Why Asia’s Silicon Valley is in India, not China
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Photo Credit: Ramesh Lalwani / Flickr

Photo Credit: Ramesh Lalwani / Flickr

India can become a torchbearer for Asia’s tech ambitions, equalling or surpassing China

Tech in Asia

I was dining alone at a hotel in Bangalore when an Indian stranger came up to me. He asked, “Can I join you?”

I was surprised by his forwardness. No one does that in Singapore where I come from. This behavior, I later found out, is common in India.

After learning about what I do, he peppered me with questions about the tech industry. Returning the favor, I asked him about the brands he uses.

“Ola or Uber?” I said.

“Uber,” he replied, adding that it provides better service and Indians generally perceive American brands to be of better quality.

So here’re the crucial difference between India and China. India has deep cultural and political affinity, as well as admiration for the U.S. Facebook and Twitter, both from the U.S., are already widely used by people in India.

China has the Great Firewall.

Indians willingly engage the outside world and welcome outsiders in. Playing the good host is absolutely important among Indians. Again, China is a different beast.

And because of these qualities, India can become a torchbearer for Asia’s tech ambitions, equalling or surpassing China.

China against the world

Indian engineers rival the Chinese, but with a crucial edge: they speak better English. Both India and the U.S. are former British colonies, making English the language of business.

This advantage means the best Indian engineers got cushy jobs at tech companies in Silicon Valley. They’ve even climbed all the way to the summit, as Google and Microsoft are now run by Indians.

Likewise, many Silicon Valley companies see India as their second home, setting up engineering centers and tapping into a huge, growing mobile market. There’s a huge pool of programmers in the massive outsourcing industry waiting to be tapped by startups.

Facebook founder Mark Zuckerberg may break out into a Chinese speech or two, but it’s in India where the consumers and next billion users are. This is why it’s pushing Internet.org in the country, which one writer calls the “Facebook Poor People Acquisition Department.”

So Silicon Valley and India are inextricably linked. India’s becoming increasingly attractive as a startup hub, which means top-tier talent are returning home to India’s ecommerce giants like Flipkart and Snapdeal, commanding equal salaries despite lower living expenses.

In some cases, they’re starting up in India, bringing the best of the Valley with them. The brain drain is reversing.

The Indian market mostly plays by global rules. There’s fair competition: Facebook, Google, and Amazon don’t worry as much about being stymied by a protectionist and censorious state. It’s like how Bollywood and Hollywood have co-existed in India for the longest time.

Chinese tech talent are also venturing home of course. And Baidu, Alibaba, and Tencent are massive companies founded by capable entrepreneurs. They’re also starting to play in the global arena, with Xiaomi and Lenovo as examples of success.

But their credentials have a slight blemish, as my colleague notes. Could they have made it in a free market against U.S. tech giants? Could they reach the level of global impact embodied by Apple and Microsoft?

Indian startups, on the other hand, face an onslaught of world-class competition from day one. This means while fewer may survive, those that do can stand up against the very best.

Deep moat, many bridges

Yet Amazon would kid itself for thinking it’ll have an easy ride in India.

Only 10 percent of locals speak English, yet 30 percent speak Hindi – the most common language in the country. It’s been said India is not one country but 29, as each state has different laws, cultures, and languages.

So it offers the best of both Silicon Valley and Beijing. It has the global mindset and receptive culture of the former, and the massive, tough-to-penetrate consumer market of the latter.

We could be seeing the genesis of a thriving ecosystem. India is seeing a virtuous cycle of exits, as well as startups serving as early adopters to other startups. FreeCharge, for example got acquired by Snapdeal for $450 million in cash and stock, making it the largest startup M&A in India’s history.

Companies like RazorPay, a Stripe for India , are already getting support from the country’s ecommerce biggies.

India doesn’t just have links to the Valley though. As a society, it faces the same issues as other emerging countries in Southeast Asia: low credit card usage, lack of payments and logistics infrastructure, and a fast-growing mobile consumer population.

Which means startups who’ve conquered India have a wealth of global expansion options. If you’re software-as-a-service or high tech, the U.S. would be the logical market – think Zoho and Freshdesk. Anything else, it’s probably Southeast Asia. FreeCharge is looking at the region. So is Teewe, a company with a Chromecast-like device that wants to enter the home of every mobile-enabled family.

VC-fueled bubble

India’s startup scene is growing fast, but the fuel is venture capital money. Ecommerce is the country’s hottest tech sector, but it’s far smaller than China’s and has attracted tons of skepticism.

Entrepreneur and venture capitalist Alok Goel believes the country’s top 10 ecommerce players are burning $9 million a day, or $6 billion for the next 12 months.

“There are hardly any investors out there who can support that pace of
cash burn,” he warned. For winners to emerge, either there’ll be massive innovation to bring down business costs, or there’ll be an acquisition by a global player (read: Amazon or Alibaba).

Another venture capitalist, Avnish Bajaj of Matrix Partners, said something similar. Tech companies in India are spending “at global levels for revenues at local levels so it’s high burn with lower monetization.”

So, while India’s ecommerce companies are spending big, they’re no Alibaba. The business models aren’t proven. The green shoots have barely sprouted.

India’s population rivals China, yet its GDP per capita is six times less. India’s smartphone penetration rate stands at 30 percent, much lower than China’s 95 percent. India’s biggest selling point therefore remains its potential. It’s pimping a story of blistering future growth.

Which means that until India matures, China remains the market to beat in Asia. But India has the raw potential to rival China’s rise and produce a truly world-class, global tech company.

Editing by Malavika Velayanikal, Steven Millward, Anh Minh Do

This post was originally published on Tech in Asia

Photo Credit: Ramesh Lalwani / Flickr

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