Given how most of the successful internet companies you hear of today didn’t even exist a few years ago, it is not surprising that most big Indian IT firms are in the process of finding ways to co-opt start-ups who are working on cutting edge apps/solutions. Firms like Wipro and Infosys, for instance, each have $100 million funds for buying into start-ups.
The activity hasn’t really picked up any significant scale as yet, and it is not as if any of the firms are expecting any meaningful share of their revenues to come out of the start-ups they invest in for the near future. The purpose of the investment is different. At the most superficial level, it is to give the IT majors a possible solution they can talk to their clients about, say an app that helps optimise promotional spends across various medium.
With this edge, what IT firms are hoping to do is to build larger solutions/service bouquets that can be offered to clients. Were the IT majors not to associate with these start-ups, chances are they will lose business to them; so the best thing to do is to try and co-opt them. Investing in them—as opposed to buying them outright—helps to retain their innovative edge while giving the start-up the right degree of financial comfort as well as mentoring.
It is in this context that Nasscom’s 10,000 start-ups programme needs to be evaluated, as an attempt to replicate the Silicon Valley ecosystem of bringing together cutting-edge technical solutions with not just money, but also mentors who can help take the start-ups to the next level of development. According to serial entrepreneur Ravi Gururaj, who also heads the Nasscom Product Council, the current run rate of the programme suggests there will be over 11,500 software product start-ups by 2020, employing more than
2.5 lakh persons. In just the last four years, start-ups have managed to attract around $2.3 billion of funding. If Nasscom and the IT
majors are able to create a Silicon Valley-like environment, this will do wonders for both them and also help take India’s IT sector to the next level.