How Mumbai can catch up in the startups race

Prohibitive living costs, lack of quality tech institutes and a poor will to attract founders and investors to the city are the big inhibitors. The city urgently requires a collective effort to develop startup infrastructure

Updated - January 25, 2017 05:11 pm IST

Published - January 10, 2017 09:25 am IST

Ok, let’s face it. It’s not difficult to feel cynical about startups and Mumbai. Seen through a popular lens, this city hardly has anything a startup, particularly a tech startup, wants in its early days.

Mumbai is tough. Working space is expensive. Living space is expensive. The general cost of living is high. Distances can kill. Traffic is a b@#$h. Other than IIT-B and VJTI, hardly any engineering college comes in India’s top rung. Big tech companies are either conspicuous by their avoidance of the city or have a token presence. Good techies are difficult to get, partly because they all want to go and work in Bengaluru or NCR. Most angel investors come from a not-so-cool traditional business background and don’t really understand technology. Experienced tech founders who have gone through the full cycle can be counted on finger tips.

The city has too much of a trading mindset, thanks to its history and the stock exchanges. Both the local political parties have unparalleled son-of-the-soil approach to workers, which you can’t ignore as a non-Maharashtrian, even if you have been told that the target of their ire are taxi drivers, vegetable vendors and other lesser mortals from ‘Bhaiyaland’. The government has hardly built any startup-friendly infrastructure. The startup community infrastructure and activity, to most founders, is just not cool enough.

More than commerce

It is not for no reason that in trade perception and even more so, in media reports, Mumbai comes at third position and sometimes even lower, after Bengaluru and NCR, in terms of top Indian cities for startups. Even NASSCOM rates Mumbai as No. 3 in its report ‘Startup India: The Momentous Rise of the Indian Startup Ecosystem’. Many founders, venture capitalists and angel investors would tell you that Mumbai has a lot of catching up to do with Bengaluru in terms of understanding of core technology and product development. Many Bengaluru founders dismiss Mumbai startups as ‘commerce’.

That does not mean no startup has made it big here or others don’t thrive. Ola, Housing, Freecharge, InMobi, all started in Mumbai, although some of them eventually moved to Bengaluru or NCR.

So, can Mumbai become stronger in the Indian startup ecosystem or is it destined to slide down the totem pole?

I co-founded VentureNursery, Mumbai’s first startup accelerator, in 2012, and have invested in nearly 40 startups in my personal capacity. I have screened thousands of applications and have had the good fortune to have met hundreds of founders from all sorts of cities. I do believe strongly that like each city, startup founders in Mumbai are special in their own way and we can do things for them to build great companies and also founders from outside Mumbai can find it attractive to move here and chase their dream, as aspiring film stars do

Two things are clear to me though. One, Mumbai’s startup ecosystem needs to be transformed. Incrementalism won’t work and it cannot be fixed by merely emulating Bangalore and NCR. Two, Mumbai has to play to its unique strengths and neutralise its weaknesses to make itself startup friendly.

Why Mumbai? And why startups?

As economies and cities evolve, the kind of businesses that want to go there also evolve. Startups represent hope and bring a vibrancy to any economy or society. They solve age-old problems in innovative and disruptive ways.

Startups exemplify disruption. The largest and most established companies innovate in incremental doses. When a city invites startups and gets known as a startup-friendly city, all businesses start being disruptive. Startups also help businesses and people deal with complacence. By definition, these ventures cannot rest on their laurels, and they can teach others not to do so too. We have seen many examples of how a startup like Mozilla was hammering Microsoft in the browser space, or how the software giant had to emulate Dropbox’s cloud-based storage and create things like OneDrive.

Mumbai is full of age-old businesses, and has a long history of trading and commerce. It is natural for such businesses to become complacent, and they can benefit from disruption. The city itself is not seen as being as vibrant as a Bengaluru or Gurgaon. This is a classic New York versus San Francisco difference – one is an old seat of commerce, the other shows businesses what disruption is.

A question of scale

Scale and scalability are inherent parts of being a startup. When they create scale, they create jobs in the city they are based in, that are fundamentally different from the kind of jobs established companies offer. Startups create the kind of jobs people aspire to, that perhaps didn’t exist a decade ago. For instance, the most a college student would do back then was flip burgers at McDonald’s. Today, however, he or she has various other options, such as working as a delivery person.

Moreover, startups bring venture capital into the city. This iss important at a time when we are getting large companies to invest in the country through Make in India and other schemes.

Another interesting thing is that startups fuel nomadic behaviour. Nomads teach local people things they would never have otherwise known. Sons of the soil don’t always build large economies. Bengaluru came to be known as IT city because of the people who settled there from all over the country. Nomadic behaviour changes the kind of things a city does. It creates diversity of talent, and a startup culture. If you don’t create that culture, sooner or later, your innovators will go out.

Tech talent will stay in the city if they believe there is a good future here, that is not short-term. This is where we have lost to Delhi and the NCR. Can we stop people from moving out? At least institutes like IIT have incubators. Can we say the same about other engineering institutes in the city? Are they even ranked among the top 10 or 20 institutes in the country? When working people want to start their own ventures, do they go to Bengaluru or stay back here?

This is where policy decisions can play a role. For instance, builders can be asked to reserve two flats for startup founders to stay in till demand for the property grows. Or they can be given tax rebates for the first three years. The biggest nightmare for a startup founder is often how he can make ends meet in Mumbai: even with funding, he earns not more than Rs. 25,000-Rs. 30,000 a month. The minimum cost of a rented place in the city works out to Rs. 35,000-Rs. 40,000 a month. Plus there’s the issue of long, tiresome commutes. Sure, startups know what struggle is about. But won’t he be tempted to move to Bengaluru if he can save some money, which he can use to hire a techie?

We need to create a genuine, measurable and meaningful outcome that will be a reason for startups to start, stay and build here. For that, we need to move beyond hype and vapour, and create systems on a meaningful scale.

The Fixes

Here are my six success pills.

1. Whose agenda? Fixing Mumbai’s startup ecosystem has to be someone’s priority. It could be a minister, a bureaucrat, the mayor, a BMC councillor, a private collective or a PPP. Someone who has strong commitment, support from political leadership, good resources and knows startups and how they are different from regular businesses [alas, this is a general problem with our policy makers in India], someone who can work as a patron saint. Private companies like VentureNursery, no matter how ambitious we are, just don’t have the resources.

This is what the Mayor of Paris initiated by creating Paris&Co [a VentureNursery international partner] in 2015 with the merger of Paris Développement, the Parisian agency in charge of inward investment attraction and the Paris Region Lab, dedicated to the development of the Parisian innovation ecosystem.

I have read casual reports in the media from time to time about the State Government’s resolve to make Maharashtra India’s startup capital, but until I see something concrete on ground, that appears to me like Mumbai-will-be-Shanghaikind of talk. In my view, the Government has to move beyond announcement; it has to act like an anchor and play the role of a supportive enabler.

2. Collaboration of Like-Willed : Mumbai has some of the most supporting angel investors, many of whom have been investing in startups for eight to 10 years. It has some of the finest and most progressive old guard companies such as Mahindra, Raymond, Castrol, the Aditya Birla Group, Wockhardt, L&T. Most of these companies have a bias towards innovation, but they may be depending too much on their internal R&D teams to deliver them the next generation of innovations. It also has several accelerators and incubators. We need to set in motion a proper outcome focused collaboration between engineering colleges, private companies and passionate individuals, small groups, firms. If a collective can work without ego and power politics, it can work wonders.

Many of these are already working hard to help startups, but they follow an ‘island’ model of doing good. We need to string them together and incentivise them to create transformation.

In my suggestion, the collective would be focused on developing a startup infrastructure in Mumbai, striking partnerships with other cities around the world and promoting Mumbai as a startup destination to founders elsewhere, much like countries and states promote themselves as tourism and investment destinations.

3. Corporate Acceleration : Progressive companies should be encouraged to create formal acceleration programmes, open to employees as well as ‘outsiders’, to create a symbiotic relationship between internal R&D departments and true blue startups. They can get access to disruptive technologies, ideas and business models and in turn offer startups sector know-why and know-how, small amounts of money and pilot base.

4. Create Resccelerators : As I said before, Mumbai founders face the double sting of high cost of workspace and living space. Given the large overhang of real estate inventory, developers many be persuaded to allocate space, even temporarily, which can be converted to residential accelerators or what I call resccelerators. Where this is not possible, creating pocket-friendly living islands may be an option. This can be Mumbai’s killer app, something every founding team would love.

5. Think Region, not City : Treating a city as a standalone ecosystem may not be the smartest thing to do. In our interconnected world, it may be worth looking at Mumbai-Pune-Nashik-Goa as one startup geography, with possibility of multi-locational teams and cost-effective remote work spaces.

6. Create Proto Labs : A lot of Mumbai founders are not techies, but they are smart entrepreneurs. Many struggle way too much with technology in the early days. We need to create at least five to six labs for creating the first look prototypes.

To me, the startup goal for Mumbai need not be to defeat Bengaluru. It’s not an ego tussle. The goal should be to build Mumbai as a strong magnet for founders in the city, in the neighbouring cities as well as in the broader region to want to build powerful companies solving real, big problems.

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