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Why Delhi-NCR Beating Bengaluru In The Startup Race Is Surprising

Why Delhi-NCR Beating Bengaluru In The Startup Race Is Surprising
Earlier this week, a detailed report highlighting the startup ecosystem in the country pointed out that in 2019, Delhi-NCR region has more startups than Bengaluru.

The study titled "Turbocharging Delhi-NCR Start-up Ecosystem" by the Delhi-NCR chapter of TiE, also mentions that at least one new unicorn has emerged each year in the NCR region since 2013.

This subject has definitely raised eyebrows across different segments of the industry. But the question we’re asking is, does it really matter that the Delhi region has more number of startups than the other cities in India?

To get a better understanding of why this seems like a big deal, we reached out to Abhishek Kumar Gupta, Founder, Startup Delhi, who indicated that Delhi’s startup ecosystem is predominantly covered by services-based companies.

What is a Startup in India?

Owing to the debatable definition of a startup, a lot of companies get added to the list. This probably explains the figure of over 7,000 startups Delhi founded between 2009 and 2019.

The report says a startup is an entity working towards innovation, development, deployment, and commercialisation of new products, processes, or services driven by technology or intellectual property. It should be an active company founded by persons of Indian origin that’s less than 10 years old and have a product to show.
Abhishek Kumar Gupta, Founder, Startup Delhi Service-based entities can start operating from day one. So, one can start the company as well as the service from the first day itself. For instance, if someone starts a website, and starts selling through it, they can also be recognised as a startup.

Technology based startups are mostly concentrated in Bengaluru. However, to be recognised as a technology startup, a company needs a ready product that’s on sale in the market, Gupta adds.

In addition to this, one cannot ignore the difference in geographical scale between Delhi-NCR (which includes Delhi, Noida, Gurugram and Faridabad) and Bengaluru, as pointed out by Ankur Pahwa, National Leader, E-commerce and Consumer Internet, EY India. But he believes talking about such comparisons in 2019 doesn’t matter.

Ankur Pahwa, National Leader, E-commerce and Consumer Internet, EY The reality is that in today’s world, geography is history. The talent pool for engineering in the South is significantly more than Delhi. Markets these days are dispersed, geography doesn’t matter anymore.

The ‘Quality vs Quantity’ Debate

Even with a higher number of startups, the talent pool in Delhi-NCR region is mostly targeted for the services sector, that is available at affordable cost compared to what’s available in Bengaluru.

Ankur Pahwa, National Leader, E-commerce and Consumer Internet, EYWhich is why a large part of the R&D team’s for Indian as well as global companies sits out of Bengaluru. Given the availability of skills and technical work force, they believe innovation happens there. 
The govt had introduced the India Aspiration Fund, a Rs 2,000-crore seed fund for startups.

Ankur also emphasised that even today you will find most global companies based out of Bengaluru and that’s unlikely to change anytime soon.

The ‘Unicorn’ Factor

You might say that the Delhi region has more ‘unicorns’, that is companies with valuation of over a billion dollars, but does that matter, especially when others aren’t getting the monetary support.

This is where Abhishek has observed that since 2016, investors have stopped risking their money on early-stage startups. This has also been highlighted in the TiE Delhi-NCR report.

It says, some 420 startups were founded in 2018 as compared to 826 in 2017, and 1,361 in 2016. When it comes to the first half of 2019, the report highlights that only 142 startups have been founded to date.
Early stage startups need more money.
Abhishek Kumar Gupta, Founder, Startup Delhi There has been a fall in number of startups in Delhi-NCR over the past two years. In 2014-15, the startup craze was high, funding was at its peak, which made them think they can sustain in the long run. But since 2016-17, funding for early stage startups has come down.

This reality is likely to be the biggest takeaway from the report driving home the point that investors need to look at Delhi-NCR as a blossoming startup ecosystem, as mentioned by Rajan Anandan of Sequoia at the press event earlier this week.

The TiE report has also outlined a road map to set up more than 20 incubation centres in the region by 2025, and also taking the number of unicorns from Delhi-NCR to 30 in the same period.

Ankur Pahwa, National Leader, E-commerce and Consumer Internet, EYThe focus of this report is less a comparison to other cities but is instead trying to get the state government’s attention, asking them to draft policies and a structure that encourages budding startups.

If such dialogues or reports can have a statewide impact, nobody, and especially the startup community, would be making these comparisons.

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