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How did Bengaluru evolve into a global hub of technology start-ups?

Photo: Sudhira HS/Research Matters

Technology start-ups are often viewed as important sources of innovation, productivity, growth and employment, contributing to a country’s competitiveness by introducing new products or services. The emergence of a unique entrepreneurial ecosystem, which supports and promotes technology start-ups, is an essential factor for a city to harbour technology start-ups.

Bengaluru has earned many nicknames over the centuries. It was called the ‘city of baked beans’ (Bendakaluru), the ‘garden city of India’, the ‘Silicon Valley of India’ and now, the latest label is the ‘global hub of technology start ups’.

Thanks to the growing number of technology companies, Bengaluru is now ranked as the city with highest growth index for start-up hubs, followed by London and Tel Aviv. The city is one among the nine ‘International Start-up Hubs’ outside of the United States. In 2015, it was identified among the top twenty cities to have the best eco-system for start-ups in the world.

While these accolades make Bengaluru proud, have you ever wondered how Bengaluru emerged as a global hub of technology start-ups in India? In a recent study, Prof. M H Bala Subrahmanya from the Department of Management Studies at the Indian Institute of Science, Bangalore, traces the factors that have contributed to this distinction of the city.

Tracing the origins

Bengaluru did not emerge as a technology hub overnight. The study points out that a combination of factors like policy intervention and positive response from market forces over a period of more than half a century have laid the foundation for the emergence of Bengaluru’s entrepreneurial ecosystem.

Immediately after India’s independence in 1947, policy makers promoted Bengaluru as a ‘modern industrial city’ by establishing many Public Sector Units (PSUs) such as Hindustan Aeronautics Limited (HAL), Indian Telephone Industries (ITI) and Hindustan Machine Tools (HMT). This was followed by the creation of industrial estates as part of the national policy for the promotion of Small and Medium Enterprises and encouragement of the subcontracting relationship between small and large firms.

Bengaluru is also home to a large number of education and research institutions that play a major role in supporting and promoting the ecosystem. The vast entrepreneurial and workforce talent available in the city can be attributed to these institutes, says the study. In addition, these institutes provide mentorship and occasional market support as early adopters of the products and services offered by technology start-ups. Some institutes like the Indian Institute of Science (IISc), Indian Institute of Management- Bangalore (IIMB), Institute of Bioinformatics and Applied Biotechnology (IBAB) and National Centre for Biological Sciences (NCBS) have their own Technology Business Incubators (TBIs) to nurture entrepreneurship, particularly among their own would-be graduates.

After the entry of Texas Instruments into Bengaluru in 1984, a slew of IT based Multi-National Corporations started flowing into Bengaluru. The biotechnology (BT) boom of the 1990s that started in the city helped Bengaluru become home to a large array of biotechnology enterprises. During the course of time, many of these IT and BT enterprises  started their Research and Development(R&D) centres to take advantage of the easy availability and high-quality R&D workforce, thereby helping the economy.

As the numbers of technology based industries grew, the policy makers started to effectively use the experience to build an ecosystem that could support the emergence, sustenance and growth of technology start-ups, thus taking Bengaluru to its present state.

Emergence of an Entrepreneurial ecosystem

It takes a lot to build an entrepreneurial ecosystem. Structurally, there needs to be a ‘nucleus’ comprising entrepreneurs or prospective entrepreneurs, who form the core of the ecosystem. Then there are primary components such as domestic and foreign private enterprises, educational and research institutions, government support for industry and infrastructure, financiers, nurturers in the form of accelerators and business incubators, technology and business mentors. This is supplemented by secondary factors like an exclusive start-up promotion policy, good weather conditions, supportive media and accommodating culture.

“The ecosystems change from time to time in terms of people, organizations and environments”, remarks Prof.Bala Subrahmanya. “The entrepreneurial organizations such as venture capitalists, business angels, banks and supportive institutions such as universities, public sector agencies, financial bodies and other entrepreneurial processes meet formally and informally to connect, mediate and govern the performance within the local entrepreneurial environment”, he adds describing how an ecosystem for entrepreneurship evolves.

The study identifies government support as a key factor in building the ecosystem. For instance, Karnataka was the first state to have an Information Technology Policy in 1997 that heralded the growth of the IT sector. With the focus now shifting on start-ups, the government of Karnataka has recently launched an exclusive ‘Karnataka Start-up Policy’ aimed to make registering technology start-ups an easy, smooth and quick affair.

Bengaluru’s pleasant weather throughout the year adds another brownie point for the city to be liked by all. It’s culture of supporting regional entrepreneurial ecosystem, which can nurture and promote start-ups, is an added bonus too.

But not many start-ups are successful without the necessary mentorship and guidance. Thanks to the ‘import’ of start-up founders from all around the world, there is no dearth of mentors in Bengaluru. The study states that most of these mentors are either youngsters who are educated abroad or industry veterans or former founders of start-ups. With their varied experiences and wider international exposure, they may not be averse to experimenting or risk taking. In addition, there are numerous start-up clubs and programs, which enable prospective entrepreneurs to understand the pre-requisites of entrepreneurship. Many a time, this support system plays a key role in acquiring a seed fund for the entrepreneurial ventures.

The large and diversified consumer base of the city offers adequate scope for customer testing of new products/services too. In Bengaluru, any new online service – be it for cleaning up your house or grooming a pet, immediately has a strong user base. In fact, it is this vibrant and moderately mature customer base is what draws so many enthusiastic entrepreneurs to start here, helping the life-cycle of their start-ups.

While all is well, there is more to come, says the study. “The gradual and steady scaling up of a large number of tech start-ups, induced by their success and growth is yet to take place in a big and visible way”, signs off Prof.Bala Subrahmanya on an optimistic note.