Away from the metros and India’s Silicon Valley, a quiet revolution is brewing in the country’s tier-II cities. A whole bunch of startups is being incubated in research institutions that are fostering cutting-edge ideas and seeing the companies through their first steps.ET takes a look at the latest hubs of startup activity.At least 90% of India's startups are in six cities: Bengaluru, NCR, Mumbai, Hyderabad, Pune and Chennai, according to Nasscomm (see map). The statistics are skewed as they deal with only information technology companies, but the overall trend has been unmistakable in the past decade: startups form in a few big cities in the country.There also clear signs that this is going to change.The immediate followers to the big cities are Kochi and Ahmedabad, but those like Mohali and Jaipur are beginning to do well too. ET spotted two cities with immense potential: Bhubaneswar and Indore. Both have a high concentration of high tech institutions, an immense amount of problems to be solved in the region, and unlimited entrepreneurial enthusiasm.ET profiles four of these cities, two with rapidlyestablishing credentials and two more with considerable potential. In the next decade, these four cities could join the big six as major hubs for entrepreneurial activity .Some of the startups forming there are already of a high quality, but are forced to move after a period of initial growth. The startups may not need to do so if these four cities develop as they promise.As a young geneticist at KIIT University in Bhubaneswar, Birendranath Banerjee studies the effect of lifestyle stresses on one’s genes. He was feeling uncomfortable teaching in his hometown Kolkata when KIIT offered him a job with a promise of complete intellectual freedom. KIIT was then in the initial stages of setting up a business incubator, and Banerjee in the early stages of setting up a company. It was a perfect match.The company, InDNA, was set up in 2012, and things have gone smoothly since then. He got Rs 1 crore from the department of biotechnology, and Rs 2 crore subsequently from rich doctors in the region. InDNA is now expanding to Kolkata, Hyderabad, Bengaluru and other cities. He is talking to large companies to provide testing services for their employees, and to figure out how much stress has influenced the functioning of their genes. “We are looking at the effect of lifestyle on the entire genome,” says Banerjee.InDNA is the most high-tech among the KIIT incubator companies. In the past four years, KIIT has invested Rs 15 crore in its building and Rs 10 crore in equipment, for which the DBT provided Rs 9 crore. It has incubated 34 companies, nine of which have moved out to their own offices and are in business. Bhubaneswar has other startups too, as the large IT companies have come to the city.



With several institutes of higher education, including an IIT, the city is slowly setting the foundation for becoming a hub for research and technology startups in the eastern region. Says Mrutyanjay Suar, director of biotechnology at KIIT: “Bhubaneswar is at the same stage where Bengaluru was in the early 1990s.”



With its sketchy business history and laidback culture, Bhubaneswar at first seems an unlikely birthplace for 21st century startups. None of its educational institutions has set the country on fi re through its research. The city is well laid out but retains its rural charm, being on the edge of a large forest and an elephant trail.



And yet there are signs of the city developing as a major eastern hub, as people of eastern origin started preferring the city to Kolkata. Consider IIT Bhubaneswar, one of the youngest among the country’s elite institutions. It will eventually have a 1,000-acre campus, but it currently operates from a partially-abandoned government building, an environment that does not bother some of its young and distinguished faculty.



Saroj Nayak returned from Rensselaer Polytechnic in the US a year ago to be a professor at IIT, despite several attempts by this famous institution to keep him back. Power cuts greeted him when he sat in his makeshift office, a situation he had never faced in his life.



His answer was to make solar back-up system, which he now sells through his startup Karma. This unit, replete with a solar panel, a battery, a fan, phone charger and a light, sells for around Rs 4,500. Nayak also had a fair bit of intelligence built into the system for energy management. “We are trying to reduce the environmental impact of energy generation with minimal investment, he says.



When he moved, he found a job for his wife — a medical scientist — easily in the city, which is now sprouting luxurious new buildings, some of them built by large IT companies. Infosys was the fi rst, as it built its fi rst campus outside Bengaluru. TCS has one of its swankiest offi ces in the city. MindTree has built a learning centre in Bhubaneswar right next to TCS, and sends all its new recruits for intensive training there. Chip design fi rm Sankalp too has a development centre here.



Bhubaneswar has some native IT startups too. Software services firm ESSPL, started in the city in 1998, has offi ces around the world. AABSys, a geospatial and design software services company founded in 1996, is now a medium-sized company. But the current generation of startups, particularly from KIIT, are venturing beyond IT and solving problems of people in the region. As a master’s student, Rahul Chatterjee researched the practices of the food industry.



It has resulted in two startups, one making safe food using biotechnology and the other converting waste cooking oil into biodiesel. Sruti Kanti Mishra set up Maiestas Luminaries as a second-year engineering student to manufacture LED panels and other products.



Within two years it has a 120-member team and has notched up revenues of Rs 1.2 crore in six months. Anurag Kyal is a second year master’s student, but has developed a process to use the weeds that are destroying the Chilika lake; he now looks at an assured business making raw material for paper. The region eagerly awaits these problem-solvers.

Indore: The delta factor



The story of how Zomato’s founders Deepinder Goyal and Pankaj Chaddah quit their jobs in Bain & Company to start the now thriving restaurant discovery venture is well-known. What’s less known, however, is that Chaddah grew up in Indore and spent his formative years there before enrolling as a student in IIT Delhi.





Indore, an erstwhile industrial hub where companies like Ruchi Soya are headquartered, is also an education centre attracting students from across Madhya Pradesh and in the neighbouring Gujarat and Rajasthan. It has yet to build a reputation for startups. Statistics on the number of startups in Indore are hard to come by.There are no incubators, accelerators or other facilities that entrepreneurs in large cities typically have access to these days. “Until now, even if there was an incubator, there was no pipeline of startups,” points out Marlina Ramchandran of the National Entrepreneurship Network (NEN). Ramchandran estimates the number of startups in the city to be a little over 100.Indore may not as yet boast of a large startup ecosystem but statistics tell only one part of the story — they don’t account for delta which is the entrepreneurial spirit — the ability to overcome odds, which can’t be predicted.While VCs haven’t yet started looking seriously at investing in Indore, funding isn’t a very big problem for startups and there are local businesses willing to fund interesting ideas. “The big difference we saw in Indore and other cities we go to is that most of the ventures giving the demo were already funded,” says Jatin Chaudhary, co-founder of eChai Ventures, a grassroots entrepreneurship organisation, which organises entrepreneur meets and demos in various cities.“Some are also funded by friends and family,” he says. eChai, which is present in over 30 cities, started an Indore chapter six to seven months ago. The last two years have also seen local startup groups such as the Indore Entrepreneur Network and Indore Startups Community spring up. Meets by groups typically attract 50-60 people. More recently, NEN, which is supported by the Wadhwani Foundation, set up a centre for excellence for supporting entrepreneurs, in partnership with Acropolis, group of education institutions in Indore.Indore is also among those cities to have both an IIM and IIT. Rishikesha Krishnan, who took over as director of IIM Indore from IIM Bangalore last year, said the institute plans to set up an incubator in 12 months. Both IIM and IIT, which was set up in 2009, are also collaborating to organise events around entrepreneurship.“We are interested in supporting the entrepreneurial ambitions of students,” says D L Sunder, professor of Strategic Management and Entrepreneurship, IIM Indore. He and nine other faculty members are available to act as mentors to students who want to convert their ideas to businesses. In stage two, these ventures can get a mentor from the industry and help from the alumni network.Virat Khutal, founder of Twist Mobile is one of Indore’s rising entrepreneurs. His story is reminiscent of another, now successful, entrepreneur — Indiagames founder Vishal Gondal, who sold Indiagames to UTV Software. Twist Mobile is also in gaming development. Growing up in Rau, a village near Indore, Khutal went to the city to study architecture.His real interest though was not in being an architect but in his starting something on his own. While he was in Indore he also learnt English, then went on to Pune to complete a Masters in Computers Management, and worked in Delhi and Hyderabad.After two stints in Hyderabad at Gameloft, the US-headquartered gaming firm, he returned to Indore to set up Twist Mobile in 2009, riding the crests and troughs of an operator-driven revenueshare model, the spike in smartphone sales and finally, the app economy.Matrix Partners spotted him at a Nokia event in Mumbai where he was making a presentation and invested in him in 2012. Twist Mobile is one of few fi rms in Indore with investment from a well known VC.“The Snapdeal, Flipkart and Ola kind of highly operationally complex, thousands of people businesses probably cannot be built out from small cities. But with the advent of the mobile, an app can be a business. Two guys in a garage can start a thriving business,” says Avnish Bajaj of Matrix Partners, pointing to Whatsapp’s 50-odd employee strength.



Kochi: Taking deep roots



Despite its recent fame, the Kochi Startup Village does not reveal its true nature easily to the casual visitor. “We want to retain the startup atmosphere,” says vicepresident of incubation Thomas Antony. This consists of two buildings – plaster peeling off from the walls, equipment kept haphazardly inside — where startups share office space. “We are providing a pre-incubation platform for students and experienced people for self-learning.” The platform is not an offi ce but a network; of investors, experienced entrepreneurs and other startups.





The village works with only telecom and internet companies. In three years, it has housed or helped 679 startups, of which 249 were from students. It has had just two failures among the 58 physically incubated. It wants to launch 1,000 successful startups over the fi rst 10 years of its history, hoping for a billion-dollar company from among them.Some of its incubates have such dreams, and aim squarely at the rich US market. Mindhelix has fi gured a way to use old smart phones — 280 million of them in the US alone — and build a home security device. Mindhelix has raised $100,000 through crowdfunding and is preparing to launch the product in the US.Exploride is developing a display system for cars, and is also aiming at the US market. This device, costing $250, will sit on the dashboard of cars and provide navigation advice. Being an Internet of Things device, it will also provide information about weather, news and so on. Exploride is launching it at a Kickstarter event next month in the US. It has seed funding of $50,000, and is looking for more to launch the product.Mindhelix was launched by students. Exploride was launched by two professionals with a bit more experience. Students dominate the startups at the village. “Students are in the consumer space as that is what they understand,” says Sharad Sharma, Bengaluru-based angel investor and a mentor to the Startup Village. The Indian consumer market was not big so far, but these companies have a chance as it is expanding.One of the early startups, In Robotics, has reportedly raised undisclosed but substantial sums for expansion. It makes a gesture control system that can be worn as a ring on your finger. The experience of the Startup Village has caught the attention of other entrepreneurs and potential incubators in the city. The Cochin University of Science and Technology, about 10 km from the village, is in the early stages of forming an incubator. The startup culture is taking deep roots here.



Ahmedabad: Waiting for a makeover



Ahmedabad has incubators, mentors and a well-entrenched ecosystem for entrepreneurship. IIM-A has been fertile ground for entrepreneurship and has historically produced more entrepreneurs than any of the other IIMs.



Its efforts are supplemented by education institutions of repute such as the Mudra Institute of Communication, IIT Gandhinagar, National Institute of Design, National Institute of Fashion Technology, and Nirma group of institutions. Between these premier institutes there is engineering, management and design talent — and in short, many of the ingredients needed to start and run a successful startup today.



IIM-A also has access to some of the best mentors in its alumni, who include Sanjeev Bikhchandani (Naukri) and Deep Kalra (MakeMy-Trip) from the internet and technology sector. Bikhchandani, Kalra as well as several others like Nirmal Jain of Indiainfoline and Narendra Murkumbi of Shree Renuka Sugars are part of an initiative that adopts aspiring student entrepreneurs who have a promising business idea.



But despite this, Ahmedabad has ceded its lead as the country’s startup capital to cities like Bengaluru and Delhi. “In Bengaluru, if you walk into a cafteria you can run into a venture capital or angel investor. In Ahmedabad there are near-zero VC funds,” says Kunal Upadhyay, CEO of the Centre for Innovation Incubation and Entrepreneurship, an autonomous not-for-profit body.

“It has one of the most entrepreneurial cultures,” says Bajaj of Matrix Partners, about Ahmedabad, “but it needs to rebrand itself and up its coolness quotient.” In a presentation made to the Gujarat government, CIIE pointed out that the city attracts the best people but retains few.“Ahmedabad is a very good place to start but not the best place to scale up. Beyond a certain stage, you have to take a call and move to a larger city,” says Upadhyay. And not, necessarily only if it is tech venture, although it is especially true for them. One of the primary reasons why startups shift to Bangalore or Delhi is because of the availability of adequate tech talent there.Kanupradeep Subramanian and Sristi Shaw, 24, batchmates at IIMA, are the founders of WIMWI Foods, a startup in the business of selling healthy food. Their venture was incubated in IIMA’s IdeaPad facility, which is free of charge for one and half years. This along with the support they received in terms of nominal grants helped them start the venture soon after they graduated in 2014.Since then, the startup, which imports shiitake mushrooms from Japan, sells through nearly 50 retail outlets, and online through tie-ups with Amazon and Bigbasket. com. “Our operational costs are about half of what they would’ve been,” says Shaw. The startup, however, plans to shift to Bengaluru by the end of the year.“It makes more sense for us to be there because that’s where our market is,” says Subramanian. “People are more willing to experiment, the population is younger and there is a large market in the IT campuses.” Other than e-commerce player, Infi beam, there are not many well-known internet or tech brands headquartered in Ahmedabad.Infi beam’s Vishal Mehta counters the claim that cities like Bengaluru, Delhi and Pune have an advantage in terms of hiring tech talent. “A lot of good engineering talent is available from IIT Gandhinagar and many IIM-A students are also engineers. We don’t need large numbers like IT services companies — we need quality people. Also, once you are a well-known brand, attracting talent is not a problem,” he says.Like many others, Mehta feels that once the Gujarat International Finance Tec-city Company city, a project aimed at creating a global-class fi nance and IT hub near Ahmedabad is ready, tech fi rms will start operations there, creating a larger technology entrepreneurship ecosystem.