Bangalore feels young and youthful
and eager to experiment.
Bangalore is actually called the Silicon Valley of India.
About 42% of Indian startups are born here every year.
It has has become this driving magnet for talent.
India's startup scene is booming.
This year alone, the country has seen
over three dozen unicorns,
private companies valued over $1 billion.
And much of this impressive growth has happened
in record time.
The last decade and a half, it's a sea change.
We live in such a different world today.
I think in 2006, if you said we would have 10 unicorns,
let alone close to touching maybe 100 unicorns,
that would have looked madness.
From last September to this September,
there's on an average three unicorns every month.
It's a clear indication of the ecosystem maturing.
India has had a record year of IPOs.
But with a recent stock launch faltering
and fierce global competition,
can Indian startups keep up this breakneck growth?
Unlike in the old days,
when we had to build everything from scratch,
today a lot of the infrastructure
for creating a company exists.
The challenges will be how to succeed in the business
before somebody else does better.
The speed and execution is becoming even more vital.
So India's technology story goes back
at least five or six decades
when the government decided it needed a strategic location
to start a whole lot of defense-related technology companies
that would serve the government's armed forces.
Since then, Bangalore became the location
for a lot of those companies.
And to support them,
a lot of educational institutions
have come up in and around Bangalore.
The government chose Bangalore
as the place to build its defense industry
as the southern Indian city was considered a safe distance
from its rival countries Pakistan and China.
In the early '80s, smaller private companies also began
to shift their operations to the city,
among them Infosys.
In 1981, with initial capital of $250,
seven engineers set up the business,
marking the beginning of the private tech industry in India.
Today it's one of the biggest companies in the world,
with a market capitalization of over $95 billion.
Infosys in some sense is India's original startup.
When Infosys began in 1981,
it was in an socialistic era
when India was not really that friendly towards business.
And we had many, many challenges.
For example, just getting a telephone connection
would take two years.
To import even a single computer,
you had to go to Delhi to get a license.
And even if you had to make a small change
in the configuration of the computer that you've purchased,
you have to go back and get the license changed
all over again.
Then came the economic liberalization
in the 1990s.
The government deregulated markets,
and reduced taxes and import tariffs.
Infosys and other IT companies thrived.
In 1993, Infosys went public
and built India's first software campus in Bangalore.
Prompted by this technology boom in the 1990s,
people from all over India poured into Bangalore
to work or study.
Bangalore was the take-off point
for a lot of those people that came to study
and then went overseas to study further
to get post-graduate degrees or work
in a lot of these global companies,
perhaps most of them in the United States.
And they made a comfortable life for themselves overseas
and never returned.
But something changed in the late 1990s and 2000s.
Bangalore became a valid destination
to chase a career in technology on its own.
Many local talents,
especially those from humble roots, decided to stay.
Lots of overseas Indians returned to Bangalore as well.
Vani Kola was one of them.
She built and sold two startups in Silicon Valley
before starting a venture capital firm in Bangalore in 2006.
I was in India end of 2005 for a long trip,
which I hadn't done in the two decades that I was gone.
And for me it was just a very different country
to the one I left.
There was so much confidence, so much potential,
so much opportunity.
I saw a big future for startup India.
What I saw was the underserved consumer experience,
India consumer story,
just ready to embrace many, many new business models
and entrepreneurship that could successfully build
very high-scale companies.
But the startup culture itself,
I could trace back to about 2007 when Flipkart was born.
So Flipkart is one of India's two large online retailers.
Two engineers who used to work for Amazon decided that
why don't we start an online retailer
like Amazon by ourselves?
So the two of them got together in a little apartment,
not far from where I'm standing in Koramangala in Bangalore,
and they decided to start Flipkart.
Like Amazon,
Flipkart started out selling just books
and slowly expanded into other areas, including fashion,
by acquiring e-commerce startup Myntra in 2014.
Kola was an early investor in Myntra.
Flipkart acquiring Myntra was a really smart move.
Flipkart had already dominated many categories
except fashion at that time.
And Myntra was the fashion leader.
So it made sense that combined,
they would have the only real, horizontal platform
that truly came out of India.
And today
Flipkart is one of the biggest startups in India.
The company was bought by Walmart for $16 billion in 2018,
making the two founders billionaires.
The story of Indian e-commerce
started out as definitely not something that we see today.
I don't think anybody expected what really happened
in the last seven, eight years.
It's been a tremendous journey.
There used to be a time
when a startup and entrepreneurs in India was shunned.
Entrepreneurs or people who worked in startups told me that
in India's arranged-marriage system,
parents were not willing have their daughters married
to startup entrepreneurs or workers in startups.
That whole thing has changed
because of people like Sachin Bansal, Binny Bansal,
the two entrepreneurs who set up Flipkart and sold it.
All of those stories
have now made being a startup entrepreneur
or working in a startup a very valid career option
for a lot of young Indians.
The turning point for a lot of the technology startups
and particularly the internet startups in India
has been the arrival of Reliance's Jio telecom service.
Four, five years ago, when Reliance launched the service,
India had very expensive broadband internet.
Mukesh Ambani, one of the world's richest men,
decided that he wanted to offer calling for free
and data broadband internet services at dirt cheap prices.
Smartphones were becoming cheaper.
A lot of Chinese brands were introducing really sleek,
inexpensive devices.
So multiple types of internet startups
started getting launched in India.
And particularly in Bangalore,
startup ecosystem started catching fire.
A part of that early ecosystem
was online education firm Byju's.
Today it has become India's most valuable startup
with 7 million paying users.
Unlike the first generation of Indian tech companies
who solve problems for global companies,
the current generation of startups like Byju's
are trying to solve local issues.
Initial years, when we were offline scaling,
that module was a big challenge.
We started this to solve three big challenges,
which exist in our education system.
One challenge around access to good teachers,
learning driven by a fear of exams, unfortunately,
and not love for learning.
And more importantly,
it's impossible to personalize the way you deliver classes
when there are 30, 35, 40 students sitting in a classroom.
To solve those challenges at scale,
it's very important to use technology as an enabler.
At the right time,
when smartphones were taking off, apps were taking off,
we were able to launch our first learning app.
That's in 2015 August.
And with time, with more people coming online,
with data becoming better and cheaper,
we've been able to scale our model around
so using smartphones as a medium to reach out.
2021 has been a breakout year
for these startups.
During the Covid-19 pandemic,
many consumers have turned to online services
for grocery deliveries, tutoring and medical diagnoses,
contributing to surging revenues.
Billions of dollars have poured into India.
In July, for instance,
as in China, the Communist Party has cracked down
on a lot of these technology companies,
Indian startups gathered almost $8 billion
in venture and PE capital,
making India for the very first time overtake China
as a venture capital destination.
Record numbers of unicorns have been born
at an unprecedented speed.
And investors are hoping to profit from companies
that could become the next Google or Facebook.
Global investors always asked, where is the exit?
And in startup lingo that means,
how do I make a return on my investment?
Suddenly, a lot of these startups have plans to debut
in the public markets.
And now that is a legit exit.
And investors then triple,
four times, 10 times their investments.
That is what's happened this year
with the public market debut
of a food-delivery startup called Zomato,
which was really the game changer.
I think twice in our journey,
we've gotten to a point that we can't do this anymore,
and this just cannot be done.
But we actually continued for one more day,
and it all gets sorted and it all starts again.
Zomato as a company is neither profitable,
and its medium-term prospects for profitability
are really mediocre.
But retail investors have lapped up the shares of Zomato,
sending the valuation of the company
soaring to $13 billion on debut.
But digital-payment firm
Paytm's IPO in November, which is India's biggest ever,
has been a disappointment.
It raised $2.5 billion,
but the stock price has sunk dramatically,
making it one of the worst initial showings
by a major tech firm since the dot-com bubble era
of the late 1990s.
Like Zomato, Paytm is not profitable.
And its IPO debacle casts a shadow
over other Indian startups.
The Indian startup world has to show
that they are not only building growth,
but also profitability.
When you look at the founders of the first generation
of companies in India, like Infosys or Wipro and so on,
they were, as I said,
they had to be financially very prudent.
They had to generate profits from the business
and feed that back into the business.
Because they were the only source of capital
that we could reinvest.
Today's entrepreneurs are encouraged by their backers
to grow quickly, even if they don't have to make a profit.
The thesis is that once you grow
and reach a certain critical size
in the market segment of your choice,
then you can always make your company profitable.
Profitability is still a ways off
for a lot of the startups.
Of course, there is a 1.3 billion market
that on the face of it seems like a humongous market,
but then there's the other side to it,
that is not enough people with spending power.
It all depends on how many consumers can afford to buy,
how much of a middle class India can grow each year
and who can afford to buy these services.
India's 40,000 startups
also face other challenges to grow bigger.
Compared with China or the U.S.,
India's internet industry is still much smaller in size.
And the bureaucracy faced by India's first generation
of private companies still exists in some ways today,
pushing some startups out of the country.
Sometimes I hear frustration echo
through entrepreneurs' voices
when they talk about things that are needed to, say,
apply for an IPO or get permission to set up an entity,
how complicated the rules are.
Corporate taxes are very high
compared to countries like Singapore.
And a lot of the entrepreneurs have then chosen
to shift their basis to countries like Singapore
because they find that the tax regime in Singapore
or elsewhere is much friendlier.
While it is easy enough to start a company in India,
as you scale,
I think you run into a lot of areas
where regulation is not clear.
One thing would be industry by industry
for government and government bodies to continue to work
to be a step ahead in terms of providing
clear regulatory guidelines
and continuing to engage industry in modifying that.
But starting up in India still has advantages.
Half of the Indian population is under the age of 25.
Young Indians adapt to technology easily
and could be potential consumers with spending power
in the long term.
They also provide the country with a rich talent pool.
India has about 4.5 million software engineers.
And within the next 10 years, this is going to double.
So as the technology talent improves in the country,
it'll provide a fertile ground to create more startups.
It's still a nascent ecosystem
just about at take-off point.
But a lot of entrepreneurs are actually dreaming big.
Entrepreneurship is not a skill, it's a mindset.
It's a mindset where you don't take no for an answer.
If you are passionate about what you are doing
and if that is making an impact,
I'm sure that we can do this for decades.