New tech businesses emerge from tier-2 cities
Posted on December 3, 2010 | Author: Sutanuka Ghosal | View 387 | Comment : 1
A vibrant investment ecosystem emerging in the heartlands & a promising team of entrepreneurs are creating ripples that could translate into a potent wave in future.
They are the newest entrants in the entrepreneurial sweepstakes unfolding across the country.
In Ludhiana, Jaipur, Ahmedabad and Kolkata, scores of new companies are using technology to reach out to customers across the world, proving that geography is no bar in the pursuit of enterprise.
This growing trend of globally-competitive businesses emerging out of India’s tier-II and tier-III cities is best exemplified by niche software firm InfoSoft Global.
The creator of flash charting suite, Fusion-Charts, for data visualisation, counts US president Barack Obama amongst its user list of 17,000.
This 30-member outfit based out of Kolkata caters to Fortune 500 clientele across 110 countries.
In Ludhiana, Kayako Infotech builds web-centric customer support solutions for a customer base of over 30,000.
Salaree.com in Jaipur builds business solutions for payroll applications, employee support services, and automation of perquisite payments within large companies.
“Technology entrepreneurship is growing in tier-II and tier-III cities, largely because it is cheaper to set up enterprises there, while the rate of attrition is also comparatively lower, making for an assured talent base,” says Pradeep Udhas, head, IT & ITes, at consulting firm KPMG.
“Moreover, in this age of internet and advanced communication systems, one can do business from anywhere,” he added.
The spread of business into these cities is also creating a vibrant investment ecosystem that could create huge ripple effects in future.
For instance, InfoSoft’s Pallav Nadhani has just launched an angel investing and incubation facility in Kolkata, Seeders, in partnership with another entrepreneur Abhishek Rungta, founder of Indus Net Technologies.
“The growth of technology entrepreneurship in Kolkata is nowhere near compared to tech hubs like Bangalore, Pune, Chennai or even Delhi,” says Rungta, who feels the primary reason for this is the very nascent level of mentoring and support for new ventures.
It is this gap that the two young entrepreneurs are now aiming to fill with the launch of their incubation and mentoring network.
“Seeders Venture Capital will provide seed funding and incubation facility to technology start-ups in Kolkata. This is our way of contributing to the ecosystem,” says Rungta.
“Nasscom is also organising Emerge Out, a programme primarily targeted at the start-ups, which will further act as a major booster for start-ups in the region,” says Nadhani.
It’s not only Kolkata that is seeing this growing spurt in tech entrepreneurship.
Tier-II cities like Jaipur, Ahmedabad, Chandigarh and Ludhiana are also emerging as a part of this growth story.
“Kayako Infotech builds the world’s leading helpdesk and customer engagement solutions which help organisations deliver better customer support. Though these start-ups are based in tier-II cities, they are doing extremely well in their own fields,” says Avinash Raghava, regional director, northern region of Nasscom.
Amrita Therapeutics in Ahmedabad is a biotechnology start-up, which is pursuing a dual programme of advanced pre-clinical research and identification of additional priority candidates for early research.
While RapidRadio Solutions provides services for identification and tagging with products such as readers, antennas, tags, evaluation kits and biometric readers.
Both these start-ups have raised venture capital financing from Gujarat Venture Finance Limited, which is seeing heightened entrepreneurial activity across the technology sector in the area.
“We are keen to invest in companies in and around Ahmedabad as it is easier to monitor and interact with these companies,” said Mihir Joshi, managing director, Gujarat Venture Finance.
The fund’s portfolio also includes other Ahmedabad based start-ups such as Net4Nuts Ltd, e-Infochips and Pegasus Semiconductors.
Industry watchers also point to the global ambitions of start-ups from cities that are not traditionally a hotbed for technology entrepreneurship.
In Kolkata, A1 Future Technologies, a firm set up by Srish Agrawal in 1997, is looking to acquire a graphic design company with operations in the US and UK.
The firm works in the domain of logo design, graphic design and print design and has 100 fulltime designers who cater to a client base of 10,000 spread over 50 countries.
“The overseas acquisitions will help us reach closer to our clients. We also are planning to increase our sales and marketing related investments. We are also planning to set up a 20-30-seat call centre,” said Agrawal
Apart from overseas locations, these start-ups are also moving to smaller cities within India.
Virtual Infocom, a gaming and animation start-up in Kolkata is setting up facilities in Jaipur and Allahabad.
It is a trend that a host of investors are now keen to back.
Kolkata-based company Orion Edutech has raised funds from early-stage VC fund, VenturEast.
Orion focuses on the skill development of unemployed youth, mainly from non English medium background for which it has raised $4 million from VenturEast in July this year.
“Next time, we will look for investment at time of IPO within next three-four years,” says Manish Agarwal, director of Orion Edutech.
The company plans to have 300-plus centres in India within next two years.
“We have plans for international expansion in countries of Asia Pacific and Africa like Vietnam, Indonesia, Malaysia, Sri Lanka, China, Kenya, Nigeria,” he adds.
Indus Net Technologies is another Kolkata-based start-up in the digital marketing and technology space, with operations in Chennai, Delhi and Warwick in the UK.
It has a global workforce of 425 professionals and a client base of Fortune 500 companies, governments and digital agencies around the world.
This decentralisation of innovations is one of the main reason why there is an exponential increase in private equity and venture capital investment say industry watchers.
“These cities are being recognised as hotbeds for innovation — successful-start ups are not merely restricted to the metros and we have seen path-breaking ideas emerge from the Indian hinterland,” says Harshal J Shah, managing director, Reliance Ventures.
“We take special care to scope out opportunities across the world and especially within India in smaller cities,” he added.
Ecosystem-building measures by entrepreneur networks such as Tie and industry bodies such as CII and Nasscom have also contributed to the rise in entrepreneurship in these areas. “We’ve been getting a greater percentage of proposals from these areas than we did 12 months ago,” says Gaurav Saraf, director, Epiphany Ventures.
There is now greater understanding by aspiring entrepreneurs from these centres on the process involved in raising funds and attracting investor attention, he said.
Also, a contributing factor is the rise in the number of colleges that focus on entrepreneurial education and incubation of start-ups. ”
The rise of several boutique investment banks catering to the needs of early-stage entrepreneurs have also helped bridge the gap of entrepreneurs with investors,” says Mr Saraf.
Ahmedabad-based company. Has technical expertise in RFID technology
Ahmedabad-based biotech firm. In advanced pre-clinical research
Ludhiana-based firm. Builds web-centric customer support solutions
Jaipur based company. Offers online payroll application.