Bengaluru: Delhi has toppled Bengaluru from its position as startup capital of India, but the southern city is wasting no tears. In Karnataka, the government, investors, policymakers, and even Opposition leaders are unfazed at the loss of rank because they say they have what really counts: the highest number of companies that reached unicorn status last year and a substantial share of investment inflow.
Between April 2019 and December 2021, Delhi added more than 5,000 startups to its tally, while Bengaluru launched 4,514, according to India’s Economic Survey 2021-2022, which was tabled in Parliament on 31 January. However, the general consensus in Bengaluru is that this does not mean very much.
“Mere number of registered startups does not mean anything. Worthy measures are sustainability, growth, size of investment etc. Bengaluru is far ahead of the closest competition like Delhi-NCR on those yardsticks,” Dr C.N. Ashwath Narayan, Karnataka Minister for Electronics, Information Technology and Biotechnology, told ThePrint.
“Anyone can register a startup and for whatever reason. Our FDI (foreign direct investment) inflow numbers should be enough to speak about investor confidence,” the minister added.
Karnataka accounted for 45 per cent of total FDI investment in India for the first half of fiscal 2021-2022.
Narayan also told ThePrint that the government is putting together a presentation that will elucidate that Bengaluru is still the country’s favourite destination for investments and startups.
Bengaluru ahead in the unicorn race
According to the Economic Survey, 44 Indian startups reached unicorn status in 2021. Bengaluru has the highest number of unicorns — companies that reached the valuation of $1 billion — in this list.
“The numbers in the Economic Survey are yet to be analysed but what matters is our contribution to the total number of unicorns and how much investment has come to Bengaluru. That is where we dominate — 42-45 per cent of total unicorns are from Karnataka. Big investments, angel funding is coming here, too, and the size of startups also has to be bigger,” Gunjan Krishna, Commissioner for Industrial Development, and Director, Department of Industries & Commerce, Government of Karnataka, told The Print.
Bengaluru companies that made it to the unicorn club include startups in a diverse range of spaces. Among them are Slice, CRED, and Digit Insurance (fin-tech), Mensa Brands (digital fashion brand builder), Licious (online meat delivery), Cure.Fit (health and wellness), Meesho (e-commerce), Vedantu (edtech), BlackBuck (trucking), Apna (professional networking), CoinSwitch Kuber (cryptocurrency), Groww (investments), NoBroker (real-estate), ShareChat (social media), MPL (online gaming), and Zetwerk (B2B manufacturing)
Investors agree: number of startups not the most important metric
Many investors seem to agree with the government’s stand that merely the number of startups is not a meaningful measure in and of itself.
According to T.V. Mohandas Pai, co-founder and chairman of venture fund Aarin Capital, Bengaluru’s startup ecosystem was more conducive to business.
“You can call me biased, but I would rather invest in a ‘conservative and innovative’ Bengaluru than an ‘aggressive’ Delhi-NCR. The government, entrepreneurial spirit, quality of life is better here, while of course infrastructure is as bad as it is in Delhi-NCR,” Pai said, adding that he was more concerned about cities like Chennai, Hyderabad and Kolkata falling behind.
Pai, however, acknowledged that there was a “boom” in the startup sector and that investors were “seizing opportunities” in north India.
“This is not just Delhi but Delhi-NCR region (which also includes Noida in UP and Gurugram in Haryana). Bengaluru is more about deep engineering while Delhi-NCR is more about trading, about engineering. New Delhi in itself has very few startups but the numbers come from Uttar Pradesh and Haryana,” Pai said.
Krishna said that weightage should also be given to Bengaluru’s move away from more basic sectors, like call centres, towards more specialised areas of innovation.
“When call centres and BPOs came in, Bengaluru was their destination but over the years that sector has moved to the hinterland. Bengaluru is now focusing on a host of other sectors like EV (electric vehicle) manufacturing, quantum computing, aerospace and defence, artificial intelligence, clean tech, IOT (internet of things) etc. It is natural for growth from the lower denominator to be steeper when there is focus on startups as a whole,” Krishna said.
Even some Opposition leaders in Karnataka believe that the Economic Survey’s analysis is limited.
“One has to consider the ticket size of investments and the kind of companies money is flowing into. In my assessment, Bengaluru’s startup ecosystem is more technology- and product-oriented, whereas it is service-oriented or replica businesses elsewhere,” said Priyank Kharge, senior Congress leader and former IT&BT minister of Karnataka. “More companies in Bengaluru get funded and step up to the next level.”
He, however, added that it was a wake-up call for the Karnataka government. “The Delhi government is holding business blasters (a programme to encourage entrepreneurship among students) — something we did five years ago. Maybe we need to improve on policies like sandbox policy, innovation authority policy which haven’t been started in the right way,” he said.
(Edited by Asavari Singh)