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.

30 Responses to “The Pyramid is actually a Lollipop.”

  1. Bharat Kumar says:

    Vijay – You didn’t say who comprises the upper half of the lollipop :) Without being offensive, the lower hemisphere of the lollipop gets licked and the upper half gets sucked.

    Does our lack of understanding of these local companies reflect the problem? The fellows (the techies) who can provide the push, are in the wrong place. Almost like driving backwards…come to India to serve the US companies?!! No wonder they are called the back-ends.

    Did you wonder why neither Indiatimes, nor Rediff and more recently the ’18s and big’s are not based out of Bangalore or even Chennai?

    Infrastructure which means all round development of minds and the place attracts serious players. Weather, soft-talk etc. attracts vacationers, the homesick NRIs and the expat, besides the retirees.

    Whatever the pressures of Bombay (for globals), or Mumbai to locals), there exists a cross-domain thinking (media, finance, technology, etc.). Delhi learnt quickly, Hyderabad seems getting there faster. See Naidu or even Reddy!

    Moral of the story? Any guesses? Let me see some responses and I will submit next :)

  2. Sujai says:

    Vijay:

    you said:
    Bangalore, as per the count that we have on the number of startups, measures quite low.

    I am curious. My superficial observations tells me quite a different story – that Bangalore is the best place to start. I always believed that there is no other city in India that comes to close to providing the necessary atmosphere to create a technology startup.

    I could be wrong.

    But I am curious to know why you think Bangalore does not have as many startups. Since you are familiar with many startups in India, do you see a pattern in the number of nominations received, the number startups that you get to meet, which suggests Bangalore has less number of startups compared to a city X?

  3. Vijay says:

    Anand,
    In kannada there is one saying.. kalagadavaru mai parachikondrante. Bangalore is in no way a comparison to Chennai. Otherwise, many US returned guys wouldn’t have thought of Bangalore as the first destination for funding or starting a venture. Pleasant weather, friendly people who talk in English and Kannada unlike Tamil only even the person knows English or any other language a new comer knows, brewing with talent, [check why the big MNCs are here for].. the list goes on dear.
    If the talent is costly, why biggies are flocking to Bangalore? Everything comes at a price and in Bangalore you will get best of all worlds.
    If Bangalore is such a loser, check ur latest initiative and u will find out how many startups are fostering here. If I am not wrong, you initially refused to have Bangalore on ur proto agenda. How come u are considering it? How come u r considering Bangalore to be ur next home?
    Writing any Tom Dick and Harry can do. But u are not any Tom Dick Harry. You should keep writing better stuff instead of getting into mudslinging. You know what happens when one wrestles with pig right?

  4. Vijay Anand says:

    Vyaas,

    I am sure that thought did trigger and that was essentially the point of that post. I dont think we should ever retire saying that we have achieved it – but have to strive to push the limits of how better it could be. How is it right now? Its quite nascent at best I’d say. We have a long way to go. And we need to visualize and build an inclusive one, with cross territorial expertize built in – we barely have a handful of smart people with experience and we dont have the luxury to hide behind city limits…yet.

    And all this quotes about the world being flat, It isnt… Not yet.

  5. vyaas says:

    There are 20 comments to this article and except for 3 (Aditya, Shenoy and Kopos) every comment is advising You(vijay) about he is wrong because of what he has written about B’lore.
    If anyone wants to do a startup they should be first and foremost be articulate. Instead of writing Vijay, you should be enlightened about B’lore….we can write B’lore is good/better because……
    What surprises me is 17 out of 20 (leave vijays comments) advises he is wrong because….

    There was another article few days back
    http://www.venturewoods.org/index.php/2008/03/08/is-location-is-a-constraint-for-start-ups/

    There were only 5 comments there and only Mr.Shenoy had commented there, we could have all commented there telling B’lore is the best there..

    What it boils down to is we are mostly argumentative and the moment we are given a chance we want to criticize.

    I think we should come above this You/I business and commenting only on merits and demerits of a blog article.

    Rgds
    Vyaas

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