Is India Coming In Power With Its Startup Cult?
As the IFII say, "How do we compare to Silicon Valley?"
I see similarity in what is happening in India today to what was happening in the US about a decade ago. But I look at it in two ways. First, is India moving ahead on the entrepreneurial scene phenomenon? The answer is absolutely yes. But then I think is it becoming like Silicon Valley? That’s a difficult question to answer. The reason I say that is because even through entrepreneurship and technology are becoming a global phenomenon, like a good virus that is spreading throughout the world, it’s interesting that if we look at the numbers, even within the US Silicon Valley remains not only the hot sun but it’s becoming bigger.
We look at total venture capital investment in the US. By regions, in 2000, 25 per cent of investment was made in Silicon Valley, 75 per cent was Boston, New York, New Jersey, Washington D.C., Texas Austin, and other parts of the US. But in 2014-2015, instead of that 25 per cent of VC investment in Silicon Valley, it was 50 per cent. So, these places are moving ahead as well, but Silicon Valley is moving ahead at such a break and pace.
For example, if you go back to 2000 Silicon Valley was really all about IT, related sectors, and to some extent about biotech.
Today, of course, IT and Biotech remain absolutely hot, but then you look at for example automotive. The automotive center of the world is not Stuttgart, Detroit, Tokyo, or Nagoya, it’s in Silicon Valley.
You look at Fintech, look at Edutech and so on, other industries that were not touched by innovation or digitization, as they are being transformed by digitization, they are gravitating towards Silicon Valley. In that sense, Silicon Valley remains at least, so far, a unique almost like hotspot in the world.
Now that said, the question isn’t really whether India is becoming or can become a Silicon Valley, but the question is if Bangalore is moving at a break and neck pace. And that it is. And there, I think, India’s innovation and entrepreneurship ecosystem benefit both from the culture of India and, essentially, also from that connectivity Bangalore has to Silicon Valley.
If you look at the tech venture created at Silicon Valley, this happened because of that ambience formed by Chinese and Indian emigrants forming the dominant ethnic background that started in the late 80s and early 90s. Now, many of them have graduated, become very successful and many of them are now VCs in Silicon Valley. Therefore, there are a whole bunch of tech entrepreneurs and tech VCs in Silicon Valley whose roots are in India and they provide the connectivity.
That’s why we look at someone from the Silicon Valley, for instance, Vani Kola and Kalaari Capitals. We look at some of Silicon Valley venture capital firms such as Sequoia, which are very big in India.
Another thing I want to mention is the quality of talent that comes out of the IITs and IIMs, it's phenomenon. Though IITs are not yet research powerhouses but the quality of the talent, the average IIT graduate certainly from the top five institutes that goes back to the 50s and 60s, they are at least as smart as the people coming out of MITs and Stanford’s. And they don’t want to work for a large company.
They want to be an entrepreneur. And that is leading to more and more flow of money.
Is this cult here to stay?
These are still the early days in India and therefore I think this will continue.
And of course, it is not only Indian money that is coming in, but also Chinese capital and Japanese capital. You look at Softbank but you also look at Alibaba and other companies. And, of course, US capital, venture capital, and again from Europe, and both domestic, whether it is Mr. Ratan Tata or others like him.
First of all, when it comes to venture capitalists, I’m not particularly concerned about whether it is Indian money or US money or Russian money. Yuri Milner has invested money and Napster from South Africa has invested, Singapore, Sovereign wealth fund has invested in India.
And the reason I’m not concerned and in some scenes I see that as A+ is, because unlike, say in portfolio investment, at the click of a button they can sell the stocks right away, whether it is equity or debt. But, if foreign investors put money in, say a Flipkart or a Snapdeal, and so on, that money is stuck. They cannot turn around and take that money back.
Number two - so the real question now is, if they put in more money into the company as the company moves ahead? That, of course, is a perennial question but that’s a question even in Silicon Valley because if you look at what some of the seasoned VCs are saying is that the reason that many of the unicorns, and it is even being said for companies like Uber and so on, are not going public is because if they do, their evaluation will be lower.