Why Bengaluru remains the best place for tech startups in India

Salubrious climate, deep technical pool, established private and public technology institutions, and proactive government policies have turned Bengaluru into an irresistible magnet for all tech startups, says the Bengaluru Innovation Report 2019.
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Bengaluru, the pensioners’ paradise of India, has turned into the technology capital of the country, as it remains in the forefront of tech-driven innovation, with the city possessing all the ingredients in terms of people, infrastructure, and know-how to keep this a pulsating as well as a vibrant destination for the startup ecosystem today.

Technology and research & development (R&D) devoted to science have long been the hallmark of the city. The establishment of the Indian Institute of Science (IISC) way back in 1909 is also a testimony to the fact that technology is deeply rooted in the city.

However, this connection does not limit to this academic institution alone as there were other pillars like the public sector units - Indian Space Research Organisation (ISRO) having its headquarters in Bengaluru and also research laboratories of the defence industry.

All these have culminated into Bengaluru becoming a technology hub in the country, and this makes it a strong magnet for tech startups to launch their operations in the city.

The Bengaluru Innovation Report 2019, a study done by leading institutional investors – Accel, 3one4 Capital, Ideaspring Capital, and the Government of Karnataka on the state of startups in Karnataka, amplifies the importance of the city as the destination for those who would like to start their tech venture.

“With over 100,000 PhDs, top technical talent from across the country, and two million people now working in technology, the city also has the most open and welcoming cultures in India. A true ecosystem built by our best people as an example of what India can contribute to the world, Bengaluru will lead India as the epicentre of innovation in the age of disruption, and I am truly proud to stand as a Bengalurean to welcome this future,” says T V Mohandas Pai, Chairman, Aarin Capital.

Contributing factors

The dominant technology base in Bengaluru has been due to the result of the various steps taken over the years - whether in terms of government policies, the sizeable number of engineering colleges, and the readily available talent, while also being millennial-friendly.

As the report mentions, Bengaluru’s GDP is projected to grow at 8.5 percent until 2035. It will also be among the fastest-growing cities globally between 2019 and 2035.

Bengaluru has also been ranked as the most millennial-friendly city in the country, with 37 percent of the population falling in the age group 15 to 35 years. Added to this, the city has a sizeable technical talent pool as it is home for over 100 engineering colleges churning out over 90,000 engineering graduates every year.

In parallel to this has been the policies and the overall encouragement from the state government to promote and showcase Bengaluru as the technology capital.

Govt support

Dr Ashwathnarayan C N, Deputy Chief Minister and Minister for Higher & Medical Education, IT & BT, Science & Technology, Govt of Karnataka, says, “Bengaluru’s vibrant startup culture has continued to maintain its strong growth momentum, with the city being home to one of the largest startup ecosystems in the world.”

“The growth in scale of Bengaluru’s startups, both domestically and globally, as well as the ambition and drive of the city’s entrepreneurs continues to be a source of inspiration for the entire ecosystem. We have truly come far in the last 10 years, and continue to produce exceptional companies and founders that can become behemoths in their respective industries,” he says.

The other important factor which has made Bengaluru a key destination for technology-related activity has been the presence of the information technology (IT) industry, which includes both the Indian and multinational companies (MNCs).

R&D impact

According to the report, Bengaluru and the rest of Karnataka houses 400 R&D centres, and 85 chip designing houses. Around 60 percent of biotechnology companies in India have a base in Bengaluru.

The report also says that India is the preferred destination to set up global capability centres (GCC) accounting for 25-30 percent of Fortune 500 companies. Bengaluru is also the most preferred GCC location in India with 34 percent of GCCs located.

The presence of such centres makes an invaluable contribution to the city, both in terms of creating technology capability, as well as having that growing pool of experienced tech resources.

S Gopalakrishnan, Chairman, Axilor Ventures, says, “The Bengaluru ecosystem is unique - R&D departments of startups, domestic and multinational corporations, academic and industry, defence, product, and user organisations - all coexist in one metropolitan city. This means that future innovations are planned and developed in Bengaluru and will also be first used in Bengaluru. The talent in the city is hence up to date with the developments that are being contemplated.”

This ecosystem has a positive rub off on the startup community. As the report mentions, the GCC-startup engagement is becoming a mainstream operating model for global enterprises to advance their innovation agenda. “This is evident in a large number of corporate accelerators being established by GCCs as they look for ‘startup’ solutions for enterprise problems,” it says.

Dr Vijay Chandru, INAE Distinguished Technologist, IISc, says, “Bengaluru has had a culture of tech innovation for almost five decades now. The ecosystem is quite evolved and robust with a lot of successful entrepreneurs and tech executives who have created investor pools that support a diverse set of tech startups in deep tech, health, and fintech among others, which then dovetails the enterprises with a wide array of venture and private equity players who have been active in the ecosystem for at least a couple of decades now.”

Destination for tech startups

The impact of this technological evolution in the city is visible in actual numbers. According to the report, Bengaluru has recorded more tech-startups founded since 2016 than Mumbai and Delhi combined.

The report also states that Bengaluru-based startups have raised more money since 2016 than Delhi and Mumbai combined. Bengaluru-based startups raised $30.57 billion since 2010 and it is $20.1 billion in just the past four years.

Lizzie Chapman, Co-founder, Zest Money, says,As a fintech, we are always straddling the tech world of Bengaluru and financial world of Mumbai. But having our hub in Bengaluru was never up for debate. We knew we would need to hire hundreds of talented skilled engineers and data scientists, and Bengaluru would be the place they would want to be based. Talent attracts talent and the community of tech talent here is one of the best in the world. It leads to fast idea-sharing and constant positive reinforcement.”

In this journey of the startup ecosystem in Bengaluru has been the evolution of deep tech and IP development in the city. Bengaluru based deep-tech and life science startups have the highest hit rate of attracting investors due to the vast presence of best-in-class academia and talent.

The report states that one in every four companies in the deep tech, health tech, and fintech sectors can raise money in Bengaluru.

The startup ecosystem in Bengaluru will continue to march ahead, breaking new grounds and creating fresh innovations, and the city is expected to shine brightly for years to come. In this journey, the state government will also have to play a key role, which understands the importance of nurturing these young companies.

“For a city to produce successful entrepreneurs, it needs to provide the right policy support and allied infrastructure that can nurture innovation. With the creation of the Startup Vision Group-Karnataka under the Startup Karnataka programme, we have aimed to bring together the brightest minds in the ecosystem to help set up a robust framework for policy generation that can be both flexible in its reaction to disruptive technologies but at the same time fair to all stakeholders that are involved,” says Dr Ashwathnarayan.

(Edited by Megha Reddy)