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작성일자 2018-03-16 17:29 수정일자 2018-03-16 17:36
The Korean startup ecosystem’s development
as the “3rd way”
Why Korean Startups Need India Part. 2
▲ Steve Cervantes Konkuk Univ.
Global stereotypes of traditional Indian snake charmers, yogis, and cows ambling Old Delhi’s roads have recently been transformed into the Indian startup ecosystem’s meteoric rise and growth. India is globally the second largest smartphone market in the world, ranks third in total venture capital invested and an abundance of upcoming and recently closed IPOs and M&As. In addition, India’s R&D is one of the world’s strongest. Despite obstacles such as poor infrastructure in rural areas and tier three cities and an outdated educational system, the Indian startup ecosystem is in the midst of a Cambrian Explosion. Part 2 will succinctly describe the Indian ecosystem’s most salient characteristics.
As compared to Korea, India’s startup ecosystem is highly decentralized and diversified where each city and region has an industrial specialization, which is not surprising given India’s enormity and complexity- “there are so many India’s.” India’s five largest startup hubs are Bangalore, Delhi, Mumbai, Hyderabad and Chennai.
Bangalore is considered India’s “Silicon Valley”: Its ecosystem began long before all others, circa 1998-99, where the others started from 2010-2013; a pedigree of Infosys, Wipro etc. personnel were the original startup founders; as such Bangalore had a 10-15 years head start on the others. Bangalore is home to 26% of India’s total startups which are mostly concentrated on ecommerce, hyperlocal ecommerce, and consumer services and analytics.
“23% of startups are in Delhi NCR.” Startup Delhi similarly specializes in ecommerce and hyperlocal ecommerce.
Mumbai is India’s largest financial hub and accordingly its strengths lie in fintech and blockchain.
Hyderabad after some political wrangling and the 2013 central government’s decree to separate it from the state of Andhra Pradesh, has become one of India’s fastest growing ecosystems. Not only are Apple, Google and Microsoft’s headquarters located in Hyderabad, but it can also claim at the end of 2018 to have the world’s largest incubator, t-hub. Hyderabad focuses on edutech, healthtech, and agritech.
Chennai is India’s Ulsan for its numerous-automotive-manufacturing-facilities; however, it has morphed in recent years into India’s leading B2B Software as a Service (SaaS) hub.
The startup miracle just began in tier 2 and 3 cities recently, but potential growth and profits are boundless. “What we are seeing in India’s startup hubs though is a very miniscule part of India”, according to Paritosh Sharma CEO of 59 Seconds and startup crusader. He goes on to say, “from engaging businessmen in most of India’s second and third tier cities I have seen many success stories in legacy businesses.” They are now trying to learn about technology and how they can leverage it for their businesses with the smartphone-helping them is a multibillion dollar industry. Now the challenge is creating trust and goodwill with them to bring a symbiotic relationship between technology and business acumen- “business opportunities in these cities are endless.”
Like Korea, returnees are major contributors toward ecosystem development. About 15-20% of Silicon Valley startups have Indian founders and some have returned to contribute to India’s startup ecosystem. A typical scenario is exiting and moving to India to symbiotically create an Indian startup with Silicon Valley and Indian business models or become a VC and invest in India’s rising startups. T-Hub CEO Jay Krishnan aptly describes the synergization saying “Silicon Valley experience with integrating in a seamless place to get things done compounded with an India that has an entrepreneurial mindset and hunger to succeed creates a dynamic ecosystem.” In addition, returnees are models for risk taking where Indians until recently were reluctant to do.
Indian venture capital is among the world’s most established and ranks third globally-such global luminaries as Sequoia Capital, Accel Partners etc. have a strong Indian presence. Though 2017 saw a significant decline in VC activity not seen since the subprime aftermath, simple explanations are numerous VCs are cashing out on investments from years past and reconsolidation.
Angel investors on the other hand are embryonic relative to other global players. As such, it is still difficult to raise early stage funding. Sharma Paritosh believes “Indian creditors are just opening up to take risks in startup ventures and Indians are characteristically averse to risks.” Yet, angel investors have been vastly growing in the last few years and will grow even faster in the coming years with startup growth in demand and opportunities.
A less familiar fund and heard little in Korea, syndicated funds, are growing exponentially. A syndicate fund is an investment where investors co-invest in with other reputable investors in the best startups-the syndicate leaders are generally angel CEOs who allegedly have great startup insight and experience. Hamad Jowher Country Lead in Hyderabad’s Headstart Network Foundation epitomizes syndicated funds and Indians by saying, “syndicated funds inherently appeal to Indians because of a penchant for public anonymity, friendships and familial ties.”
Notwithstanding a promising Indian startup ecosystem, startup CEOs and activists unanimously believe India’s outdated educational system and human resources preclude it from even stronger growth. Most higher and secondary education institutions’ curricula are rote memorization based with little practicality-commercialization is almost nonexistent. Much has been written on India’s engineering accomplishments and abundance of engineers, but “upon graduation most are under qualified and lack the practical know-how in contributing to a startup” declares startup activist and director of Chennai’s AtWorks Ashwin Shankar. In fact, Hamad Jowher’s university experience was so uninspiring and lacked challenge that it became the impetus for joining a startup during his coursework.
Red tape and a rigid Ministry of Education are most culpable for the status quo, and according to most policies for reform may not change any time soon.
Part 3 will be concerned with ways India and Korea can bridge their two ecosystems and create the 3rd way.
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