In Last 10 Years, Hyderabad Failed to Build Vibrant Start-Up Ecosystem: Jayesh Ranjan
Hyderabad: During the last decade, the BRS government trumpeted Hyderabad as the next big thing in the Indian start-up scene, but failed. There is little funding and no rise of unicorns, the ultimate test of success of start-ups, from the city.
With grand claims and promises of fostering a vibrant ecosystem for innovation and entrepreneurship through institutions like T-Hub, WeHub, TS Innovation Council (TSIC), among others, the BRS government tried to paint Hyderabad as a bustling hub rivalling Bengaluru.
However, revelations by Jayesh Ranjan, bureaucratic head of Telangana state’s IT and industries department, several start-up entrepreneurs, and employees in these bodies, have torn apart this facade, exposing the grim reality lurking beneath the surface.
“The start-up ecosystem in Bengaluru is more mature than in Hyderabad. Start-ups find it easier to raise funds in Bengaluru,” Ranjan told Deccan Chronicle, when asked about the vast chasm between Hyderabad and Bengaluru in attracting funding.
Ranjan’s damning statement comparing Hyderabad and Bengaluru speaks volumes of the failure of the city to truly nurture a vibrant start-up ecosystem in the last decade. While Hyderabad depended solely on politically inclined promoting branding efforts, the Bengaluru start-up ecosystem stood tall with its maturity and ease of fundraising.
Despite the former BRS government’s chest-thumping about Hyderabad's prowess, the hard numbers paint a starkly different picture. And the Central’s government’s data reveals a sobering truth.
As on April 30, 2023, Telangana state had 5,157 start-ups recognised by the Centre’s Department for Promotion of Industry and Internal Trade (DPIIT). This number pales in comparison to Maharashtra, which had 17,981 recognised start-ups, Karnataka’s 11,080, Delhi’s 10,812, Uttar Pradesh’s 9,058, Gujarat’s 7,357 and Tamil Nadu’s 5,940. Even a small state like Haryana is partially ahead of Telangana state with 5,161 start-ups.
The gap only widens when comparing the rate of start-up additions over the past three years. Hyderabad’s feeble 1,590 start-ups added in that time is a fraction of what Delhi-NCR, Mumbai, and Bengaluru achieved.
According to data collated by TheKredible, which tracks start-up activity in the country, to Hyderabad’s 1,590 start-ups in the last three years. Delhi-NCR had added 6,100, followed by Mumbai with 2,840, Bengaluru with 2,470, and Pune with 1,610 start-ups.
But the most telling metric of Hyderabad’s underperformance lies in its struggle to secure funding for its start-up entrepreneurs. Despite initiatives like T-Hub and WeHub and other government-backed incubators, Hyderabad languishes at the bottom of the funding ladder, overshadowed by Bengaluru, Delhi-NCR, and Mumbai. The vast chasm in funding amounts and the number of unicorns further underscores the city’s failure to live up to the BRS government’s hype.
In the last three years, Hyderabad-based start-up companies raised $765 million through 126 funding deals – translating to an average ticket size of about $6 million each. Start-up firms in Bengaluru, in the meantime, raised $39,400 million ($39.4 billion) in 1,733 deals with an average ticket size of $22.7 million, which is nearly four times bigger. In Delhi-NCR, $16,580 million ($16.58 billion) in 1,039 deals with an average funding of nearly $16 million per deal.
Mumbai start-ups received $11,580 million ($11.58 billion) in 650 deals with an average funding of nearly $18 million per deal. The start-ups in Pune got $2,089 million ($2.09 billion) through 147 funding deals with an average size of $14 million, which is more than double the size seen in Hyderabad.
In terms of rise of unicorns, which are firms valued at over $1 billion (approximately Rs 300 crore), Bengaluru tops the national list with 45 unicorns, followed by Delhi-NCR with 35, Mumbai 20, Pune seven unicorns. Hyderabad claims to have three companies which are worth over $1 billion.
When asked about the reason for dismal performance, Rajan admitted that “Bengaluru has a much better and mature start-up ecosystem. We failed to match it. It is easier to raise funds in Bengaluru.”
He also said that many companies which were started in Hyderabad shifted to Bengaluru to get funds and hire good human resources.
While Ranjan touted a 139-fold increase in start-up numbers over a decade (from 50 in 2014 to 7,000 in 2023, to be precise), it pales in comparison to the national average, which saw a staggering 262-fold surge during the same period. This yawning chasm between rhetoric and reality lay bare the extent of Hyderabad's underperformance.
Addressing a youth congregation in New Delhi on June 2, 2023, Union minister of state for personnel Dr Jitendra Singh said India had just about 350 start-ups before 2014, but after Prime Minister Narendra Modi rolled out the Start-up India scheme in 2016, the number jumped to 92,683, which is 262 times more than the 2014 number.
Yet, Hyderabad’s failure to capitalise on this momentum and achieve the nation beating growth rate in start-ups raises serious questions about the efforts of start-up hubs groomed by the previous BRS government during its tenure.