Till about two years ago, only about 100 technology start-ups were funded a year, despite the fact that the information technology (IT) services sector had a workforce of three million. But after Nasscom launched the 10,000 Start-ups programme, that number had doubled to 200 start-ups through last year, Rajan Anandan, Google's India chief, told Business Standard in a recent interview.
The buzz around start-ups in India is unmistakable. Various corporate houses, white-collar executives and governments are contributing towards building an exciting entrepreneurship environment in the country, and Nasscom's year-old initiative is a significant stakeholder in this. The programme, in which both Google and Microsoft are partners, has completed a year and has entered its third phase. This comes on the heels of the IT industry body receiving flak for being too "IT" driven, and not taking up the cause of products and start-ups enough.
This programme, however, has proved to be a sort of course correction for Nasscom.
In the first two phases, the initiative received about 7,000 applications, of which about 4,000 were received in the first phase. Now, Nasscom has decided to run the project in four batches a year. Rajat Tandon, senior director of Nasscom, says the first month will be spent collecting applications, the second in due diligence and the third in pitch sessions with partners.
Of the 7,000 applications, 529 were short-listed. Of these, 130 were impacted, pitching to angel investors, incubation partners, accelerators, mentors, etc. A further breakdown reveals 30-35 firms received funding directly through the project. Around 30 companies were selected by accelerators to groom them for the next level and qualify for funding. Another 40 secured mentorship and executive connects by the chief experience officers of companies such as Target and Walmart.
|SOME COMPANIES THAT RAISED ANGEL FUNDING|
Tandon says in the past six months, early-stage funding of $1.5-2 million has been invested in some 20 companies by firms such as Tlabs, Venture Nursery and Kyron.
In its first year, the project might have created awareness about entrepreneurship, but the total number of companies benefiting by way of pure funding isn't very high. "We are realistic in our approach and are planning to run a marathon, not a one-year sprint." But the project has generated a lot of interest in the corporate, government and venture capital worlds, he adds.
Industry groups are reaching out to Nasscom on a daily basis, claims Ravi Gururaj, chairman of the Nasscom Product Council. "The new mantra in large corporate houses is to embrace innovation, internal or external. We are able to nurture innovative companies, aggregate them and provide resources to connect with them; else, these companies would be hard to discover."
The Karnataka government has already set up a start-up warehouse, through which 29 companies have gone through; a second is coming up in West Bengal. Four-five states have also evinced interest in setting up such centres. "It is just the tip of the iceberg," says Gururaj.
|REAPING THE BENEFITS|
When the project was launched, companies whose business model wasn't necessarily online were also considered. But with the launch of the third phase, Tandon says the quality of companies applying is "far better". A lot more are in the prototype stage, which means these already have a decent business model. Nasscom is also receiving proposals from companies not restricted to focusing on North America, a deviation from the export mindset. Many of these are consumer driven and considering catering to the local Indian market, he says. E-commerce is still the "hot button", though a lot more companies are coming up with ideas on big data and analytics, with health and education receiving a lot of interest in the last phase.
The Internet of Things, the concept of connecting the most basic of utilities on a grid is "crucial and critical". Hopefully, more companies will come up with business ideas in this emerging area, says Tandon.
The geographic spread of start-ups is "anybody's guess"-south India dominates, with the most applications coming from Bangalore, Chennai and Cochin. "Mumbai, Pune and the Delhi National Capital Region fight for the second spot closely," adds Tandon.
Despite the good response, India still has to play catch-up. As Anandan told Business Standard, "The US has 15,000 funded start-ups. So, this is not enough."
An industry official agreed, saying about 3,000 companies had applied for funding to the Indian Angel Network in 2012. Of these, 13 secured funding. "There are several hundred companies out there and only a couple of hundred will make it," the official said, adding some chinks were appearing in the accelerator programme. "The over-promise, under-delivery disenchantment is kicking in for the investor community.
So, other ways to enhance this eco-system should also be considered."