Geography becoming history for start-ups

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SummaryAsk early stage investor Sasha Mirchandani how promising entrepreneurs in small towns of India are, and the answer lies in the excitement in his voice.

For once, location does not matter as budding entrepreneurs in small towns give the big city guys a tough contest

Ask early stage investor Sasha Mirchandani how promising entrepreneurs in small towns of India are, and the answer lies in the excitement in his voice. Part of the jury that judged a recent contest for student start-ups, which saw almost half of the entries come from small towns, Mirchandani has visited umpteen campuses across the country. And, he is pleasantly surprised with what he has seen. “The quality of start-ups has improved dramatically since I have been observing them over the years. The teams are far more savvy, their plans far more precise and concise, and business models much better.”

But is it still a disadvantage to be in little India? “To some extent it is important where you are, but more important is the entrepreneur’s ability to sell his plan to a venture capitalist, which can be done from anywhere,” says Mirchandani.

He also dismisses concerns if VC funds, angel investors and seed funds are reaching out to small town entrepreneurs. “The savvier and smarter VC firms are looking at deals beyond metros because those deals will be less competitive, but still high on quality,” says Mirchandani, adding that funds such as Kae Capital do small-ticket investing ranging from $50,000 to $2.5 million.

While funds are gung-ho about start-ups, industry experts believe a lot more needs to be done to create a good ecosystem in the country. Commodore Anand Khandekar (retd), former mentor and director of Nvidia Graphic Pvt Ltd and IT evangelist, says it takes around 10-15 years to build an ecosystems, especially in the IT industry.

He says it is here that large Indian IT companies could have played a role. “They have not done anything. Indian IT companies are sitting on piles of cash and have not helped create an ecosystem. Real transformation has to start from these iconic companies,” says Khandekar.

What is also helping build the ecosystem is emergence of support organisations like NEN, which spruces up youngsters and gets them to a level where they can present their ideas in boardrooms of venture capital firms.

Mirchandani hopes for small angel clubs in towns where entrepreneurs can meet and role models can emerge. “People look up to role models. Sunil Mittal coming out of Ludhiana makes other people there feel if he can do it, so can we,” says Mirchandani.

He cites the example of a small company from Shimla called Interview Street that subsequently moved to California and now has the potential to become a global company. “It is happening from Shimla to California even as we speak.”

If a business plans works in Shimoga, it will work in the rest of the country too, depending on the kind of business you have, he says. For example, Groupon started in Chicago but they had no idea whether a group discount would work in Boston, but they tried and it worked across the country.

K Srikrishna, executive director of NEN, says new technologies also enable breaking of geographical boundaries. “The growth of cloud technologies is permitting young entrepreneurs to get started with far less investment and to access markets that are not confined by geographical boundaries,” he says.

Dayasindhu N, senior director at Zinnov Management Consulting, believes start-ups in the IT space can theoretically be located anywhere, but the reality is that they have clustered around the existing IT hubs of NCR, Bangalore and Pune because of a ready ecosystem. Dayasindhu feels a big driver for the growth of start-ups across the country would be folks returning to their towns after working in these clusters. “IT is a great leveller; everybody is using the same Google and Facebook, so start-ups from smaller towns can leverage technology to fill the gaps in their ecosystem,” he says .

He says the government should set up incubators, offer funding support and incentives, hoping Budget 2013-14 will prove to be a start.

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