The Pyramid is actually a Lollipop.

Everyone, and Just about anyone with a background in Economics and can understand the market will tell you that a healthy market is supposed to be somewhat close to what C.K.Prahalad defined and popularized as – atleast here in India – a Pyramid. But is our economy, atleast when it comes to the Industrial sector anywhere close to it? Hmmm… One has to really think about that one.

I am not even for a second going to even go near the point of saying that I am enlightened here with this revelation that our economy is not a pyramid. Infact, this conversation has been initiated, argued, debated, chewed and spat on in most economic forums in the country and everyone is very well aware that we dont have a healthy Pyramid. I am just thinking through, what it means in terms of repercussions to the industry as a whole and to the entrepreneurial community.

Let’s start from the basics: The pyramid usually has about three segments. The 20% of the huge corporations and conglomerates, and the rest 80% which are pretty much the SME segment and the Startups. Now, do the numbers really add up? I’d have to think about that one, yet again.

During a conversation with a friend recently, the conversation revolved around which city provides a better atmosphere for a startup, from a perspective of providing that initial feedback, customer insights and etc, so that there is clarity past the ideation stage before the prototype is built. I had this perplexed look on my face trying to figure out if there is yet a city which provides that here in India. While most do cry out “Bangalore”, if you ask me, that city is the most startup-unfriendly territory that I am observing.* Whilst there is a very active group of people, and some with disposable incomes, who have started an entire community of unconference events and discussions that surround that, very little is happening past that. Bangalore, as per the count that we have on the number of startups, measures quite low. Salaries are high, infrastructure is expensive, branding is a very costly affair, attracting talent is a dance on the pole – let alone quality talent, and there a dozen startups fighting for the starving number of resources who are available and will actually provide that high caliber value for a startup. On the number of new startups that are emerging, the city ranks quite low. But at the sametime there is quite an active number of “startups” in the city which have been lurking around for a while – and when I say a while, it means for roughly around a decade. They have neither joined the SME alliance, nor are they really a newborn child. And this is essentially the company of alliance that is available in most places to get “that initial feedback” that we were discussing about. When these companies themselves are struggling to make that jump after a decade, I am not sure what sort of real feedback they can provide their new wave, that is coming up. I do hope that you understand the conundrum that we are facing here.

So that roughly puts things in perspective. If you break down an industry vertical, lets say the internet space, we have the likes of the public sector companies, and then we have companies such as Rediff and Indiatimes which form the bottom hemisphere of the lollipop, and then there is this ultrafine line of companies which are not more than a handful, which are to be the SME and startup companies put together. Lo! and behold, not the pyramid, but the lollipop. And in this Lollipop economy, the upper circle is competition and fiercely guards anything, anyone from the bottom is trying to pull. Feedback, and initial discussions are absolutely out of the question in most cases.

This is a concern, cause in an efficient ecosystem, I strongly believe that Incubators will have much less of a role to play. If knowledge was freely available, and people could catch up over a cup of coffee to vet out an idea, and that validation process could happen over conversations in a much more fluid manner – eventually leading to mindshare, market traction, talent referral, intial client base and even funding, then there is absolutely no need for a third element to facilitate this. Today, Incubators become an essential part of this conversation, since they are the only ones who can moderate and manage the intellectual property talks that are carried out and have any say with these bigger guys, who if they wish could squish these startups in as much time as it takes to blink.

It is quite beautifully put: Markets are inherently conversational. The more conversations we have, the faster we mature, and we need to have them in a much more open manner with all our cards on the table and as early as possible – if you are building a startup, or contributing towards the ecosystem. But unless the economic bifurcation by quantity and numbers is a pyramid, and not a lollipop, it is going to be a tough stroll up that mountain as we grow.

*While it is my opinion that, if a valley-type of ecosystem comes together in India it will be in a tier 2 city such as Pune or Hyderabad, that’s a conversation separate for another day.

Note: Repost of an article.