How Bengaluru’s HSR Layout wooed startups to 'Unicorn Street' and became a mini Silicon Valley
As I wait for my next meeting at Bengaluru’s very own version of Starbucks - Third Wave Coffee Roasters, a sudden realisation struck me. A year and a half back, when the Third Wave opened its HSR Layout outlet, the cafe remained empty for most of the day. Only post the office hours, people gathered in groups to enjoy the ‘Make in India’ coffee. Today, irrespective of when you step in, the chairs are occupied by freelancers, budding entrepreneurs, and even a few VCs, signing off a few initial cheques.
I take another look around - only four tables remain empty. Behind the shining laptops, I see a couple of familiar faces. It’s Sivareena Sarika and Subhadeep Mondal, founders of YourStory’s 2018 Tech30 company, PregBuddy.
Now regulars at Third Wave, the duo has seen HSR transform from a residential area to a startup hub. “I see entrepreneurs meeting with VCs, discussing ideas, or startup founders just hanging around for interviews,” says Subhadeep.
Bengaluru, India’s startup capital is home to more than 5,234 startups, a report by TiE-Delhi-NCR and Zinnov stated last September. Its posh neighbourhood, Koramangala, was once crucial for the spilling of the startup ecosystem in India. With young techies, affordable pubs, and apartments turned into office spaces, Koramangala reflected everything that a startup universe would look like.
Further, Koramangala once housed India’s most successful startup story - Flipkart. Today, Koramangala’s fintech street boasts Instamojo, Paytm Money, PhonePe, Cashfree, Slice, furniture rental startup Furlenco and coworking space WeWork.
However, 10 years down the lane, Koramangala is less desirable by budding entrepreneurs. Identified with maddening traffic, broken roads, and cramped up buildings, in the last five years, the startup ecosystem has gradually started moving to the neighbouring HSR Layout.
HSR Layout's 'Unicorn Street':
Ironically, the Third Wave started its journey by opening its first store in Koramangala back in 2016. Co-founder Ayush Bathwal says, “The first few months were low. We had about 25 people walking in every day. But our number of transactions has tripled now.”
Ayush said that they are planning to open another outlet in HSR soon.
Characterised by less traffic, more greenery, and relatively new and spacious buildings, HSR Layout houses more than a dozen startups today. Its 17th Cross Road in Sector 3, houses India’s fastest growing unicorn, Udaan.
“HSR has all the attributes of a good location in terms of accessibility, connectivity to other places in the city - whether it is going to the airport or Electronic City. There is a certain vibrancy to this place,” says Sujeet Kumar, Co-founder of Udaan.
The B2B marketplace founded by former Flipkart executives Sujeet Kumar, Amod Malviya, and Vaibhav Gupta, Udaan has the record of becoming a unicorn in the shortest time. It has also managed to attain a valuation between $2.5 billion and $3 billion, within only three years, disrupting offline distribution with its B2B model.
It has been located at HSR since its inception in 2016. With four large offices in the same street, Udaan is not the only HSR-based startup making it to the headlines. Soonicorn Cure.fit also ventured into the startup space with its head office in the same 17th Cross Road.
New startup hub
Standing tall, just next to Udaan’s office is Mukesh Bansal and Ankit Nagori’s startup Cure.fit. Starting up in a small bungalow, Cure.fit now has a 32,550 sq. ft. black coloured office that shouts the startup’s slogan: Be Better Everyday.
True to its words, Cure.fit started with two centres in the HSR Layout and today, it has managed to expand to over 270 Cult.fit centres and 35 Mind.fit centres.
Ankit Gupta, Head of Engineering and Org Operations at Cure.fit, says, “HSR has a very good mix of residential and commercial properties when compared to other tech parks. When working for a startup, work-life balance becomes very important. While spending time in the product or tech, employees do not wish to sacrifice personal time either. Bengaluru’s traffic makes it difficult if employees live too far from their offices.”
Besides these big players, HSR also houses a dozen other startups, including SaaS company Whatfix, fintech startup Khatabook, HRtech startup Hush, job listing platform WorkIndia, home rental startups Nestaway and Zolo, edtech startups Simplilearn and Vedantu, and community management solution provider MyGate.
“A startup like ours requires working with a lot of partners. Here, we can identify our partners within five km of our office,” says Arminder Thind, Founder of StanceBeam, which has its office in Sector 1 of HSR.
Krishna Kumar, Founder and CEO of Simplilearn, says, “I moved to HSR way back when it was not known as a startup hub. I landed here looking for a good daycare for my son. In the process, I was impressed with the way the area has been maintained, planned, and developed.”
The reasons for the shift of this startup hub status from Koramangala to HSR were many – affordable homes and office spaces, easy availability of engineering talent, less traffic and pollution, and of course, its location. Over the years, HSR has developed to be a self-sustained suburb.
“I don’t need to move out of HSR if I need anything. You have everything but a mall in your vicinity. Previously, we only had CCD (Cafe Coffee Day) to conduct meetings, now the options are unlimited,” says Sivareena of PregBuddy, which has its office in Sector 2.
The 17th Cross Road, along with the startups, is also characterised by the presence of famous restaurant chains and pubs. A few years back, Koramangla’s House of Commons opened a new branch in the same street. Besides that, there are multiple options for cafes, fast food joints, north Indian restaurants, and fine dining eateries. HSR also got its first micro-brewery, Brother Barley Brewing Company, a few months back in the same 17th Cross Street in Sector 7.
“The parks and the quiet environment makes HSR peaceful to not just live in, but also work. It includes a mix of commercial and residential properties, providing options to stay and set up offices. The presence of multiple startups makes it easier to mingle and network. Also, there are no parking issues and lots of food options,” Krishna adds.
Additionally, Ravish Naresh, Co-founder of Khatabook, says that areas in-and-around HSR has a lot of engineering talent, which was one of the reasons for the fintech startup to choose HSR as its base when it shifted its office from Mumbai early last year.
“HSR’s biggest advantage was the availability of talent and affordability of office spaces,” he adds.
Real estate market
But how has this shift affected the real estate scenario of HSR?
While most startups preferred to set up their offices in HSR for its cheaper rents, the trend has been of increasing rents over the last few years.
Debanjan Biswas, a Senior Analyst at Dell, has been living in the suburb for the last three years. In 2017, he paid Rs 19,500 per month for a 2BHK apartment in Sector 4. The same house costs him Rs 25,000 today.
Subhadeep, who decided to shift to HSR five years ago, and set up PregBuddy’s office in the locality, paid Rs 18,000 as his initial rent for a 2BHK. At present, he pays Rs 23,000 as rent.
American commercial real estate services and investment firm CBRE states that with global multinationals expanding and consolidating their footprint in Bengaluru, the market has shown tremendous development.
Ram Chandnani, Managing Director, Advisory and Transaction Services India of CBRE, South Asia, says, “At 166 million sq. ft., the city has the largest office stock in the country, with more than 30 million sq. ft. of office space due for completion by 2021. Overall, the city is expected to witness rental growth due to strong demand for space in quality developments and continued pre-leases in under-construction spaces.”
Khatabook has one office in Sector 3 now and is constructing another five-storey office space in the locality. “It will be seating 200 people and we would be paying Rs 1 crore a year,” Ravish says.
Abhishek Patil, Founder of Oliveboard, says that the startup has a 3,400 sq. ft. office and it pays Rs 78 per sq. ft. per month. Over the last four years, Oliveboard’s rent expenses have gone up by 20 percent.
“We expect Bengaluru to remain one of the key drivers of supply addition in 2020, with development completions likely to be concentrated in peripheral or suburban micro-markets,” Ram adds.
“Koramangala was always the startup suburb, but in the last three years, VCs have been saying that most of their portfolio companies are in HSR,” says Abhishek.
However, for Krishna, the biggest drawback in HSR continues to be the non-availability of large commercial buildings. “In fact of late, the area has become very crowded and is losing its original charm of peace,” he adds.
(Edited by Suman Singh)