Startup ecosystem in Kerala

How good is the startup ecosystem in Kerala? Where do we stand? What do we lack? What can be done? These are some questions for us when we see the startup frenzy happening elsewhere in India. The question hits us hard when we see the growing success of Byju’s. Why Byju’s did not happen from Kerala?

The State Of Kerala Startup Ecosystem 2019 published by Kerala Startup Mission [KSUM] details a lot about where we are now. You can read that here. An analysis of the startup ecosystem can be found here. A guide on how to startup in Kerala can be accessed here. Clearly, the government is doing a lot to get the ecosystem to work and nurture a potential unicorn from Kerala. The central government has even recognised the state as a leader across all pillars of the startup ecosystem for the 2nd time in 2019.

It seems like we are doing everything possible and we just have to wait patiently for a success story. It is not that simple.

Indian startups seem to have received $10.14 billion in funding in 2020, even in the midst of a pandemic. India holds on to its 4th position globally in attracting funds after the US, China and the UK. That’s big! A significant portion of global funding is definitely flowing to India. Bengaluru, Delhi NCR and Mumbai accounted for 90% of the startup funding in the country.

55% of the total startups in India are in the states of Maharashtra, Delhi, Karnataka, and Uttar Pradesh. Kerala is at the 9th position holding only 3.43% of startups in India.

Kerala has more than 2200 registered startups. Now and then we hear some instances of glory, them getting recognised. But that’s it. Is there a single startup in Kerala that can become a unicorn?

Startups are essentially people-driven. Founders and founding team are the key to a startup’s success. They come together immediately after college or from the industry in which they are working. If they are working, they come across an untapped demand which they attempt to meet. Most of the startups that we see around are of this kind. Then there are multi-billion dollar exceptions like Google & Facebook. Such startups coming out of educational institutes are completely novel. Those startups are catering a latent need, which the consumer is not even aware of. These are the moonshots!

In Kerala, our exercise is mostly around institutes. Here success can be big, but elusive. For the other set of startups, we first need an industry from where they can come out, to start something. All the states ranked above us are far better in terms of industries they have. The diversity augurs well for the diversity and number of startups they produce. Kerala cannot make a remarkable change in this area overnight. But we are now seeing multiple IT companies setting campuses here. They can be a breeding ground for future ideas and startups.

Next comes the capacity of the city the startup belongs to. Startups need the best minds. The best minds are in the best cities, which are global in every respect. We only have Kochi as a city that can be considered here. No wonder, 36% of startups in Kerala are in Kochi. We need Kochi to be much better in all aspects as a global city.

Next is the angel investors. Beyond the family and friends that help the founders bootstrap a startup, it is the angel investors who believe in them early on. They invest around ₹50 lakh to ₹1 crore in a startup and help the idea to bloom in its most critical state. Banks would not invest in startups as they are highly risky. Angel investors invest in 10 startups expecting at least 1 to be successful returning them more than 10x money. Angel investors are High Networth Individuals (HNI) who can afford to take such risks, expecting better returns than alternate avenues.

We have enough HNIs who can afford to invest such money in startups. KSUM is doing its bit to guide them. But significant investments can only happen directly. Angel networks and anchor investors are the most important cog here. We need to identify and bring anchor investors who will fund their own money and help channelise funding from other investors.

In short, what we lack now are,

  • Cutting edge, global companies and industry

  • Vibrant global cities and,

  • Angel investors

We need to have this ecosystem in place for us to have our own Byju’s.

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