Last week I had the opportunity to spend time with startups and tech companies in New York, aka Silicon Alley. The excitement in the startup and venture circles in the city was impressive. Previously where finance used to dominateÂ all conversations, now its about ad tech, social/mobile and Pinterest clones.Â VC’s seems to around each corner – from Accel, KP andÂ Canaan, plus USV, DFJ, RRE and many more. More importantly, there is a passion towards entrepreneurship similar to whatÂ existed for maybeÂ hedge funds previously, and investment banks before that.Â
The venture funding numbers confirm this transformation – in Q3 2011 New York beat Massachusetts for the first time in a decade to land $831 million in venture funding in 86 startups. Compare this to $260 million in Q3 2009 for 55 startups, and clearly something seems to be working to drive this growth. The successes coming out of the state also paint a glowing picture – Foursquare, Fab, Tumblr, ZocDoc, Gilt all are based out of New York.
What would it take to engineer a similar transformation in India? Could Bangalore, Mumbai or Delhi be the next hotspot of innovation? Speaking to a few veterans of the NY entrepreneurship scene revealed the following drivers behind this change:
- Macro environment: Wall Street is under fire, and engineers have realized that designing trading algorithm is neither very interesting nor might be well paying in the future. Inspite of its inefficiencies, movements like Occupy Wall Street seems to be chipping away at the image of financial firms. On the other hand Tech is cool, creates jobs and with the availability of easy venture funding makes for a no-brainer switch for many wannabe entrepreneurs. Though India’s growthÂ has slowed,Â we are still accelerating at a very respectable 6.9% rate – hopefully we can leverage this momentum instead of waiting for things to slow down before we start focusing on entrepreneurship.
- Government Support:Â The passion for entrepreneurship starts at the top – Mayor Bloomberg has himself founded a namesake company, and is an ardent supporter of startups in NY. Initiatives such as a newÂ Tech campus in New YorkÂ are ensuringÂ continued supply of high qualityÂ tech talent. Plus NY’s legislature is considering providing aÂ 25% tax breaks to angel investors, while sadly here in India we are contemplating theÂ exact opposite.
- Supportive Ecosystem: In addition to availability of capital (VCs) and techies, NY developed a healthy mentorship environment where experienced entrepreneursÂ advise new ones – giving back to the community. There are a dozen odd incubators providing early funding and support to startups. The last couple of years have undoubtedly seen rise of many incubators in India, however the level of support provided to entrepreneurs outside the top few is concerning. Incubators need to be powered by entrepreneurs – providing desk, chairs and few lakh rupees is unlikely to produce the next facebook from India.
- It takes time!:Â It took New York more than a decade of hard work to build the rich ecosystem that exits today.Â A few investors actively funded startups, some of these startups scaled up and provided a shining light for others to follow, as well as mentors to help guide them. As the next wave of startups continues to mature in India – from MakeMyTrip and Flipkart to InMobi and Snapdeal – hopefully we are also headed in the right direction.