Kochi/Bangalore: Kalamassery in Kochi is known for its chemical and fertilizer factories (or what remains of them), but it is in this incongruous setting that student start-up incubator Startup Village has chosen to locate its office.
Physically, it’s hard to miss the glass-and-steel building standing amid the lush green foliage abutting the highway that connects the city to its international airport, although, at first sight it looks more like a holiday resort than the office of a company that aims to create 1,000 software product companies in India in 10 years.
You read that right, 1,000 in 10.
And you read that right too: software product companies.
There’s also a subsidiary objective: to create India’s first billion-dollar firm founded on a college campus.
Inside the building (which is actually not very big), a narrow corridor flanked by life-size portraits of Larry Page, Sergey Brin, Sean Parker and Mark Zuckerberg leads to four dining halls. Each hall has several long tables. And around each are huddled students who want to be entrepreneurs. One hall also sports a portrait of Infosys Ltd co-founder S. ‘Kris’ Gopalakrishnan, arguably the most famous man from Kerala in technology, and a message from him: “We started Infosys in a room of about this size; it’s your turn now.”
Gopalakrishnan is a mentor of Startup Village, a technology incubator promoted by India’s department of science and technology and Technopark Trivandrum that follows Silicon Valley’s Y Combinator model. Y Combinator is a Silicon Valley-based start-up accelerator founded by Paul Graham that has turned unknown coders into geek-celebrities by offering seed funding of around $18,000 (around Rs.10 lakh) on an average, apart from helping them connect with potential investors. Dropbox, Scribd and reddit are among the around 300 companies funded by Y Combinator. Their average valuation? A neat $224 million.
And the holiday resort (fine, budget holiday resort) look isn’t out of place because students will live and work out of the incubator while their start-ups take shape. “I am hoping to create an environment that subsidizes cost of living for these youngsters, gives them a place to eat, work, sleep and create the next Internet companies,” said Freeman Murray, a Silicon Valley veteran and founder of Internet music firm Kendara, who will relocate to Startup Village next week and help the incubator create the Valley culture among student entrepreneurs.
“We are attempting to build an environment where failure is not seen as something negative, but is a learning opportunity. They (the students) all push each other, they all learn from each other,” said Gopalakrishnan.
Since March, when Startup Village was launched, over 250 students from engineering colleges across Kerala who want to be entrepreneurs have applied with their ideas. In October, they will compete for a spot in what aims to become the country’s hottest launchpad for software product firms. For years, India’s $100 billion software outsourcing industry has become more famous for code writing and maintenance projects, with only a handful of home-grown technology product companies (they contributed $1.8 billion in revenue to the total during 2011-2012).
Those selected after rounds of interviews will receive funding of anywhere between $10,000-30,000 to help them start up. They will also get an opportunity to be mentored by successful chief executive officers (CEOs). In return, Startup Village will pick a nominal 6% stake in their companies.
The entrepreneurs will have to raise subsequent rounds to grow their companies.
“Traditional VC (venture capital) money is chasing very elite people who have been successful entrepreneurs in India—I feel there is a great opportunity to make this happen with younger people,” said Murray, who will be Dumbledore to this Hogwarts for start-ups.
The idea came to the founders of MobMe, a start-up founded in 2007 by students of Trivandrum’s College of Engineering. The firm started off orchestrating mobile campaigns for Malayalam films. Today, it works with telcos such as Bharti Airtel Ltd, India’s largest, and will close 2012-13 with Rs.33 crore in revenue.
The founders approached Gopalakrishnan, who liked the story. “That’s what prompted the thought of creating a space where these students can come, experiment and create companies while studying. We are not saying that you should be a dropout; in fact, you shouldn’t,” he said. And MobMe is a good example for students who want to start a firm. “Our early struggle to scale the idea, finding people who would invest, and later getting business from top clients showed it’s possible,” said Sijo Kuruvilla George, CEO of Startup Village and one of the co-founders of MobMe.
Money and space, apart, Startup Village’s real attractions will likely be its mentors.
Y Combinator brings together the biggest names in the US technology industry such as Gmail creator Paul Buccheit twice a year to help mentor selected start-ups. Startup Village plans to do the same, but is still hunting for some instantly recognizable global names who can serve as mentors.
“Y Combinator has this strong mentoring access, which is missing here right now. We will need that as some of these companies reach the next stage from idea to some kind of a product,” said Gopalakrishnan. Apart from Gopalakrishnan, the incubator has managed to sign up MindTree CEO Krishnakumar Natarajan, chairman of the Nasscom product forum Sharad Sharma, and investors such as Sasha Mirchandani of Kae Capital and Nishant Verman of Canaan Partners as mentors.
Nasscom’s Sharma, who ran Yahoo India’s research centre until March 2009, said mentoring could help more student start-ups survive. “In the early days of the accelerator, one needs to establish the operating routines that deliver high quality. Only once that’s in place, should one scale—premature scaling can hurt quality,” he said. “Globally, it has been noticed that large business ideas like Facebook have came from students.
An incubator is a great start and with mentors of proven track record, its credibility can go high. We are looking at investing in Startup Village,” said Mirchandani. He added that incubators can not only nudge students to start early, but also advise and encourage them to take the plunge when doubts crop up. To be sure, Startup Village will not be the first attempt to foster entrepreneurship among students.
The Wadhwani Foundation-funded National Entrepreneurship Network (NEN) runs entrepreneurship cells on 470 campuses across India, although it doesn’t invest in the firms. K. Srikrishna, executive director of NEN, said his organization focuses on creating entrepreneurs—both students and experienced professionals. Last year, some 270 student entrepreneurs came from the NEN network; this year, he expects to help around 400 student start-ups take shape. “It’s not really competitive (with other incubators), we do this at a much larger scale and the thrust is on sustaining these entrepreneurs,” Srikrishna said.
“We run the world’s largest entrepreneurial education network.” Startup Village’s unique approach may find favour with potential investors who otherwise have to put student start-ups they like through the paces themselves. Indeed, it’s possible that Startup Village’s efforts also expands the universe of entrepreneurs because of its focus on engineering students. The state government seems to have also done its part by announcing a new policy that offers student entrepreneurs 4% weightage in grades (if the total is 100, student entrepreneurs start from 4, while everyone else starts from 0) and 20% in attendance.
Successful start-ups also get a three-year tax holiday. “If you are a student and fail early, you are not risking your family or any other thing,” said Gopalakrishnan, arguing that it is better to start young. Already, over a dozen startups, including MindHelix, a mobile application development firm, and WowMakers, an Internet design studio, operate out of Startup Village and hope to make the October cut. Kallidil Kalidasan, 23, who founded MindHelix along with two other batchmates in December 2010, is now hoping to take his company to the next stage at Startup Village.
“Raising money for a product start-up is quite tough in India. With mentors like Kris and potential investors, Startup Village looks to fill that gap,” he said. The incubator, itself funded by the department of science and technology, and angel investors such as Kris and MobMe (to the tune of Rs.5 crore), is, in turn, raising a fund of around Rs.10 crore to fund the start-ups it selects. Some of these, it is convinced, will become successful product firms. Gopalakrishnan is betting that 20 of the 1,000 firms coming out of the incubator will have a chance of becoming the Infosys of the software products business in India. Deepti Choudhary in Mumbai contributed to this story.