The rise of Bangalore – startups and beyond - IMD Business School
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The rise of Bangalore – startups and beyond

An enquiry into the city’s three-decade long journey of emergence
May 2018

Buckle-up tight, wait for landing, de-board the plane, collect your luggage, and walk out into Bangalore’s contemporary-looking Kempegowda International Airport. One of the things you may notice are loads of advertisements for high-rise, luxury condos – which may come as a surprise for a few; not quite the Mumbai slums of the Slumdog Millionaire.

Next up, get on your mobile to reserve an economical Oyo room and an Ola cab. Hop in and drive to your destination. If you’re lucky, the traffic will allow you to check in within 60 mins. Trying some Indian Paneer Tikka Masala with Butter Naan is not a bad idea for a first Indian meal. Use Swiggy to pick and choose from the best-rated restaurants and get it delivered before you reach your destination. If your jet lag or a headache persists, you can always order some aspirin or book an Ayurvedic massage or quickly chat with a doctor using the Practo mobile app. Sounds savvy or overwhelming? It is both.

 - IMD Business School

The purpose of my story is to give you a glimpse into the new, internet-powered India. A country that has been perennially plagued with serious infrastructure problems, evidently, is now flourishing on smartphone screens. In the last decade, Indian internet users have lived an unprecedented story of adoption. From groceries to pizza to the pharmacy, and from booking spa sessions to doctor appointments to pedicures at home, the rise of the on-demand economy has led to the birth of several high-growth tech startups.

But how can a country with a thousand complications of cultural divide and caste systems and poverty and illiteracy breed the second largest internet user population in the world? Who is driving this growth? And when did this happen?

Let us step back to understand the impetus as the answer unfolds nearly three decades.

1990s – Rise of IT and ITeS companies

The growth story of India has been fueled by its young, burgeoning population and the genesis goes back a couple of decades to the mid-90s. India opened up its economy for foreign direct investments to the rest of world in 1992. For the next two decades, IT and IT-enabled services, driven by home-grown companies such as Infosys, Cognizant and TCS, grew to constitute an estimated $141.0 billion in the 2016-17 fiscal year. Needless to say, the industry needed to employ hundreds of thousands of young people with the right IT skill-sets. Naturally, IT, over the last two decades, became the choice of study for countless students. Thousands of private and public institutes along with vocational training centers came into existence. Bangalore became one of the epicenters of this change. The result? A large chunk of GenX and GenY became highly IT literate. This generation also passed on the tech savviness to their families, especially to the older ones.

2000s – Making of a huge, IT literate middle-class

Today, although many Indians unfortunately still live in poverty, India has a huge middle-class that is IT literate, lives a busy lifestyle and has a sizeable disposable income. The need for at home, online convenience gave rise to a band of startups which were driven by some visionary entrepreneurs who were happy to claim a share of customers’ wallet. These startups also benefited from an influx of equity capital to the country – which came in large numbers. Bangalore stood second in terms of the number of deals closed and leading in the value of deals that touched USD 13.7 billion by 2017.

According to the leading Indian media platform Inc42 DataLabs, in 2017, Indian health-tech startups raised about $346 million across 111 deals. In a country with no real public healthcare system, users can avail all medical services with a single tap of a button. Startups such as Practo and Portea allow users to chat with doctors, compare and order medicines and even get diagnostics done at home. Bangalore is the home of these startups that raised a total of over $300 million to date.

2010s – Cost of Smartphones and Internet Data

The story of internet adoption has two more crucial facets – the cost of smartphones and internet data. While the cost of mobile data has fallen amidst rivalry between network providers like Airtel, Vodafone and Idea, a new entrant shook the economics in 2016.

Mukesh Ambani, India’s richest and the world’s 19th richest man and the owner of Reliance Industries – a USD 50 billion petroleum to media conglomerate – launched Jio. The launch added fuel to the growth story of mobile internet penetration, taking the number to an unprecedented 500 million, while Reliance Jio subscriptions rose from a mere 16 million to 160 million in little over one year. The cost of data in India has dropped to less than half of what it was three years ago.

Young, willing and entrepreneurial, Bangalore represents a promise of aspiring India. Its journey from a garden city to a startup city is not a coincidence, but rather a result. As the world is moving from an age of information technology to the age of data intelligence, skills required and business the context will continue to change dramatically. With cities like Tel Aviv, Berlin and Melbourne catching up with numbers, Bangalore will have to keep reinventing itself to keep its seat at the table.

An MBA candidate for the current class of 2018, Piyush Rawatis an enthusiast and advocate of all things digital. Before coming to IMD, Piyush worked in India and Germany in several product and commercial roles in technology – including at a startup which he co-founded and sold.

IMD MBAs will be visiting Bangalore from Tuesday June 26th to Saturday June 30th. The purpose of the trip is to visit some vibrant tech companies and meet a few inspiring entrepreneurs that the city hosts.