By Venture beat
While Silicon Valley remains the center of innovation and startup activity in the globe, other geographical markets are developing startup ecosystems in varying degrees of maturity. Comparing these bubbles of startup activity, it’s clear that more globally successful companies are coming out of Israel compared to any other geographical region apart from Silicon Valley.
Contrast this to a region like India with its own dynamic startup scene — and a population around 150 times bigger than Israel — and patterns start to emerge. Patterns that show the factors that make a billion dollar company.
“This is an intriguing question for us,” said Venktesh Shukla, Chair of TiE Global and President of TiE US, “we observed a couple of reasons why Indian startups are not as globally successful.” TiE — or The Indus Entrepreneurs — is a global network of non-profit chapters that seek to promote entrepreneurship.
Shukla draws from a wealth of experience in entrepreneurship and startups to outline the first couple of major factors that make a billion dollar company:
- Global from day one — Companies in Silicon Valley and Israel have a global mindset from the start. In Israel, in particular, there is no thriving domestic market for startups. In comparison, startups in India develop a global mindset as an afterthought because they achieve initial success by catering to the local market.
- Narrower product focus — “Silicon Valley companies are like Redwood trees: tall and narrow. They do one thing and one thing extremely well, better than anyone else,” said Shukla, “Indian startups are like a Banyan tree. They take on too many features requested by local customers and so they enjoy limited success and growth globally.”
Of course, these factors apply to virtually any startup ecosystem just starting to emerge into the global market, where the availability of factors contributing to global success is limited.
Billion dollar mindset
A “think global” mindset sounds like a big deal, but in practice, creating a billion dollar company is obviously not so simple.
Take Redbus, for instance. An India-based startup established in 2006, its 26-year-old founder was a first-time entrepreneur who just wanted to solve a practical problem: he needed an easier ticketing platform for long-distance buses whenever he went home to Bangalore. Redbus was a pioneer in the entire region; there was no other company like them and they had the potential to go big.
Instead, they took a deal north of $100 million from the Ibibo Group and exited via M&A in 2013.
“A Silicon Valley VC would never have allowed that to happen,” Shukla said, “especially the [venture capitalists] who’ve seen and managed these kinds of successes.” In the case of Redbus, however, it wasn’t just a matter of not thinking big enough. One could certainly make that argument, but during its time, there were hardly any exits in India and in many ways, the community welcomed the exit. In fact, Microsoft sought to deal with this exit problem in India’s startup ecosystem by pioneering a mentorship and accelerator platform called ThinkNext in Bangalore.
So aside from thinking global from the start, what other factors make a billion dollar company?
The right people
One of the biggest advantages of having the right mentors is understanding when to scale up and out — a majority of startups in ecosystems like India are helmed by first-time entrepreneurs. The value of mentors lie in telling them when to zero in on product and when to add the right kind of bells and whistles. The same people who have done it successfully before can help startups strike the right balance between catering to the local market without losing sight of the global picture.
The right people can also help startups think of global factors early on, such as building company culture and how to make trade-offs in the early years of development.
And startup ecosystems are developing all over the world, bolstered by the formation of local investor groups for various stages and even startup-focused policies endorsed by local governments.
Take India, for example: $5 billion went into the startup ecosystem as investments for startups in various stages last year. In 2014 that figure was only $1.7 billion. In 2013, it was less than a billion.
Truly global startups
Some startups coming out of the region offer global products as well.
One example is Grey Orange, a startup that builds robotic systems that successfully raised $30 million in 2015 and is used by clients like Flipkart, Aramex, Delhivery, DTDC and Kerry Logistics. The company started in India and is now expanding its market, starting with customers in Japan, China, and the U.S. Another promising startup with local roots and a global mindset is Seclore, a Snapchat-like service for enterprise documentation. The startup offers timed, restricted access to enterprise documents and has doubled its revenues last year and recently closed a series B round of funding.
“Globally, the only way you can succeed is you do something nobody else can do,” Shukla said. This global mindset and narrow focus can grow into billion dollar potential when given access to the right pool of talent, mentors, and capital. And startup ecosystems are becoming mature and robust enough to be conducive for global, billion dollar ideas, at least if they can connect to the right people.
Access, access, access
Access to a pool of good quality mentors and talent is a crucial factor. “The tech expertise that is needed to scale from a million users to 100 million users does not exist in abundance outside of Silicon Valley,” Shukla said, “Even companies that are initially successful, wherever in the world they are, when they start to grow at the pace of hundreds of millions of users, they have no choice but to come and recruit in Silicon Valley or open development centers in Silicon Valley to gain access to that expertise.”
Indeed, in Silicon Valley, there are many successful role models, a greater pool of talent, and more accessible mentors, investors, and supporting infrastructure compared to other startup ecosystems the world over.
Today, however, markets like India are maturing, organizations like TiE are helping startups gain access to the capital, mentorship, and talent they need, and there are more chances for unicorns to be born.
First appeared at VB