The Economist UK - 14.03.2020

56 The EconomistMarch 14th 2020

1

W

hen itinerantventure capitalists

land at Delhi airport, many head

straight to Aerocity, a new development of

glass, steel and Starbucks next door that

would not look out of place in Silicon Val-

ley, Singapore or Shanghai. Cyber City, an-

other tech enclave 20 minutes away by

Uber (traffic permitting), swarms with

young programmers in t-shirts and jeans

not unlike the Stanford students plotting

the next disruptive app at Philz Coffee in

Palo Alto. Many are one and the same.

What Delhi’s tech parks lack in the

splendour of India’s historic business hub,

in south Mumbai, they make up for in un-

potholed roads, uninterrupted mobile con-

nections and stable broadband. Between

2017 and 2019 the capital spawned 2,562

startups, according to Tracxn Technol-

ogies, a data provider. Other clusters, nota-

bly in Bengaluru, Mumbai, Hyderabad,

Pune and Chennai, added a further 4,500 or

so between them. India now has 80,000

startups (see chart 1). They raised $10bn in

2019, up from $3.1bn in 2012 (see chart 2 on

next page). That puts India’s venture capi-

tal (vc) activity behind America ($114bn)

and China ($34bn) but ahead of larger

economies such as Germany or France.

PitchBook, a research firm, counts 18

unlisted “unicorns”, valued at more than

$1bn apiece, grazing in India. They are

worth a combined $72bn. Bright engineers

and managers now aspire to work for

them—or their vc backers—rather than

settle for safe careers at a multinational, a

bank or a state-run firm. Another 150-odd

“soonicorns” may reach the $1bn mark

shortly. They promise free cappuccinos,

excitement—and, for a lucky few, riches.

They may reconfigure parts of the national

economy. Mohandas Pai, a vc-wallah and

former finance chief of Infosys, a local tech

giant, predicts that within a decade India’s

startups will help triple its gdp.

Mr Pai is not alone in his bullishness.

India’s business press revels in tales of

startup wonder. Foreign vc firms have

piled in. They hope to ape the success of

Flipkart, an e-commerce platform in which

Walmart bought a majority stake for $16bn

in 2018. Yet despite startup India’s indis-

putable promise, pitfalls await the unwary.

The Indian vc scene has come a long

way. In 2005, when Rajan Anandan, a

partner at Sequoia Capital, a Silicon Valley

vc titan, returned to India after a spell in

America, all-important early-stage vcwas

close to non-existent. Foreign firms began

to fill the gap. Californian stalwarts, in-

cluding Accel, Matrix, Lightspeed, Besse-

mer and Norwest, have since set up mostly

autonomous Indian offices. So have Singa-

porean sovereign-wealth funds, Temasek

and gic; Chinese tech giants, Tencent and

Alibaba; and, inevitably given its startup

covetousness, SoftBank of Japan. They

have been joined by powerful local firms

such as Blume Capital. Giant Indian con-

glomerates such as Tata, Reliance and Ma-

hindra have launched vc arms. vc types say

they get more than 5,000 pitches a year.

Most of the money has gone into famil-

iar platforms: ride-hailing (Ola), food de-

livery (Swiggy, Zomato), online grocers

(bigbasket), car rental (Zoomcar), online

Technology in India

Silicon subcontinent

DELHI, MUMBAI AND SINGAPORE

After a decade of phenomenal growth, one of the world’s biggest startup scenes is

showing signs of trouble

The IT crowd^1

Source: Bain & Company *To December 7th

India, startups, ’000

0

20

40

60

80

2012 13 14 15 16 17 18 19*

Business

57 The anti-covid industrial complex

58 Bartleby: Rethinking sick leave

59 Multi-cloud computing

59 A case against stakeholderism

60 Schumpeter: The rise and rise of

Accenture

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