startup: Why new startups are homing in on old-economy hubs – The Economic Times–04.12.2017

When Sachin Kishore, Somy Sridas and Varun Moorthy were casting about for a base for their bicycle startup Scolarian in 2014, Coimbatore seemed like the best option. The southern city had a thriving engineering and auto ancillary ecosystem, built up over more than eight decades.

For the three VIT graduates trying to design and build high-performance, affordable geared cycles for India, the city provided all the support their venture needed, from welding and painting to manufacturing motors. “Coimbatore is one of largest pump manufacturing bases in the country, and small factories are experts at coiling and winding electric motors. The motor that is used to power a pump is also used for our specialised bicycles,” says Kishore.

Scolarian isn’t the only startup that’s leveraging the advantages of an existing ecosystem, created by the old economy. Bengaluru, Mumbai and Delhi remain the hotspots for investors and startups, but in smaller cities like Coimbatore, Pune and Hyderabad, entrepreneurs are building startups on the base provided by traditional industries.

An existing base of automotive industries is the reason why Vinay Nathan, founder of IoT startup Altizon, decided to stay in Pune though he was selected to be part of Microsoft Ventures’ accelerator in Bengaluru.

“We do a lot of the field testing at automobile companies for our industrial internet of things platform,” says Nathan. In Pune, most of these factories are within driving distance of his office. If he’d moved to Bengaluru, he might have lost that advantage, he says. “Along with an industrial belt comprising more than 3,000 companies, Pune region has a long history of innovation that helps startups like us access early adopters, and scale the business in the growth phase,” he explains. Altizon recently announced a collaboration for smart manufacturing with Varroc group, a global automotive component manufacturer that has plants in Pune.

For many startups looking for a niche in the medical and life sciences space, Hyderabad is the ideal location. The city is home to several research institutes and centres of excellence, including the Centre for Cellular and Molecular Biology (CCMB), National Institute of Pharmaceutical Education and Research and Dr Reddy’s Institute of Life Sciences. Some have in-house incubators for startups like CCMB’s iHUB.

While being close to customers is important, a favourable ecosystem must be in place for a startup to thrive, says Sreekanth Nadella, chief operating officer of Hyderabad-based health tech startup Call Health. “Naturally, pharma and health tech startups thrive here. The ecosystem provides quality nursing talent and the cost of diagnostics, imaging and radiology is 25-30% less than, say, Mumbai,” he says.

Padmaja Ruparel, founder, Indian Angel Network says the presence of the IKP Knowledge Park and Genome Valley in Hyderabad have aided startups in the areas of medical devices, life sciences and biotechnology. Genome Valley is a high-technology business district spread across 600sqkm in Hyderabad and is estimated to house over 200 life sciences companies. The IKP Knowledge Park also has a Life Science Incubator, which has been supporting startups since 2006.

Ajay Jain, VP of incubation and scaling, T-Hub, says startups like CallHealth and Theranosis are success stories from Hyderabad. “The benefit for startups in the medical sciences area is multifold. They can use the hospital facilities for testing and prototyping. More importantly, they can find mentors who are domain experts. For instance, one of our incubatees Monitra has found a mentor in a senior cardiac surgeon here.”

While T-Hub focuses on tech and tech-enabled startups, it is home to many medtech start ups, including Monitra and Doctornull. While Monitra has developed a band-aid like strip that can help doctors monitor a patient’s heart using cloud-based technologies, Doctornull uses an algorithm to detect diseases like TB and diabetes.

Availability of talent is another reason to choose a traditional manufacturing base for a product startup. Founder of electric vehicle startup Ampere Hemalatha Annamalai says her decision to start up in Coimbatore was driven by the availability of engineering talent. “From a talent perspective, people are open to trying hands-on mechanical work and are inquisitive here in Coimbatore,” she said. “So we decided to set up our factory here.”

Being close to talent and skill means the cost of starting up and doing business is also lower. The founders of Scolarian knew they could fully leverage the city’s engineering capabilities, but did a detailed cost analysis of other cities including Chennai before they set up their manufacturing unit.

Kishore says they found a 20-25% cost difference when it comes to sourcing the cycle parts in Coimbatore. “Further, manufacturers in Coimbatore are willing to help and work with you even if you are a small company. In other cities, they expect you to place orders in the hundreds or thousands,” he says.

The challenge of being in a smaller city is finding funding as there aren’t many prominent investors. But investors say startup success is about tapping into the existing expertise in a city and that deserving startups will always find backers. Sanjay Swamy, managing partner at Prime Venture Partners, says startups need to leverage existing strengths rather than creating skillsets from scratch.

“A startup like Team Indus has benefited from the rich pool of ISRO talent that exists in Bengaluru,” Swamy says. “The entrepreneur is the secret sauce but without a team, he or she cannot easily convert insights into success. I strongly recommend that entrepreneurs move to the city where they are most likely to find the right talent,” he says.

(This article was originally published in The Times of India)

via startup: Why new startups are homing in on old-economy hubs – The Economic Times

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