How to get to 1000 startups in India ever year

I will be on a panel with several others at the IAMAI conference next week for the India Digital Summit and the discussion is about how to make 1000 digital startups happen annually in India.

I thought I’d put some thoughts together and get some opinions before I present at the panel.

Currently there are less than half that number of product companies being started each year.

There are various issues across the funnel, but I’ll focus on the #1 issue, which I believe is at the top of the funnel.

Great product entrepreneurs starting great companies.

I wanted to pick a specific example from our accelerator: two of the most amazing hackers and geeks I have worked with – Melchi and Aditya co-founded Cloud Infra after 6 years at Google here in India, building high quality products.

I would fund them just given their background and the quality of hackers they are. Regardless of what they are developing.

Anyplace else (Valley) they would have been funded first and then they would have been asked questions. I worked with them for 4 months.They are amazing.

India needs more of them to increase the number of startups from 500 to 1000.

Unfortunately that’s not happening and is not going to happen.

I may get a lot of brickbats for this statement, but:

I believe the best product entrepreneurs should have built & shipped a world-class product before they start a company.

If you have worked in a services company it does not count. Period.

There are very few software product companies in India – in fact fewer than 20 are really good. Of those 20, many, including Google, are cutting back on hiring and investing in India.

That’s just awful.

Yahoo, Zoho & InMobi in particular have contributed a LOT to the product startup ecosystem in India, given how many good developers they have helped groom.

If you worked at any of these product software companies a few years ago, then you are a candidate for a high quality product startup in India.

Granted, a small number of these folks are actually starting companies, but that can be fixed.

The trouble is there are not too many of them in the first place.

And the bigger issue is that the Google’s and Facebook’s of the world are preferring to hire more folks in the valley.

In fact many of the top IIT graduates who get jobs at Google and Facebook are moving to the valley. 2 years ago they’d be working here in India.

To get 1000+ digital startups each year in India, we have to work on making sure world-class digital software companies hire more of our top people here in India.

I dont think tax breaks will provide them any more incentive to hire here.

I also believe there are enough quality folks here in India they can hire.

I’d love some ideas on what will make them hire more people of high caliber in India and keep them here. I’d love to see them not cut back on hiring in India.

What are your ideas on how we can get these companies to hire great engineering talent in India?

28 thoughts on “How to get to 1000 startups in India ever year”

  1. Hi Mukund, good post as usual. IMHO, may be an Internal Brain Drain will help. The IITs should stop teaching students and start teaching the technical staff in the engineering colleges. This way, many engineering colleges will at least try to match IIT standards and they produce lot of super engineering talent, much more than what the IITs produce now. I have shared a similar thought in my blog – http://shunmuganathan.blogspot.in/2011/04/internal-brian-drain-way-to-stop-brain.html.

  2. I honestly think, that it all should start from colleges.. Its a lot related to mind set I believe.
    Over 90% of the engineers are in it to get good (paying) jobs. Starting a start up (getting pay cuts, the instability etc) is not something that they would like to do. Thats one thing.

    And even if you do start something, a lot of product based startups need to target the non Indian (read U.S.) target. Be it platforms for developers, or end user apps. Its hard to get traction by just staying in India. You need a global reach. And for that, you need either money to market, or a good network of promoters to spread it.
    Getting a “super user” is what is missing.

    I do not really know how to solve the above problem, but I honestly think, that we need to bring about a mindset change at the school, college, university level.

    1. True. That’s one more problem to solve, but if we start at more hiring of top folks to keep them in India, and expose them to building high quality products, it will be a start.

      1. So thats trying to convince big corporations to hire the best, put them in the best projects so that they can later own quit and make something of their own?
        Don’t you think that it would be a little hard to do that ?
        I know its just a suggestion, and since I do not have a better one to put out there, I am trying to put my view on why it may not be the right one.

  3. I think we need a few super successful product company coming out from india with an entrepreneur who can inspire people to start more..

    I think the fundamental thinking around starting a product company is that it is incredible difficult thing to do with ridiculously small probability of success! So, it is incredibly important for the entrepreneurs who have tasted success with their product companies and make celebrities of them.. Once we have a few of these, we shall see young people to aspire to become someone like them..

    Just my 2 cents…

  4. So your prescription for creating more startups in India is to attempt to get Google, Yahoo and Facebook to hire more Indian engineers? Don’t you think that is a rather obtuse way to go about this?

    1. I think that’s one way. Not the only way. I have seen 25+ companies started by ex Yahoo, Google and Microsoft engineers in India that are good technology and 80% of service startups from ex Wipro, Infosys, etc.

      Open to suggestions as I mentioned. What do you think is a better way?

      1. I would suggest the exact opposite – encourage more young people to start up earlier rather than later in their professional careers – before they get caught up in a swirl of home loan EMIs, “planning for the future”, worrying about their children’s education etc.
        How does one facilitate this? The primary ingredient is obviously localized and native to the entrepreneur (drive, idea, passion) but there are definitely some macro factors that can support this that can help derisk the entrepreneur both practically and psychologically. Practically, provide (small) sums of capital and allied infrastructure through angels and seed investors without requiring ticking off all the boxes in the traditional playbook. Psychologically, laud success stories far more than is being done today to feed the inspirational/aspirational angels and provide for a worst-case scenario where other companies will see adding failed entrepreneurs to their organizations as a great value addition (companies like Inmobi for instance are already doing this). I also wish that more existing entrepreneurs who are successful/established to any extent (not necessarily just the Flipkarts and Inmobis) adopt a “pay it forward” stance and encourage and support fledgling startups more – and there are some rallying points/fora/people who can drive this.

      2. Unlike the US, where the infrastructure and understanding is much higher, fresh out of college grads in India have a 97% failure rate compared to 70+% for folks with even 2 years of experience. The problem is that after their first failure they tend to go work at a larger company and have such a negative bias against startups, that most of them even after 4-5 years prefer to go to larger companies, because their judgment is clouded by their experience when they were younger. I have personally seen this in 7 cases.

      3. By young people, I am not referring to just fresh college graduates – just those who haven’t been tainted yet by the burdens of home loan EMIs, marital responsibilities and the like…

  5. We have young ones with ideas, enthu and no experience;we have seniors with experience & FUD and no ideas; we may have other folks who experienced startups and can groom ideas – will an ecosystem that helps all such people to meet & collaborate in a an envionment of full trust help the dream of a 1000 startups per year, in India?

    1. I dont think they can never do it, but its rare. Fundamentally they go back to their comfort zone of risk-free services after they realize that 6 months of hard work gets them nowhere sometimes. They then opt for the known than plunge into another round of experiments. I speak from having talked to 10-12 folks who are struggling with their product startup after having a services company. All of them, bar none have moved back into services. They are from Infosys and two are from Wipro and others from smaller services companies.

      1. I guess where your dichotomy between experiences in product and service companies breaks down is when you actually take a deeper dive and see what folks across both types of companies are doing. Contrary to popular perceptions, as far as I can tell, very little core product development work actually happens in any of the Indian offshoots of the companies that you have mentioned (Google, Yahoo, Facebook and yes, even Microsoft) – most of the work tends to be centered around localization, support to local customers and fringe initiatives. So I severely doubt if their experience in such companies necessarily makes alumni better equipped to be entrepreneurs.
        On the other hand, there is a good chance that at least some of the folks working in large service companies have done far more meaningful technical/technological work dealing with mission-critical apps for Fortune 100 companies or directly on internet-scale cloud and mobile apps for customers.

  6. Mukund, Thanks for igniting minds.
    I have question: Why hiring from top tier colleges only?
    If you look around, there are super amazing folks from various college or even dropouts who has caliber to build world class products. The bigger problem i see is they are not compromise in their salary or say startup salary doesnt inspire them to work for particular startup. Most of geeks i know doesnt like equity as part of salary. Hiring a right talent is #1 and raising money is #2 problem for product entrepreneurs. Here what i think can help
    1) Create a fund (say 1 cr) who provides loan/convertible debt at start. This should come from a team of product entrepreneurs like you, Pallav, Navin and others. Exit at 1st round of funding or series A. This cycle should continue. Mentoring will be part of the process.
    2) Create a program, which inspire student community in India. I do have draft program ready and would love to share with you.
    3) Visibility to product team, not only founders. Ex: Award ceremony for geeks who are working in product startups.
    4) A helpline for product startups.

    1. Good point Kunal. I think both you and Sumanth are suggesting similar themes around a small funding tranche which might help kick things off, but I suspect this wont get us more startups, it will get us a lot more failures which will get those entrepreneurs off the grid for 4-5 years at the minimum (even if we do celebrate failures).

      1. Mukund,
        May I humbly submit that you are focusing on the wrong side of the equation – it doesn’t matter if the failure rate of startups (in general or specifically those started right out of college) is 92% or heck, even 99% – the nature of the game is Darwinian: those who enter it don’t care if the chance that they will be successful is 2% or 20% and those who choose to abandon it after the first failure are probably better off as employees in larger companies. What you need to focus on are the ones that break out and succeed – if we can get a company that reaches even 1/100th the scale of success of say a Facebook, a thousand new ships will sail on the winds of this one success. Also, this is not mere hearsay – you can already see the contours of something like this in Kerala where the success of one Mobme (started in college incidentally) has now lead to only a slew of companies attempting to follow their footsteps but has also seen other enablers like the Kerala Govt help in institutionalizing support in the form of the Kerala Startup Village (which probably coincidentally has the exact goal that you are attempting to get answers for – how to get to 1000 startups!).
        Cheers,
        Sumanth

      2. Mukund,
        I suggest fund as loan, so even founders fail to make it big, they can re-pay the loan by working for others. No money loss, only delayed. This will help to kickstart some good product startup. Also think about point 2 and 3.

  7. Mukund – Nearly all good startups, worldwide, have been started by people who didn’t come with a great pedigree of experience. Product companies that target the US market are likely to have their best talent in the US. And when I say talent, I no longer confine myself to engineering talent, which today constitutes lesser and lesser of the reason for success than ever before.

    It’s a lot more, today, about marketing, timing, infrastructure and access. Much of that is located where your primary market is – so while the Zohos and the Google Indias have generated good programming talent, it is rare to see individuals who come with great marketing talent from these companies.

    I must agree with Sumant here that we should focus on getting more people into startups earlier.

    However that’s not the point of the post – your point is that if this is a useful funnel for startups, then how do we continue to promote people going into that funnel? One way is to get these guys to think, at least, of custom products for India for which they’ll need local talent. It’s not apparent right now, but the only people in India that are thinking “local” are vernacular newspapers. Us big city people like big picture news, but much about India remains in the small and now visible-spending-power towns. If the Yahoos and Googles were to chase them, they’d have to get their local talent pieces in place. Take Yahoo finance for instance – the market in India is big, and Yahoo Finance is great for the US/UK etc – but the Yahoo finance site for India doesn’t do much.

  8. Two reasons:

    1) Need to make money, roi, rokada
    2) Rejection/zero celebration of failure in the society or the startup ecosystem

    The examples used in the post – Facebook and Google both spent millions and 3-5 years in building a product before they earned a single penny. Even then with no guarantee that they will succeed. Is this even possible in India? Of all the big indian names I can think of …. all of them started with a monetization strategy rather than building something groundbreaking. Or we clone the ideas from west – good example would the many pivots of ibibo before they finally settled as a ticketing company. Good money and in services section – its even better

    Even after 15 years of paypal, we still don’t have even a half decent payment system which the world would be clamoring to sign up for. Its definitely not that nobody is aware of the problem? but the risk of making it happen is very high with all the laws, rules, etc which could easily take over 2-3 years before anything meaningful is out. And even after that it may fail.

    Having ranted all this, I do believe 1000 startup is very low number for a billion+ population. There are some great examples of risk taking and trying ideas without worrying about failures – Olacabs, eruvaka, etc are fantastic hopes of by indian for indian startups.

  9. “What are your ideas on how we can get these companies to hire great engineering talent in India?”

    @Mukund Sir:

    To have companies increase their “hiring of great engineering talent” i believe we should look at what Google did.

    A large percentile of Google’s product line includes projects of employees who developed them in spare time, forcefully supplied by Google (to build your own apps). Ideas don’t appear in boardrooms.

    So, Its a different way of conducting R&D and bring in the ideas that could be scaled later (considering that employee won’t file a patent). Cost of scaling such a product will be much less expensive them acquiring a startup.

    My 2.5 cents.

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