In
a list of India’s “100 innovative start-up companies” released last
month by Nasscom, which represents software and computer services
firms, nearly one-tenth came from unexpected places making their debut:
cities such as Indore, Durgapur and Thiruvananthapuram.
The
list illustrates an emerging and unchronicled subtheme of new
businesses being incubated by the dozens in India: start-ups moving to
smaller Indian cities.
Start-ups such as Sankalp Semiconductors.
In
a couple of weeks, Vivek Pawar, his wife and two children will make an
eight-hour road trip. Pawar is moving his 18-month-old semiconductor
start-up out of Bangalore to Hubli, a small city 400 km north of here.
His team of 25 design engineers will work out of a development centre
on the campus of a local engineering college. In return, they will set
aside time every week to train first and second-year students on chip
design techniques.
Once headcount at the Hubli centre touches
60, Pawar plans to replicate this “distributed” model at other small
cities in Maharashtra, West Bengal and Tamil Nadu, with each centre run
as an independent business unit with its own entrepreneur-in-residence.
The erstwhile Bangalore headquarters will only be manned by a small
team in charge of sales, marketing and administration.
Pawar,
a graduate of the Indian Institute of Technology, Kharagpur and a
15-year-veteran of Texas Instruments’ development office in Bangalore,
is the newest entrant to a growing list of entrepreneurs who are
tapping into the technology start-up wave in India’s second- or
third-tier cities. While it is difficult to ascertain the exact number
of such companies, industry insiders estimate that close to 1,000
start-ups were launched in all of India in 2006, of which roughly a
tenth raised venture funding.
Start-ups are flocking to the
smaller cities for the lower employee attrition they promise and the
lower costs, not just of hiring and staffing but also of rent,
utilities and transport. Compared to Bangalore, says Tapan Joshi,
vice-president of marketing at eInfochips, a silicon-design firm based
in Ahmedabad, salary costs in his city can be up to a quarter lower
while overhead costs cheaper by up to 40%.
Further,
entrepreneurs say airline connectivity, broadband, fixed-line and
wireless connections are driving technology entrepreneurship to these
smaller cities.
“No one wants to be yet another programmer
amongst the 50,000 at Infosys when technology allows us the opportunity
to create another Infosys right in our back yard,” says Sanjay
Vijayakumar, who co-founded Torque, a mobile phone value added services
start-up, with classmates at the College of Engineering in
Thiruvananthapuram.
The team, which has a final semester to
clear at the engineering college, has already raised Rs5 crore funding
from a group of overseas Indians.
In May, the team will
launch a subsidiary focused on the mobile space, MobMe, that will offer
a slew of services such as a news alert, a mobile payment gateway and a
community service, Fast Blood, that links blood donors with patients.
“MobMe
will be launched in Kochi before we plan a national roll-out,”
Vijayakumar says. Torque has good company: two more mobile industry
start-ups, Tinfo Mobile and TNGicube, are also based out of Kerala.
Semiconductor
design start-ups in various parts of Karnataka are drawing on the
talent pool built up by global majors such as Texas Instruments and
Intel in Bangalore, and from raw recruits at university campuses that
dot the state.
At Manipal, a university town about 400 km
from Bangalore, KarMic, an integrated circuit design firm, has a
training and recruitment model aimed at students that Sankalp hopes to
replicate. “In three-four years, we will have an industry-ready pool of
recruits from which we can pick the top 5%,” says Sankalp’s Pawar.
Others
argue that it is not just the cost advantage driving entrepreneurship
to the smaller cities but the work-life balance that less crowded
cities offer.
“A start-up requires close bonding and
interaction between team members to be a cutting-edge outfit dealing
with global customers. In small cities, employees spend less time
commuting, have enough time for family and are keen therefore to put in
more hours at work,” says Mrinal Das, who quit Texas Instruments to
join the team at Sankalp. He is billed to be the entrepreneur-in
residence for Sankalp’s West Bengal centre.
Industry veterans view the move to smaller Indian cities as the beginning of a virtuous circle.
“More
examples of technology entrepreneurship in tier-two cities need to
happen for all of the Indian population to benefit as opposed to a very
small percentage that participates in the information technology
industry,” Gururaj Deshpande, billionaire-tech entrepreneur, who built
and later sold successful networking businesses Cascade Communications
and Sycamore Networks, said in an email interview. Deshpande runs a
social entrepreneurship programme in home town Hubli aimed at fostering
growth of small business.
