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Silicon Tiger emerges from the jungle
India has the promise to emerge as a tech power, maybe even in this decade. Already, India is home to the world's third largest venture capital business, superior-class engineering talent, a sizeable and growing mobile communications sector second only to China, not to mention switched-on startups.
A new era for tech entrepreneurship is emerging in India as savvy investors place bets on startups that can compete globally in biomedical, cleantech and e-commerce - and a lot more than outsourcing services. Another catalyst is India's rise as a base for high-end research and development.
Despite this progress, red tape, poor infrastructure and a lack of confidence restrain the entrepreneurial spirit in India. There's no startup hero such as Jack Ma of Alibaba or Robin Li of Baidu in sight, and there's no splashy IPO that can compare with China's video sharing site Youku - though mobile advertising service inMobi and others could get out of the gate and go public. India lacks the entrepreneurial buzz and fast pace I've observed among China's tech hotspots even as innovation clusters have emerged in Bangalore and Gurgaon. All things considered, India's entrepreneurial journey is at least five years behind China's path.
Indian entrepreneurship has been led by grassroots efforts, and the government hasn't always promoted regulations that foster an ecosystem ripe for creating the next, new thing. If India is ever to break through and catch up with China, it needs to develop an innovation culture, improve its infrastructure, and ditch a backward image as just for low-cost engineering and business services - a major challenge for the world leader of the huge outsourcing market.
The gap hasn't stopped leading Indian venture capitalist Ashish Gupta from betting his career on the rise of tech stars in his home country. "One good reason to set up a venture fund is that you really don't know where the white spaces are going to be in India whereas in the US there are already established players, " says Gupta, a technologist who joined Helion Advisors in 2005 as senior managing director. Among his finds were MakeMyTrip, job site Naukri and IBM-owned Daksh eServices. "In tech, we're out another four to five years. It's already happening in enough bulk in India not to be called an accident, " adds Gupta, who has a computer science degree from the elite Indian Institute of Technology and a PhD from Stanford.
What's in the pipeline to speed up the pace of innovation? Startups powered by India's thousands of talented engineers as well as MBA graduates in the leading edge fields of social networking, mobile communications, cleantech, biotech, the Internet and e-commerce, funded by experienced investors. "The companies we are backing are less than five years old, and are run by founding teams who are under 40 years of age. Already, they are well-funded, generating revenues, have a global customer footprint and patents to their credit, " points out Sudhir Sethi, founder, chairman and managing director at IDG Ventures India.
Interestingly, the same venture firms that jumpstarted Silicon Valley in the 1990s have been fishing for deals in India (and China) for a decade or more: Sequoia Capital, Kleiner Perkins, Draper Fisher Jurvetson, Accel Partners, Lightspeed Ventures, Norwest Venture Partners, New Enterprise Associates, Greylock Partners, Matrix Partners and Charles River Ventures. This network of dealmakers is supported by a vibrant angel investor community in India that numbers 1, 000 and includes well-known serial entrepreneurs who belong to the Mumbai Angel Network and Indian Angel Network.
Moreover, India's newly developing tech entrepreneurship is the result of a new breed of company founder who is bolder and braver. Only a few years ago, it was common for India's local entrepreneurs to pick up financing from the West and transplant business models that were successful in the US and China to India. In social networking, there was Twitter in the US, Weibo in China, and in India, SMS Gup-Shup. For online books and e-commerce, there was Amazon in the US, Dangdang in China and Flipkart in India. For job portals, there was Monster. com in the US, 51. com in China and Naukri in India. Yahoo had its cousins SINA in China and Rediff. com in India. In digital mapping, there was MapQuest in the US, AutoNavi in Beijing and MapMyIndia in Delhi. For online payment, the pattern repeated: PayPal in the US, 99Bill in China, and PayMate in India. The popular online gaming sector sparked a lot of lookalikes in India too: for example, Kreeda, Nazara and Games2Win.
Today, the startup action is shifting to locally based investors and from not-so-risky clones and outsourcing services to a broader array of made-in-India techie products with global potential. Venture investor Sethi contends that the product companies his team is backing have "strong intellectual property and patents, " and are "led by serial entrepreneurs who have a product background and know how to build global companies from India".
No doubt, India's business leaders are optimistic about the country's prospects, longterm, to propel its own Silicon Valley economy forward. "You have a vibrant, stable market in India. While India may seem bureaucratic, you have fewer of the regulatory and restructuring issues that you have in China due to currency issues, " says Ash Lilani, president of India for SVB Financial Group. He adds, "India has the most dynamic entrepreneurs, and the good news is that there are so many of them. "
Yet, the search for truly breakthrough technology from India remains elusive. Tellingly, India is not even among the top 15 countries on the scales that measure international patents. By contrast, China has leaped ahead to fourth place globally for new patent applications.
All this is not to overlook another booster of both China and India as tech powers: the nations' emergence as a land of opportunity for returnees from the west. Highly educated and skilled immigrant entrepreneurs and professionals who made their career in the US are returning by the thousands to their home country for careers and enrichment - and it's a one-way ticket.
India's Silicon Valley has started off more slowly but steadier than China's Silicon Dragon. Now there's growing evidence that India could speed up and deliver better results. In no small measure India's democratic system and free speech practice are stimuli that unleash the imagination and creativity that go into the DNA of the best startups that survive and matter.
Fannin is author of Startup Asia (2011) and Silicon Dragon (2008) and Forbes contributor TECH TONIC SHIFT
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