Entrepreneurs heading to smaller cities to set up technology-led companies

Away from big city lights, scores of young Indians are starting new ventures, encouraged by the rising needs of middleclass citizens and the global reach that technology offers. In cities like Bhopal, Lucknow, Coimbatore, Vellore, Siliguri and Jodhpur, many young graduates from lesser-known universities and colleges are churning out products and services for customer at home and abroad.

These businesses, ranging from food delivery and enterprise software development to robotics training, are using the internet to connect with vendors and reach customers.

“With basic infrastructure available, you can start an online business from any city,” said Navneet Chaudhary, the 21-year-old founder of Trainkhana, a food delivery venture based in Jodhpur.

Fed up with the bad quality of food provided in India’s trains, Chaudhary, a third-year engineering student and son of a local farmer, launched the venture last year. He borrowed Rs 1.5 lakh from friends and family, and travelled to almost 90 cities and towns to tie up with local restaurants that now deliver quality food to travellers. Users who log onto the portal’s website have to just enter their PNR number or train journey details. The food can also be ordered through its call centre.

At present, TrainKhana earns revenues of Rs 1 lakh every month. “The money is sufficient for our 10-member team in Jodhpur, where the costs are low,” said Chaudhary.

Experts are of the view that small-town entrepreneurs are hungrier for success and have a clearer view of the problems that ordinary Indians want solutions for.

“Small-town entrepreneurs come with at least more 10 times more passion and a fire in their belly,” said Vijay Shekhar Sharma, cofounder of One97 Mobility Fund. The $100-million fund has invested in ventures such as mobile security firm WaveSecure, mobile payments startup MobiSwipe and ecommerce platform ZEPO.

Sharma, who hails from a small village near Aligarh, Uttar Pradesh, has built a Rs 200-crore company that provides mobility solutions and has raised capital from global investment firms including SAIF partners and Intel Capital. The lack of job opportunities outside the metros is also pushing many to start up on their own.

Bhopal-based Nemesh Singh struggled for over three years to land a job after his graduation. Fed up with failures, Singh and three batch-mates decided to start Appointy - a task scheduling application.

The five-year-old company now grosses about $40,000 per month (Rs 24 lakh) in revenues. “With pervasiveness of the internet the location of a startup doesn’t matter now,” said Singh, who is targeting revenues of $4-5 million in 2015, from over 58,000 clients, all based in the US.

“We don’t want to move out of Bhopal due to the low cost of operations and quality of life,” said Singh, 34, who has rented a 4,000 square feet farmhouse for his 10-member team at Rs 20,000 per month.

Such opportunity is beckoning even non-resident Indians who are not averse to settling down in nonmetro locations which they believe offer better standards of living.

“Talented research professionals from across India are more willing to move to cities like Ahmedabad, owing to a better standard of living here,” said Apurva Shah, 45, who returned to his home town of Ahmedabad in 2005 to start the city’s first clinical research firm, VeedaCR, with Rs 7 crore seed funding from friends and family.

“While there is 25% attrition in the industry, our attrition rate is just 8%,” said the management graduate from Boston University.

The company, with operations in Malaysia, US and Germany, earned revenue of Rs 90 crore in fiscal 2014. It has acquired four companies in the United Kingdom and Belgium in past five years.

The growing number of regional airports is also helping the small town startup revolution. “Earlier we had to travel to Mumbai to fly anywhere overseas. Now we have connectivity to all major countries,” said Shah, who raised Rs 50 crore from Actis Capital in 2007.

More investors are now keen to back such growth stories. “We actively scout for entrepreneurs and startups from small towns as they are more focused and understand the needs of Bharat than India,” said Bharti Jacob, founding partner at SeedFund, which has invested in Vaatsalya, a healthcare chain focused only on small towns of Karnataka and Andhra Pradesh.

“I tell people to take six months off and travel across small towns and villages of the Indian subcontinent to understand their real needs,” said Rajan Anandan, one of the most prolific angel investors in India who has backed over 40 startups. “The needs of people of Bharat and India are very different.”

Low operating costs is also a factor for entrepreneurs who are relocating to small towns. Last year Shanmugavel Sankaran, moved his company, Fixnix, from Chennai to Vellore, about 150 kilometres away. Apart from lower costs the town also hosts a number of engineering colleges that provide a ready pool of talent.

FixNix makes governance risk and compliance software for firms such as Consim, Cipla and Hexaware. “Small town entrepreneurs should build contacts with the government and placement cells of local colleges, where they can get free incubation,” said Sankaran, 33, a former IT security manager at IBM and Microsoft. Young graduates are all basking in the warmth of greater social acceptance for startups.

After working for just ten months at a robotics and heavy machinery firm in Pune, Sakyasingha Mahapatra, moved back to his home town in Bhubaneshwar in 2010.His venture SakRobotix, sells robot accessories and provides hands-on trainings in robotics.

“For online education, it doesn’t matter where we are located,” said the 29-year-old, who expects his company to earn revenue of Rs 10 crore in two years.

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