Bangalore: Eric E. Schmidt, chairman of Google Inc., will on Wednesday launch an ambitious programme for technology entrepreneurs in India that will invest some $10 million to nurture 10,000 new businesses in five years.
This new initiative by industry lobby Nasscom, in partnership with firms such as Google and Microsoft Corp., seeks to put a better shine on the country’s poor technology start-up ecosystem.
After years of growing large software services firms such as Infosys Ltd, Wipro Ltd and Tata Consultancy Services Ltd (TCS), India’s $108 billion information technology (IT) industry lags smaller nations such as Israel in creating software product companies.
The Startup Genome project, which tracked start-up ecosystems in 141 countries and some 83,040 new ventures last year, ranked Silicon Valley in the US on the top of its 2012 start-up ecosystem index, followed by Tel Aviv. Bangalore, at 19th, was the only Indian city that found mention in the gauge.
“The programme will ensure funding of several million dollars to entrepreneurs seeking to test new ideas, build software products, and market them,” an executive involved with fleshing out the programme said on condition of anonymity.
Nasscom, Google and other firms declined to share details of the initiative ahead of its launch in New Delhi.
Entrepreneurs such as Sanjay Vijayakumar, who founded mobile value-added services firm MobMe, which is now valued at Rs.100 crore, said India needs to follow a more ground-up approach in building a globally competitive start-up ecosystem. Vijayakumar, who created start-up incubator Startup Village in Kerala’s Ernakulam district in March last year, aims to build 1,000 software product companies in 10 years.
Startup Village will be a part of Nasscom’s new initiative.
“You can’t have top-down approach in India. As a country, we need to bring all knowledge that incubators such as Startup Village have apart from many others, and create a revolution,” said Vijayakumar, who founded MobMe with other students while he was an engineering student.
“Companies like Infosys, TCS have led throughout the services revolution; now is the time for product companies,” he said.
For years, India’s $100 billion software outsourcing industry has become more famous for writing code and handling maintenance projects, with just a handful of local technology product companies. These firms contributed a mere $1.8 billion in revenue to the total in 2011-12.
Some entrepreneurs are already relocating to Silicon Valley and other locations in pursuit of lucrative incentives and better valuation among potential investors for their firms.
For instance, a programme called Start-Up Chile has attracted 3,000 applicants last year, of which at least 100 are from India, making them the fourth largest group in terms of the country of origin, after those from Chile, the US and Argentina.
On offer is the equivalent of $40,000 in seed funding from the Chilean government, which isn’t asking for any equity in return, plus a one-year work permit. Chile aims to host 1,000 entrepreneurs by this year at a cost of $40 million under the programme.
A similar kind of programme in India will help the country compete more effectively in attracting the best entrepreneurial talent.
The idea behind this programme “is to bring all important investors, companies and stakeholders under one umbrella and ensure that Indian start-ups do not lack ingredients of money, mentoring and access to markets”, said another official familiar with the initiative. He too declined to be named.
Google is backing this project because a lot is riding for the company in an important market such as India, experts said.
“Google created a lot of opportunities for start-ups by essentially allowing Android to be an open platform and facilitating people to create apps and things like that. Google has a history of creating open architecture and open platforms that are helpful to a lot of small companies,” said Rishikesha T. Krishnan, a professor at the Indian Institute of Management, Bangalore, who is also a member of newly founded Indian software product think-tank iSpirt.
There are more software professionals quitting their jobs to join a start-up or launch their own ventures than ever before, offering an opportunity to ensure they receive all early-stage help needed.
“Earlier, there used to be a problem of how do you sell and how do you support the products. But now, since most products are sold over the Internet without being physically shipped, it is completely online. This has really made it easier for companies anywhere around the world to address new product opportunities,” said Krishnan.
A Microsoft India executive said his company is part of the new programme.
“It’s very clear to me that there is an incredible amount of innovation and ingenuity and excitement around, not just start-ups, but students, professional developers and IT professionals all across India,” said Joseph Landes, general manager, India developer and platform evangelism, Microsoft.
Some say the biggest challenge faced by this initiative is the involvement of several heavyweight firms such as Google and Microsoft.
“I think if we want a sustainable entrepreneurship movement in India, then we have to advocate a bottom-up method of doing things rather than a top-down method of doing things. The agenda then doesn’t get hijacked by one company. Otherwise it’ll become just a Google or a Microsoft programme,” an executive involved with many start-up-related activities with the government and several private firms said, requesting anonymity.
Startup Village in Kerala provides a good case study for any grassroots incubator programme to succeed.
“The trick is to make it successful on the ground, like what the Kerala guys have managed to do, much to everyone’s scepticism initially,” the executive added.