Thursday, June 01, 2006

Bangalore and Silicon Valley

Abinandanan has put links to Paul Graham’s articles on ‘How to be Silicon Valley, and prompted me to write this article.

For the last three years I am living in Bangalore. Prior to that I was living in the Bay Area in US (close to Silicon Valley). I have always wondered how we could ever achieve anything close to Silicon Valley here in Bangalore. Keeping all that hype aside, where Bangalore is called ‘Silicon Valley of India’, the ground realities suggest a complete different story. Bangalore is not even remotely close to Silicon Valley in any respect. The factors like number of IT companies, the number of engineers employed, etc, are not the right parameters for the comparison. I am citing some of reasons below. I don’t want to be exhaustive.

We don’t have technology VCs

VCs who have presence and money in Bangalore do not fund product making startups. Why? Because they do not have people on board who have been product making entrepreneurs before. They invest in companies they are good at, like, IT services, BPO services, .com, etc. When they hear the word ‘technology’ or ‘product’, they balk. Not because they are not interested, but because they do not understand the implications and the consequences of such businesses- there have not been many precedents out of India. Most other VCs in India are pure private equity players, bankers who have opened a small arm of VC. There nothing ‘venture’ about them. They don’t take risks of funding early stage companies. Instead they continue to stick to private equity. I am not complaining. They do what they know best. Unless we see a major chunk of technology companies in Bangalore go successful, we will not be able to spawn new technology companies. Those US-based VCs that have an office in Bangalore, they are still unsure on what to do. Should they invest? If they should, should they stick to Indian model (of being a private equity player) or should they stick to Silicon Valley model (but then there is no ecosystem)?

We don’t have rich technocrats

We do have rich people in Bangalore but we do not have rich technocrats. Even those supposed technocrats, after achieving the success, tend to believe that they were an exception and that the norm is ‘Bangalore cannot produce technology companies’ and hence continue the trend of supporting less-risky businesses.

We don’t have too many nerds

Nerds are those people who don’t care much for the employment but rather work for sheer thrill and kicks they get out of doing something extraordinary, however impractical. Many engineers in India, even those would-have-been-nerds, get into the pressures of financial security, family issues, building a home, buying a car, etc, and seem to suppress their nerdy characters to become normal.

We don’t have good university-industry collaboration

I cannot say we do not have good universities. There are good universities in India, but I think we do not have university-industry collaboration which is vital for getting the right kind of ecosystem.

We don’t have the necessary infrastructure

While Bangalore is good for a technology startup in many respects, despite the drawbacks I listed above, it is not ideal for travel, commute, and is less preferred by people who have made money and want to relax. Infrastructure of Bangalore is not conducive for a smooth life and poses lot of impediments. Not that any other city in India is better, but if we want to see anything close to Silicon Valley here in Bangalore, proactive, concerted and aggressive measures need to be taken up to make this city conducive for such a ecosystem.

I am radical in my approach. I propose we move the entire defense units out of Bangalore and use that space to create approachable parks, large and wide roads, government and corporate buildings with wide parking spaces. With proper planning, and without being too greedy about filling it with concrete, one can come up a much better planned city for Bangalore. For every tree that is cut down, plant four new ones. Also, please don’t throw garbage and plastic on the streets. They clog up the drainage during monsoon season and damage our roads perpetually.

We have too many service-oriented companies

This is my pet peeve against Indian companies. We have been able to produce great service-oriented companies through Infosys, TCS, Wipro, etc. But that’s where we stopped. All the new companies that spawn in Bangalore take them to be the role models and continue doing the same. Even VCs and the so called technocrats want that. What is wrong with services? In short, it is not a scaleable business. If a services company does $2 Billion revenues with (say) 50,000 engineers, to get to $20 Billion in revenue, they need to hire 500,000 engineers. How can this city support such an organization?

And size is extremely important for services industry. IBM, Accenture, Infosys, TCS, etc, leverage their size to bag more and more orders. Compare this with a technology startup. A small group of individuals can make a big difference and if successful can create mega industries with very few people. This will throw out rich technocrats who in turn can spawn more technology companies.

From my own experiences as an entrepreneur, I can say that there is lot of truth in what Paul Graham has to say. You can’t create Silicon Valley where there are no rich people to fund your startups. Also, you need an atmosphere of nerds. Both are lacking in Bangalore. Does that mean we just sit back and say, ‘Yes, we lose the fight’? Not really. In spite of all the data and all the indications that you can’t recreate a Silicon Valley here in Bangalore, we ask ourselves why not?

Some look at things that are, and ask why. I dream of things that never were and ask why not? - George Bernard Shaw

An entrepreneur starts out asking himself why not.

Conclusion:

One can create
Silicon Valley here, and it may take a long time, and may be, it will take a different shape and form and may not necessarily follow Paul Graham’s Silicon Valley. For anything to happen, someone has to start and persevere. If some of us succeed, and in turn spawn many such companies here in Bangalore, then another Paul Graham will write an article 20 years from now as to why Bangalore cannot be recreated anywhere else.

14 comments:

  1. Just a couple of vague comments since I was wondering about this a while ago without coming to any conclusions. Brad DeLong has reviewd some books in his website and there are follow up comments and discussion by other experts. I refer to his review of Landes' book in:
    http://www.j-bradford-delong.net/Econ_Articles/Reviews/landes.html
    From the discussion I could not see any agreed conclusion. Perhaps why Britain went ahead of other nations at that stage was the early start in industrial revolution and may be the existence of financial institutions which were prepared to take some risks. More recently Richard Florida has this theory of three T's which make some centres attractive for the creative class.I think that for this kind of culture to develop, it may take more time if we are not too bogged down by language, race, rural-urban problems. Compared to famines during the British time, India essentially eliminated large scale famines by 60's. To catch up in other areas may be slower evolution since the desires and requirements of the affluent have increased (foreign trips used to be a rarity, but now many my classmates visit US to see their children). I do not see any quick solutions except growth and a million fights about distribution of the wealth.

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  2. sujay mehnudia by any chace??

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  3. There's nothing ‘venture’ about them" -nice! I like your approach, but I think it might be a better idea to spawn new better located and better organized IT towns, rather than trying to work with already cramped locales.

    Also, it's high time the city development boards got futuristic instead of reactive. Taking steps to deal with current infrastructural demands is not going to solve problems a year from now, leave alone the coming decade!

    PS: where do you get all the great quotes you use in your posts?

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  4. Sujai,
    These conditions that Paul Graham talks of are not choices in themselves, rather a result of paths taken at several points of time in the past. While Graham shd be appreciated for listing all possible factors that he thinks make Silicon Valley what it is today, we must not ignore the point that this is a superficial study because it is looking at background variables as they exist now. Some of these factors can be switched on or switched off easily (for instance Singapore could revoke its ban on chewing gum) but that won't take it closer to Silicon Valley. Some other variables are not so easily switched off - China is not going to stop monitoring Google searches - and even if it does it may not create a Silicon Valley; and again may yet create one even maintaining its current policies in place. Leave alone Europe, India, China and Japan; what about the different places in the US itself? Why are Silicon Valleys not cropping up here and there in the US? All over the Midwest rust belt you have cities with talented people, infrastructure, and quality of life, despite which the cities still struggle to create an entrepreneurial hub. The scale of time and social processes we are examining are vast. In the case of India we can do two things. We could examin the most important turning points and the long term damage they have wrought as well as some of the turning points where we erred on the side of caution and did not act. The socialism resolution at the Avadi Congress of 1955 is an example of a disastrous turining point; while the stepping back from collectivisation of agriculture and the decision to keep a mixed economy going are examples of bad decisions we avoided. With the enormous amount of talent in the bureaucracy (India quite simply employs the best read and trained bureacracy in the world, accountability is another matter) one would expect such studies to emerge from its gigantic maw. Who cares?

    Sujai - all credit to you for putting your money where your mouth is. We look forward to hearing about your experiences.

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  5. Anonymous:
    This is Sujai Karampuri.

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  6. astha-
    :) where do I get those quotes from?

    Most of those (that I used) I know them. I quote them to myself and to others on a regular basis- that's why I feel they guide me.

    There are many web pages on quotations. You can look them up. They are categorized by the author/originator and subject!
    Good luck!
    Sujai

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  7. sujai,
    are you a one minute manager? you seems to have a lot of time to write!!!

    (I'm just kidding, keep up your good work)

    anon

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  8. Found what I posted about Richard Florida last year. Please ignore if it is not relevent. here it is:
    "Richard Florida has initiated a study of which regions are likely to attract 'cr eative' classes. He emphasizes that if the three Ts "technology, talent and tolerance' are in place, then the region will attract highly skilled workers in creative occupations. These studies are still disputed and should probably be considered preliminary. Some of his writings are in his website:
    http://www.creativeclass.org/ and a short article by him is in the October 29 issue of The New scientist ( Special issue on creativity). According to him for all the rising global prominence of Bangalore and Shanghai, these two still do relatively little at cutting edge. "In 2003, the University of California alone generated more patents than India and China". Most science advances and innovations seem to occur in a handful of cities, primarily in USA and Europe. India and China do register in economic activity but he says that India and China are becoming more divided: "as Bangalore, Hyderabad, and parts of New Delhi and Bombay pull away from the rest of the country creating destabilizing political tensions". Perhaps the recent tensions between Infosystems and ex-primeminister Gowda are an indication of this. Even though his stidies seem somewhat preliminary, his prescriptions for creative centres seem worth looking at."

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  9. Your blog description talking of a moral life of not smoking, not eating meat and not visiting a prostitute makes me curious. I don't see anything immoral in this. Morality is subjective and confounding

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  10. Chitra:
    :)
    That's my opinion too.
    I was trying to highlight the fact that Indians look at smoking, eating meat, and visting prostitution as immoral while they continue to bribe, cheat and throw garbage :)

    Sujai

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  11. Sujai, Do you see any major changes in Bangalore (particularly new tech VCs) since you wrote this piece?

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  12. Another book recommendation for you, Regional Advantage by Saxenian.

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  13. Darpan Shroff:
    After attending to many comments on this blog, I have decided to cut down on talking about my personal stuff.

    You can write to me at my e-mail given on my profile.

    Thanks.

    PS: I went ahead and removed stuff talking about ourselves. I know this sounds corny, but this blog attracts too many unwanted characters. I have another blog where I discuss some of the entrepreneurship related stuff.

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