Tuesday, Aug 09, 2022
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Will Kejriwal’s Gambit Pull Startups Out Of Bangalore? 

Arvind Kejriwal wants to make Delhi the startup capital of India and the world. Can the AAP government achieve this feat? 

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Paytm, Snapdeal, Oyo Rooms, Zomato, Delhivery, Mobikwik, Lenskart... Do you know what’s common between these high-value startups? They were all founded in Delhi. In fact, Paytm was founded way back in 2010. Yet, the national capital region hasn’t really emerged as the startup capital of India. That crown still – for all practical purposes – belongs to Bangalore. This despite the AAP government’s focus on promoting startups since coming to power. In its latest move, Delhi announced several fiscal and non-fiscal incentives to promote entrepreneurship in the state. It is in keeping with the Kejriwal government’s stated ambition of creating 20 lakh jobs by 2027. 

And despite, Delhi adding more than 5,000 startups between April 2019 and December 2021 as against Bangalore launching just 4,514 of them according to India’s Economic Survey 2021-2022, the general consensus is that it does not mean much. However, by announcing the Delhi Startup Policy, CM Arvind Kejriwal seems determined to change that. The question is how.  

Investors’ Preference 

The biggest advantage that Bangalore has is that it is a preferred ground for investors -- Karnataka accounted for 45 per cent of total FDI investment in India for the first half of fiscal 2021-2022; most of that being in Bangalore. Delhi, meanwhile, accounted for just 13% of FDI inflow between October 2019 and December 2021 amounting to $15.8 Bn. 

“What Bangalore has done quite well is to establish translation of research into the market, which has enabled the creation of a lot of research-driven startups. The presence of various hardware and software vendors also make Bangalore ahead in terms of innovation. Every startup needs to invest in technology and at this front, startups based out of Bangalore would be more ready, compared to Delhi-NCR,” said Arpit Agarwal of Blume Ventures.  

So, one thing that Delhi needs to do to attract more global investments is achieve more tech-friendliness. Also, because most startups are driven strongly by technology. 

Cheap Real Estate 

According to the report ‘Startups Scale Up’ by Colliers and CRE Matrix, startups are expected to lease about 29 million sq feet between 2022 to 2024, a 1.3 times increase from the 2019-2021 period. The report also stated that Bengaluru remained the top startup hub with a 34% leasing share during 2019-21, with Koramangala, HSR and Indiranagar being the preferred locations for startups.  

While Delhi is catching up and is amongst the fastest-growing market in terms of leasing by startups (as per the report), Bangalore’s cheap rental spaces is what pushes it to the top slot.  

To attract more investment, Delhi needs to up its game in real estate rentals – the availability of which is much more than Bangalore. 

Tech Talent 

Attracting the right kind of talent is both necessary and difficult for any company. For startups, it becomes more essential because of the limited resources that they have.  

According to a survey conducted by professional services firm Aon, one in every four new offers made by new-age companies was rejected by candidates in the last half of 2021, extending to January 2022. The survey, which was concluded in January, covered about 700 new-age companies in IT, ecommerce and startup domains. 

One of Bangalore biggest advantage in its startup reign has been the concentration of its tech talent pool. “One prime reason why Bangalore is choosen by startup founders is the availability of tech manpower. Bengaluru has become a magnet for tech startups because of proactive government policies, technical pool, established private and public technology institutions etc.” says Padmaja Ruparel, Co-founder of India Angel Network. 

Diksha Pande, Co-founder of Bengaluru-based Samosa Party agrees. “While startups are emerging in all of India’s metros and elsewhere, we feel the quality of talent available in Bengaluru is extremely high. Plus, people staying in other regions are mostly willing to relocate to Bangalore.” 

In fact, Singapore-based financial analysis site ValueChampion rated Bangalore as India’s most Millennial-friendly city with 37 percent of the population falling in the age group 15 to 35 years. 

Being an IT hub only adds to Bangalore’s advantage. Delhi, clearly, needs to make conscious efforts to attract the tech talent pool with most offices now going back to a hybrid model following the easing of the pandemic. How the Delhi government can play a role in that remains to be seen. 

Well-developed Eco-system 

Bangalore’s strength in being India’s startup hub lies in years of development and focus on R&D, a feat Delhi may need some time to achieve.  

The city has dedicated R&D departments for startups, domestic and multinational corporations, academic and industry, defence, product, and user organisations. The impact of this technological evolution is visible in actual numbers. According to the Bangalore Innovation Report 2019, the city recorded more tech-startups founded since 2016 than Mumbai and Delhi combined. 

In the Global Startup Ecosystem Report 2021, Bengaluru rose up three spots to be ranked 23rd in an annual analysis of the world's most favourable ecosystems to build a globally successful startup, while Delhi was placed on the 36th position. 

Bangalore fared well on funding, connectedness, and knowledge apart from healthy access to growth capital.  

While the report praised Delhi for impressive growth, Bangalore’s already in place ecosystem is something Delhi lacks when it comes to startups. “The legacy of Bangalore still holds strong as a majority of talent and investors are already situated here and it will take time, maybe a decade, to neutralise and distribute them across other cities,” says Iesh Dixit, CEO and Founder, PowerPlay, an end-to-end construction management SaaS platform based out of Bangalore. 

Good Micro Market 

Last but not the least, Bangalore’s digitally-native population provides a good testing ground for any startup. People are more open to use a new app or a digital product in Bangalore than in Delhi.  

This is a major reason for many startups – tech in particular – to prefer Bangalore to any other Indian city to launch their product. “On an average, people in Bangalore are a lot more technology-oriented, as compared to Delhi-NCR. In Bangalore, you see companies scaling up a lot more via technology, and technology is the major preference amongst companies in Bangalore,” confirms Agarwal.   

While the pandemic has forced most people to become digitally-savvy, it will take some time for Delhi to provide the same advantage as a micro-market as Bangalore for any startup. 

The Delhi Advantage  

Delhi many not yet be the startup hub in the true sense of the word, but it has its advantages. 

“Delhi is the cultural hub of India, and has a diverse set of sellers, manufacturers and brands located in and around the city. For LBB to succeed, we need to have a strong pulse of what is happening on the both the demand and supply side, especially for lifestyle categories, and I don't think there's a city that has a balance of culture, infrastructure and talent quite like Delhi,” says Suchita Salwan, Founder of LBB, a Delhi-based platform to discover unique independent brands and businesses. 

Delhi’s vast population and strong infrastructure are also big advantages for entrepreneurs. “If people are starting up, then the probability of them choosing Delhi-NCR over Bangalore is more because its (Delhi’s) population is three times that of Bangalore,” said Agarwal of Blume Ventures.  

Plus, Delhi is also the political Centre and any policy-push required for startups happens from here. 

Whether Kejriwal can successfully turn Delhi into India’s startup hub and a global innovation hub will have to be seen, but the government needs to understand that what Bangalore is today is the result of its favourable policies and government initiatives since more than a decade. Matching that would’nt be that easy. 

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