STARTUPS
Mumbai has emerged as the hub of B2B startups in India, but talent still in short supply

The island city was slow to warm up to the entrepreneurial culture, but fintech and enterprise tech are now driving its startup economy. With government support kicking in, the megacity seems poised for startup action despite the talent crunch.

Everyone in Mumbai is a businessman. Dhandha, as it is called in common parlance, is in the veins of Mumbaikars. The old city is home to hundreds of legacy organisations, family businesses, large conglomerates, leading banks, financial institutions, and – lately – a few startups.

But Mumbai, the commercial capital of India, trails Bengaluru and Delhi-NCR when it comes to startups, according to NASSCOM’s Startup India: The Momentous Rise of the Indian Startup Ecosystem report released in late 2017.

A part of this has been attributed to large corporates’ patronising attitude towards entrepreneurs setting up new, innovative businesses with the potential to disrupt age-old corporate practices.

Plus, there was the cost burden. Mumbai’s astronomical real estate prices were hardly conducive to young entrepreneurs, who were high on concepts but low on cash. As a result, a lot of startup talent migrated to other places, especially Bengaluru.

Those who stayed back continued to be screened by tough investors who wondered if startups were just fads or real, scalable business opportunities. There was little support from the local government, too. Reasons that a startup ecosystem took long to develop.

Bengaluru and Delhi-NCR, meanwhile, surged ahead in fostering vibrant entrepreneurial cultures and creating supportive environments for startups to prosper.

Not until 2013-14 did Mumbai startups begin to make a dent in the minds of investors and large clients. Some prominent names, including Ola and Freecharge, did start out in the island city, but migrated down south to build scale and sustainability.

While Ola evolved into one of India’s leading unicorns after moving to Bengaluru, Mumbai continued to wait for its first billion-dollar-startup. Housing.com, which had shown initial promise and was touted to be the poster child of Mumbai startups, went down as the enfant terrible of India’s startup universe.

There have been a few success stories, of course, but they are few and far between.

But, all that seems to be changing.

In the last “12 to 18 months” — a time frame anyone even remotely linked to the city’s startup ecosystem refers to — a lot of activity has taken place. There have been a good number of deals, significant funds have flown in, accelerators and incubators have stepped up their programmes and initiatives, large clients have moved from conducting trials to forging proper collaborations with startups, and so on.

According to industry tracker, Tracxn, there were 4,582 active startups in Mumbai at the end of 2017. Between 2015 and 2017, there have been 617 funding rounds and $2.73 billion in capital has flown into the city. In comparison, between 2013 and 2014, 172 funding rounds had fetched capital of $548 million only.

What triggered the change?

Pranav Marwah, Co-Founder of ThinQbate, a startup incubator-accelerator, says:

“Until 2016, there were a host of me-too startups. In the last 24 months or so, we’ve seen real innovations coming up, especially in hardware and technology. More product-driven businesses have emerged. There is a lot more focus on building system efficiencies.”

A few verticals have been the driving force. Fintech and enterprise tech lead, edtech and healthtech follow. Investors and the community at large seem to think that Mumbai is turning out to be the hub of B2B startups, while Bengaluru continues to be the face of B2C ones.

The rise of fintech

Fintech has emerged as the second most-funded sector in the last two years. Between 2013 and 2017, over $808 million has gone into fintech startups, second only to consumer startups, according to Tracxn. Mumbai has over 400 fintech startups and is now India’s fintech capital.

Aparajit Bhandarkar, Chief Acceleration Officer at ISME Ace, a fintech accelerator, says,

“The presence of the banking system in Mumbai is fostering the growth of fintech startups. Five of India’s largest banks are located within a 2-kilometre radius of our workspace. We connect our startups to the banks, NBFCs, brokerages, insurance agencies, mutual funds and so on, and get them the right customers.”

ISME is endeavouring to develop Lower Parel, an upscale business district in South Mumbai, into a fintech hub.

Aparajit says, “Startup Bootcamp is close by. Rise [another fintech accelerator] is here. We are here. The banks and NBFCs are also here. Together we are trying to create something.”

These fintech startups cover the entire spectrum of financial services from alternate lending, insurance and wealth management to stockbroking, payments, and remittances.

Zone Startups India, an early-stage startup accelerator operating out of the iconic Bombay Stock Exchange building, has mentored a number of fintech ventures.

Zone also organises Fintegrate, India’s largest fintech conclave, that assembles entrepreneurs, investors, evangelists, and BFSI professionals. It creates experience zones for startups to showcase their products and services, and gives them a chance to network with the who’s who of the industry.

Ajay Ramasubramaniam, Director, Zone Startups India, says: “The coming together of fintech firms and incumbents is driving the industry forward. We now receive applications throughout the year from startups across India, and are connecting them to real clients, mentoring and doing business development, getting them to potential investors, and creating networking opportunities.”

Enterprise tech led by IIT-B

Mumbai is also “home to enterprise tech”, says an angel investor. “More than 50 percent of startups here are building enterprise applications,” he adds.

Fintech may be the new kid on the block, but the focus on building enterprise software/apps has existed for a while. It is led by the Society for Innovation and Entrepreneurship (SINE) at IIT-B.

SINE runs a business incubator-cum-accelerator that provides infrastructure and monetary support to tech-based startups. Their acceleration programme runs for six to 12 months, while incubation happens over a period of three years. Since 2004, close to 120 startups have been incubated at SINE.

Large corporates, including L&T, TCS, SAP and others, have collaborated with SINE and provided support to startups through their CSR funds. SINE also receives grants and benefits from the Ministry of Electronics and Information Technology (MeiTY) and the Department of Science & Technology (DST) of the Government of India.

Rakesh Rajiv, Manager – Incubation at SINE, says,

“We provide end-to-end support including prototyping and fellowship grants, incubation support (physical infrastructure, seed grant, mentoring, business networks etc.). We incubate companies at a very early stage. However, many companies come to SINE when their products are 50-70 percent ready.”

Rakesh adds that infrastructural support for early-stage startups is critical. SINE offers cash-crunched startups low-rent workspaces, conference facilities, labs, meeting rooms, pantries, and so on. This allows them to save on sundry costs, and gives them the opportunity to spend more on hiring or product development.

SINE is, in fact, upgrading to a 65,000 square feet in-campus facility from its current 15,000 square feet one. This means that it will open up its infrastructure to more startups.

“We’re getting applications from enterprise startups in faraway places like Odisha, Bihar, and the Northeast. There’s a lot of potential in their ideas, and we want to connect them to the right networks,” Rakesh explains.

Enterprise tech startups are also being considered in the Oracle Startup Cloud Accelerator Programme, which has mentored two batches so far. It has announced a new cohort of five startups in Mumbai. Four of them are enterprise tech entities.

Sanket Atal, Group VP – Development, Oracle, said in a statement to YourStory,

“Unlike traditional accelerator programmes, Oracle Startup Cloud Accelerator is a next-generation acceleration initiative driven by R&D. The programme focuses on reimagining enterprise innovation through partnerships with startups that foster co-development and co-innovation, where we all win.”

Local government doing enough?

 A part of the startup ecosystem has criticised the Maharashtra Government for not being “proactive enough”. When compared to its peers, especially Karnataka and Telengana Governments, there is no proper disbursal of funds, access to government resources, or any special benefits for startups in Maharashtra.

An accelerator programme manager, on condition of anonymity, says: “We’ve been hearing a lot of talk, but we don’t see much action. The Centre allocates each state a budget for startup development. But, the Maharashtra Government has been so relaxed.”

There is no startup policy either, which some reckon could solve a lot of problems.

Anand Desai, President of TiE Mumbai, says, “We offer white papers to the government, there have been discussions on a potential startup policy, but we haven’t seen anything yet. But, some sectors like agritech are benefiting from government schemes. As a startup, you have to fit into a government scheme.”

But, 2018 could be different. The local government has already hosted a couple of entrepreneurship and investment summits, where Chief Minister Devendra Fadnavis himself was present to outline Maharashtra’s commitment to the startup economy.

In January, Maharashtra organised a Blockchain summit and called startups working in the space to approach the government to test their proof-of-concepts. The chief minister expressed his keenness to turn Mumbai into India’s “techno-financial hub”. He sought measures and policies in Blockchain and other emerging technologies that will drive e-governance and bridge the “trust deficit” between governments and citizens.

In an earlier conversation with YourStory, Kaustubh Dhavse, Joint Secretary, Government of Maharashtra, said,

“We are inviting startups to test concepts, offer solutions to issues in governance, and partner with us on implementation. They can choose any area or issue they wish to solve and give us a POC. We’re also looking to drive private investment in the sector.”

More recently, the government held Magnetic Maharashtra, a three-day global investment summit, where it doled out cash prizes of Rs 50 lakh, Rs 30 lakh, and Rs 20 lakh to three early-stage startups. Incidentally, all three startups have been incubated at SINE in IIT-B.

But, the government needs to do more when it comes to offering land benefits to entrepreneurs. For real estate is so expensive in Mumbai that a lot of startups tend to move to Bengaluru or even Pune when they want to scale up.

ISME’s Aparajit says, “What I am getting at Rs 200 per square feet in Mumbai, I’ll get at Rs 40 per square feet in Bengaluru. I can then build a bigger facility and help more startups.”

The real estate problem is intrinsically linked to the exodus of talent from Mumbai.

Talent — an issue?

Possibly, yes. But, it depends on the kind of talent one is looking for.

All stakeholders agree that Mumbai has rich talent in business development and sales, but there is a gap when it comes to product and engineering. Barring researchers and developers at IIT-B and adjoining areas in Powai (sometimes referred to as Mumbai’s Silicon Valley), there is not much of a tech talent pool in the rest of the coastal city.

ThinQbate’s Pranav says,

“There is a greater density of talent in Bangalore. It is the hub; there is no doubt about that. In Mumbai, the cost of living and resources are not optimised. Very few have been able to crack it and stay back.”

Hence, when companies scale and expand, they move to locations where talent is not only abundant but also affordable. Mumbai startup salaries tend to be higher than those in Bengaluru or Hyderabad because it is an expensive city.

Additionally, there is a commute problem. A lot of startup professionals leave the city because reaching from point A to B is cumbersome. Simultaneously, these startups might be compelled to hire people who live in the vicinity, and those could eventually turn out to be wrong hires.

But, Rakesh, of SINE, disagrees that talent is an issue. He says, “There’s talent everywhere but sometimes they don’t know the right way to tap into the ecosystem. There is a disconnect between the lab and the industry. That is where mentorship comes in.”

However, despite the many disadvantages, Mumbai startups score when it comes to forging formal business relationships with investors or large clients.

ISME’s Aparajit explains,

“Your end goal is to get a paying customer. Mumbai guys in their formal suits do that very well. They have that boring cookie-cutter approach that Bengaluru guys in their shorts can lack.”

There is also the unhindered access that startups have to large global and Indian corporations headquartered in Mumbai. Besides banks and NBFCs, several big pharma companies also operate out of the city.

Observers say that IIT-B’s biotechnology department produces good talent that goes on to develop hardware and devices for these pharma companies, thus driving the growth of healthtech.

ThinQbate’s Pranav says, “In the end, it is about finding a customer and generating business. If you can find them in Mumbai, why would you move elsewhere?”

[“Source-yourstory”]

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