6 November 2015
Hyderabad: T-Hub, billed the country’s largest technology incubator, formally opened its doors on Thursday amid much fanfare and expectations.
But what would it take to make T-Hub a success?
In June 2014, soon after the Telangana Rashtra Samithi came to power in the newly created state of Telangana, the state’s information technology minister K.T. Rama Rao proposed the creation of a world-class incubator to attract the brightest startups to Hyderabad.
The mood was still somber in Hyderabad. Its image had taken a beating because of the Telangana statehood movement and uncertainty related to it. Rama Rao, a US-returned politician who speaks crisp English, knew his first priority was to revive the image of Brand Hyderabad. After all, the city is the economic driver for Telangana.
T-Hub was conceived with the idea of wooing entrepreneurs from Bengaluru, the startup capital of the country that has spawned unicorns such as Flipkart Ltd, Quikr India Pvt. Ltd, InMobi Technologies Pvt. Ltd and Mu Sigma Inc.
Bengaluru is a natural magnet for company founders thanks to the strong ecosystem of investors, mentors, technology firms, and a vast pool of coding and marketing talent. The city had a headstart over other Indian cities when it opened its doors to software services firms in the 1970s, attracting some of the early movers such as Infosys Ltd and Wipro Ltd, the second and third biggest information technology companies respectively. A number of multinational technology firms followed, opening offices in what is called the Silicon Valley of India.
Theoretically speaking, Hyderabad has some natural advantages too. The city has great infrastructure and a lower cost of living compared to other metros. It houses the offices of all the major Indian outsourcers besides those of top technology firms such as Microsoft Corp., Google Inc., Facebook Inc. and Honeywell Technology Solutions Inc. The campuses of top-notch educational institutes spanning technology, business management and law exist in the city, providing the much needed talent base.
A network of Telugu investors and entrepreneurs, most of whom made their careers (and money) in the US, had the wherewithal to back promising companies. The problem was there was no harmony among the different players; everything was being done in bits and pieces.
So it made sense for the newly formed Telangana government to bring together all the players, and create an ecosystem. The government invested Rs.40 crore to build a swanky, cool office space called the Catalyst that will initially house about 300 startups across 70,000 sq.ft.
“Startups like to congregate together,” says Vani Kola, managing director of venture capital firm, Kalaari Capital. “Having a place like this is a very good idea. There is no similar project anywhere in the country.”
The presence of several start-ups in proximity to each other will help create an environment that’s conducive to innovation and also give local startups greater exposure, says Ajay Kolla, chief executive of Wisdomjobs.com, a start-up jobs portal.
“An incubator helps because there is a network effect of an ecosystem,” says Sitakanta Ray, co-founder of MySmartPrice Web Technology Pvt. Ltd, a price comparison and product discovery service.
The biggest advantage of start-ups working under one roof is of collaboration and idea exchange. Co-location of startups in the same space creates a peer network among entrepreneurs, who often lose touch with friends as they focus on building their products. “When you see other entrepreneurs struggling as well, you feel I am not the only guy,” Ray points out.
Anil Bharadwaj, co-founder and chief commercial officer of mobile payment service Paynear Solutions Pvt. Ltd says peer network also acts as a cushion for entrepreneurs. “When you are working with a group of people, if you fail somewhere, there is someone to pull you back,” Bharadwaj says. “Earlier there was no one around to help you. If you fell, you were dead.”
One of the biggest drawbacks for Hyderabad is the lack of access to an institutional investor network, something that works to the advantage of Bengaluru startups, Ray, who raised $11.3 million from investors including Accel Partners and Helion Venture Partners, says. “I have to go to Bengaluru or Mumbai to do investor meetings. If I have to do five meetings, one-third of my month is gone. Whereas for Bengaluru startups, the meetings can happen at a networking event,” he says.
Minister Rama Rao acknowledged this problem during a recent meeting with journalists. The government will start a Rs.10 crore fund dedicated to start-ups out of Hyderabad. It plans to rope in seed, angel, venture capital and private equity players to take the fund size to Rs.100 crore, which eventually will grow to Rs.600 crore corpus. Besides, start-up pitches (open to everybody) to institutional investors will take place at regular intervals.
But for T-Hub to really scale the heights it aims to reach, mentors will play a critical role, says Srini Koppolu, an early stage investor who now leads a news curation startup, Veooz.
“(With T-Hub) the environment and infrastructure is taken care of. Money is not a problem; the investments are all there for the right idea. The key is about getting the mentorship right,” said Koppolu, a former Microsoft executive.
Mentors will play an important role in shaping T-Hub, acknowledged entrepreneurs Ray and Bharadwaj. Mentors help entrepreneurs with executing their ideas, identifying the right business model and also telling founders the right time to call it quits. “It’s about failing fast,” Koppolu, who has invested in about seven start-ups, says.
T-Hub will have 60 mentors to nurture start-ups. T-Hub signed in-principle agreements with industry bodies Nasscom and Internet and Mobile Association of India (IAMAI) on Thursday. Nasscom will launch its 10,000 startups programme in Hyderabad to connect startups to top mentor-investors, organisations and academia. IAMAI will set up a centre of excellence inside T-Hub’s Catalyst building to enable mobile application development.