Is Bengaluru really losing its charm as the startup hub of India?

A recent report stated that Bengaluru slipped five positions in global startup rankings – what does that really mean?

Atom Startups

Bengaluru has housed some of the biggest and most successful startups India has seen in the past decade. Flipkart, Big Basket, Swiggy, Ola are just a few examples. However, a recent study by Startup Genome, which was widely reported on, points out that Bengaluru’s position in the Global Startup Ecosystem Ranking 2017 has slipped five places down to the 20th position, from the previous year. Cities like Beijing, Shanghai and Stockholm have raced ahead of Bengaluru.

The report has led to a lot of despondent reporting on the startup scene, with writers stating that Bengaluru is worsening by the day.

So, is Bengaluru really losing its charm as the startup hub of India?

Perhaps, but not really.

Not many seem to have read the report in its entirety.

While it is true that Bengaluru has slipped in its overall ranking, the sub-rankings paint a better picture.

According to the report, while Bengaluru is ranked 7th based on valuations, it stands 11th in terms of performance. Multinationals continue coming to the city and setting up shop in hopes of tapping the innovation here. Amazon, Uber, Qualcomm and Cisco have all set up offices in Bengaluru while companies like Microsoft, Qualcomm have chosen Bengaluru to set up startup accelerators.

More importantly, in terms of technical know-how, Bengaluru has the highest rate in the world, with 94% of Bengaluru founders having a technical background. And of course, no surprise here, Indian engineers, especially in Bengaluru, are the most cost-efficient ones.

Almost 45% of Bangalore’s startup founders have gained at least 2 years of prior work experience in a startup, placing the ecosystem in the upper third globally, close to Silicon Valley at 49% and Tel Aviv at 55%.

So, what is the issue?

There has been a stagnation in growth – and the lack of exit factor.

From seeing ‘fast’ growth in 2015, growth rate of the startup ecosystem in Bengaluru has now become ‘average’. One reason could be the fact that there are other cities within India as well that are seeing traction. Delhi-NCR is one such example.

In fact, at the beginning of last year, Delhi NCR accounted for the highest amount of funding in India. It led the race in terms of ticket size as well, with an average ticket size of $5.8 million, a report by Tracxn stated. Snapdeal, Shopclues, Ibibo, MobiKwik are some of the startups that we founded in Delhi.

What Bengaluru also seems to lack is the exit factor. The report by Startup Genome says that this could mean that there is trouble at the top of the market with acquisitions

Harminder Sahni, MD of Wazir Advisors says that in the last three years, India has seen a lot of euphoria around startups. “Everyone has been jumping onto the startup bandwagon. As a result, there is a dearth of original ideas. Many companies copy one idea from abroad and when that becomes successful, three more startups try to copy this copied idea. This creates limited opportunity for investors to make money and as a result, exits remain elusive,” he says.

Image: Ramnath Bhat