Delhi combined.

In the Global Startup Ecosystem Report 2021, Bengaluru moved up three places to rank 23rd in an annual analysis of the world’s most favorable ecosystems for building a globally successful startup, while Delhi was placed at 36th position.

Bangalore has done well in finance, connectivity and knowledge, in addition to healthy access to growth capital.

While the report praises Delhi for its impressive growth, Bangalore’s already established ecosystem is something Delhi lacks when it comes to startups. “Bangalore’s legacy is still strong as a majority of talent and investors are already settled here and it will take time, maybe a decade, to neutralize them and distribute them to other cities,” says Iesh Dixit , CEO and Founder of PowerPlay, an end-to-end construction management SaaS platform based in Bangalore.

Good micro market

Last but not the least, the digital native population of Bangalore provides a good testing ground for any startup. People are more willing to use a new app or digital product in Bangalore than in Delhi.

This is one of the main reasons why many startups – especially tech – prefer Bangalore over any other Indian city to launch their product. “On average, people in Bangalore are much more tech-oriented than those in Delhi-NCR. In Bangalore, you see businesses growing a lot more through technology, and technology is the main preference of businesses in Bangalore,” confirms Agrawal.

While the pandemic has forced most people to become digitally literate, it will take some time for Delhi to offer the same advantage as a micro-marketplace as Bangalore for any startup.

The Delhi advantage

Delhi is not quite a startup hub yet, but it has its advantages.

“Delhi is the cultural hub of India and has a diverse set of vendors, manufacturers and brands located in and around the city. demand and supply, especially for lifestyle categories, and I don’t think there is a city that balances culture, infrastructure and talent quite like Delhi,” says Suchita Salwan , founder of LBB, a Delhi-based platform for discovering unique independent brands and businesses.

Delhi’s large population and strong infrastructure are also great advantages for entrepreneurs. “If people start, then the likelihood of them choosing Delhi-NCR over Bangalore is greater because its population (of Delhi) is three times that of Bangalore,” said Agrawal of Blume Ventures.

Moreover, Delhi is also the political hub and any political boost required for startups happens from here.

Whether Kejriwal will succeed in turning Delhi into an Indian start-up hub and a global innovation hub will have to be seen, but the government must understand that what Bangalore is today is the result of its supportive policies and government initiatives for over of a decade. Matching that wouldn’t be so easy.

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