Everyone, and Just about anyone with a background in Economics and can understand the market will tell you that a healthy market is supposed to be somewhat close to what C.K.Prahalad defined and popularized as – atleast here in India – a Pyramid. But is our economy, atleast when it comes to the Industrial sector anywhere close to it? Hmmm… One has to really think about that one.
I am not even for a second going to even go near the point of saying that I am enlightened here with this revelation that our economy is not a pyramid. Infact, this conversation has been initiated, argued, debated, chewed and spat on in most economic forums in the country and everyone is very well aware that we dont have a healthy Pyramid. I am just thinking through, what it means in terms of repercussions to the industry as a whole and to the entrepreneurial community.
Let’s start from the basics: The pyramid usually has about three segments. The 20% of the huge corporations and conglomerates, and the rest 80% which are pretty much the SME segment and the Startups. Now, do the numbers really add up? I’d have to think about that one, yet again.
During a conversation with a friend recently, the conversation revolved around which city provides a better atmosphere for a startup, from a perspective of providing that initial feedback, customer insights and etc, so that there is clarity past the ideation stage before the prototype is built. I had this perplexed look on my face trying to figure out if there is yet a city which provides that here in India. While most do cry out “Bangalore”, if you ask me, that city is the most startup-unfriendly territory that I am observing.* Whilst there is a very active group of people, and some with disposable incomes, who have started an entire community of unconference events and discussions that surround that, very little is happening past that. Bangalore, as per the count that we have on the number of startups, measures quite low. Salaries are high, infrastructure is expensive, branding is a very costly affair, attracting talent is a dance on the pole – let alone quality talent, and there a dozen startups fighting for the starving number of resources who are available and will actually provide that high caliber value for a startup. On the number of new startups that are emerging, the city ranks quite low. But at the sametime there is quite an active number of “startups” in the city which have been lurking around for a while – and when I say a while, it means for roughly around a decade. They have neither joined the SME alliance, nor are they really a newborn child. And this is essentially the company of alliance that is available in most places to get “that initial feedback” that we were discussing about. When these companies themselves are struggling to make that jump after a decade, I am not sure what sort of real feedback they can provide their new wave, that is coming up. I do hope that you understand the conundrum that we are facing here.
So that roughly puts things in perspective. If you break down an industry vertical, lets say the internet space, we have the likes of the public sector companies, and then we have companies such as Rediff and Indiatimes which form the bottom hemisphere of the lollipop, and then there is this ultrafine line of companies which are not more than a handful, which are to be the SME and startup companies put together. Lo! and behold, not the pyramid, but the lollipop. And in this Lollipop economy, the upper circle is competition and fiercely guards anything, anyone from the bottom is trying to pull. Feedback, and initial discussions are absolutely out of the question in most cases.
This is a concern, cause in an efficient ecosystem, I strongly believe that Incubators will have much less of a role to play. If knowledge was freely available, and people could catch up over a cup of coffee to vet out an idea, and that validation process could happen over conversations in a much more fluid manner – eventually leading to mindshare, market traction, talent referral, intial client base and even funding, then there is absolutely no need for a third element to facilitate this. Today, Incubators become an essential part of this conversation, since they are the only ones who can moderate and manage the intellectual property talks that are carried out and have any say with these bigger guys, who if they wish could squish these startups in as much time as it takes to blink.
It is quite beautifully put: Markets are inherently conversational. The more conversations we have, the faster we mature, and we need to have them in a much more open manner with all our cards on the table and as early as possible – if you are building a startup, or contributing towards the ecosystem. But unless the economic bifurcation by quantity and numbers is a pyramid, and not a lollipop, it is going to be a tough stroll up that mountain as we grow.
*While it is my opinion that, if a valley-type of ecosystem comes together in India it will be in a tier 2 city such as Pune or Hyderabad, that’s a conversation separate for another day.
Note: Repost of an article.
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Vijay
I will disagree on your assessment of Bangalore being start up unfriendly. Going by your argument on lacking a pyramid, there are around 40 large companies who actively participate in encouraging innovation and entrepreneurship, then we have around 150-200 active start ups including those who have been struggling for long and then we see around 2000+ people who want to be entrepreneurship and take part in the various Momo, Barcamp, Startup Saturdays, HeadStart, etc. So,I can not see how you call it a lollipop !!
We are now forming industry groups (formed by leading corporates in various verticals) to provide support and validation of business ideas and new work going on here. Of course, anyone from Chennai, Hyderabad, Pune and other places are most welcome to leverage and contribute to the ecosystem we are building here very actively.
Vijay,
Off the bat, sorry but this is all b.s – though I do love the idea that Hyderabad has a chance at being a valleytype ecosystem :D. And of course, I haven’t had a OOB experience with the valley, so I’ll leave that part for later…
Isn’t every market inherently a pyramid and Indian industry more so? For every individual buying a shampoo bottle there are 50 others buying a packet of shampoo. For one Rediff making a X CPM per banner ad we have a thousand web startups hoping to make a cent out of the Google Ads on their website. And for every premium design company making a website for a whopping 50K we have scores of web companies hoping to make a 5K out of the 20 sites they design?
From what I read, I’m not exactly sure that the valley comes cheap (as a place to survive). In spite of this, I believe its the particular prerogative of the founder/entrepreneur to survive cheap than that of the ecosystem’s. The ecosystem provides the mental and strategic value-adds to the entrepreneurial pursuit : social acceptance, peer groups, the network of mentors, the opportunities (funding, customers and likewise), the community – for the discussions, feedback as well as the proverbial shoulders to cry on for the individual. Cost saving is an added bonus at the end of the day for a startup – but if that is the primary value expected from the ecosystem, I would be worried if the founders have any idea of their evaluation of their opportunity costs. As for finding and hiring talent, I don’t think the situation is any different in any Indian city or even the global scenario. Every one thats someone wants to build something – as the payoff is going to be vastly phenomenal if it becomes a success and also given that they _can_ get the jobs if they do want to go back to. This I presume will remain the same – unless the risks really outweigh the returns (say something like a wave of massive layoffs at the big companies – then I think the beach surfers and onlookers will go back to the cosy/secure jobs).
What we have seen in the last 1-2 years of IT startup scene is the birth of really large number of web-based companies that seem to have a single source of revenue – ads or getting bought out. In no small part because of the huuuge success of web companies in apna US of A and the sickeningly low barriers of entry – a dream that two folks sitting together with two laptops in their room can make a fortune at the end of a year. However, though this completely discredits the many other amazing startups coming up in all the places – those dealing with personalization, embedded devices, media, et al.
Every market organizes itself as a pyramid – a set of customers paying for high-premium services and a few number of biggies catering to them as they are well made to live through long drawn feedback loop. The lollypop is hopefull the payoff – frankly though I cannot get the meaning of seeing a lollypop in the pyramid – its every ones dream to go from the trolley to the lolly – but then …
http://www.zerocaffe.in
Vijay
Interesting post. Not sure if there is sufficient evidence to say we have a “lollipop”. But yes, its a struggle for startups. Yes, none of the cities in India provide the silicon valley kind of atmosphere. (BTW, silicon valley is not cheap!) However, we have a choice between two options:
1. Look at silicon valley and complain about how bad things are for us
2. Figure out our way of making an ecosystem that succeeds in today’s ground realities.
Most of the entrepreneurs I know are choosing the second. I salute them for they are saying we make things happen rather than saying bad things happen to us. That is the true entrepreneurial spirit; be it silicon valley, Bangalore, Pune, whatever.
As far as the debate between cities: let folks choose where they want firms to be. I see lots of stuff and energy in Bangalore and Pune – Mumbai. Intrestingly, the conversations are more frequent and rich in these two corridors than any other place. Look at the Barcamps and Mobile Mondays in these three cities as the indicator. Guess that gives them the advantage.
Vijay,
It’s an interesting observation so far. Most Bangloreans would not agree with your view though. In my opinion Bangalore does lack the best of infrastructure and resources but this is also because of the numerous opporunities here.
Bangalore does have quite a few startups and SME’s and this makes it a soft bed in the ecosystem where in (as rajiv said) entreprenuers survive and emerge.
Interestingly I see a good pyramid here.
For eg: NEN starts with students ( 2 out of ten colleges which won the recent NEN Eweek awards across India where from Bangalore)
BarCamps,MOMO FooCamps, FOSS etc foster some sought of amagamation and excellent idea exchange.
KickStart, TiE, IIM, Incubations offer further shaping and supporting. Also with so many big firms having a foot hold in Bangalore bigger players can be approached through right channels.
Also to note that a valley type of ecosystem will require a lot of conversations (as you said), customer validations and a good mix of talent… Tier II cities might or might not have all these.
But it’s easier said than done. I’am sure you would have some stand point for ‘unfriendliness’ of Bangalore. It would be great if you could throw some more light.
Otherwise ‘Ildi Sambhar’ are always ready. 🙂
This is a revelation to me that Bangalore is most “unfriendly” when it comes to startups. While the topic for the post and the thing about startups had no correlation, it looked like a potshot at Bangalore under the guise of something else. Coming to: “Whilst there is a very active group of people, and some with disposable incomes, who have started an entire community of unconference events and discussions that surround that, very little is happening past that”. The corporates who are backing such events are doing so to contribute their bit to foster a valley like ecosystem wherein people share ideas, network and “startup”. Speak out and let the world know as to whom you are targeting through this blog. You must be really dumb enough to comment on stuff happening in Bangalore sitting in Chennai. You must have been to one or 2 events – don’t judge just by that. Come and sit through MoMo, Bangalore OCC, Bootstrap bangalore, e-club, etc and you will get a real feel of the entrepreneurial crowd.