How Delhi Dethroned Bengaluru As Startup Capital Experts share many possible reasons behind the shift

The Economic Survey 2021-22 report said that the number of newly recognized startups has increased to over 14,000 in 2021-22 from only 733 in 2016-17. Additionally, as per the Survey, over the recent years, Delhi has replaced Bengaluru as the startup capital of India.

"The national capital has replaced Bengaluru as the startup capital of India, with over 5,000 recognized startups added in Delhi between April 2019 and December 2021, against 4,514 in Bengaluru during the period," said the Economic Survey 2021-22 released on Monday. Experts say the reasons are manifold.

Why The Shift

"First and foremost, the number of colleges and institutions in and around the capital gives the young generation access to quality education. Delhi University is one of the finest universities in India, with top-ranked colleges like St Stephen's College and SRCC, to name a few. Other prestigious colleges in Delhi include Delhi School of Economics, IIT, JNU, etc," said Padmaja Ruparel, co-founder, Indian Angel Network & Founding Partner, IAN.

Bengaluru has always been the pioneer in the startup ecosystem. However, in recent years, the abundant commercial space available at reasonable rents across Noida, Gurugram, and Delhi has allowed budding entrepreneurs to save costs.

Additionally, access to better infrastructure and other amenities has made many migrate to Delhi, which thereby has helped startups find talents. "With well-connected public transportation and the construction of highways, good infrastructure is another factor that led Delhi to become the startup hub. The easy access to better living conditions and opportunities, too, attract talents from across the country," Ruparel added.

Availability of talent is one of the most critical factors determining the emergence of startups in a particular city and work from home has opened up more choices when it comes to hiring. "While there are a few well-known startups such as Paytm, Urban Company, and Zomato based out of Delhi NCR, several startup founders chose to move to Bengaluru to access high-quality tech talent. However, in the last couple years, work from home has allowed startups to build from anywhere, which has led to founders emerging from Delhi NCR to stay where they are rather than moving to Bengaluru," said Pearl Agarwal, managing director and founder, Eximius Ventures.

The development in NCR in recent years has a huge role to play. "With Noida becoming an academic and IT hub with the presence of many universities and India's leading IT firms, the availability of tech and management talent is ample, along with low real estate costs. On the other hand, Gurugram is a millennium city with most corporate offices and great lifestyle options, attracting youth from across the country. It is also the hub of startups for northern India, with many coworking spaces, incubators, and accelerators helping startups function and grow early," said Dushyantt Kohli, co-founder and COO, Khabri.

Moreover, the pandemic has made more people try out entrepreneurship. "People started to work from home during the pandemic, and many lost their jobs. They got more time to think about and work on ideas they wanted to work on for a long time. A lot of products developed quickly to ride the wave of new and increased demands in a certain category of services during the pandemic," he added.

What Makes a City Startup-friendly

Ruparel shares various reasons for a city to become startup-friendly, with talent being the topmost. "High-quality talent who are exposed to the startup ecosystem would be the key ingredient to becoming startup-friendly. Without entrepreneurs, there are no startups. Hence, high-quality academic institutions are important but other factors like startup incubators, engagement of industry and larger business, mentoring sessions & inspirational events are also key," she said.

The next crucial aspect that helps startups flourish in a particular place is funding. "This could be grants, debt, or equity monies. For startup-friendly cities, governments need to activate grant schemes and deploy monies, work with local banks/branches to provide soft loans to startups," she added.

Next comes the availability of infrastructure, from high-speed internet to office space to quality living in low rentals. For instance, the connectivity within NCR through metro and Rapid Metro, along with several flyovers and expressways to travel between Gurugram, Delhi and Noida is an edge Delhi NCR has. Law and order and also single-window assistance are some additional aspects that make a city startup-friendly. "No startup wants additional environmental or law and order risks. Further, there should be a single window of assistance for startups. There are several regulatory and reporting requirements for startups, which the founders struggle to comply with. To encourage startups to converge to the city, providing a single-window handholding structure where founders can get their questions or problems addressed," said Ruparel.

Will Smaller Cities Join The Bandwagon?

The pandemic-induced remote and flexible work structures have come as a boon for smaller cities. "While several startup founders come from smaller towns and cities, building from their hometown was previously challenging due to the lack of availability of talent. However, work from home and distributed workforce have allowed small-town startup founders to build from their hometown more easily than they could before. Hence, we would see Tier 2 and 3 cities starting to contribute to the ecosystem," said Agarwal.

Having said that, she also feels that due to the lack of a complete ecosystem in those cities, it will take some time before we can see these places contribute meaningfully to the startup ecosystem.

However, Kohli feels smaller towns will soon join the bandwagon, owning fast-developing infrastructure and connectivity with metros in most B towns. "Also, with tech being the enabler of most startups, the dependency to come to a metro city to start a new business is much lower," he said.

Further, today we are seeing many social impact startups that are focusing on rural problems or local problems and these startups prefer to work from smaller places and be more efficient.

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