India gets third highest venture capital investment in the world: Ajay Ramasubramaniam

Mumbai-based start-up accelerator Zone Startups India recently raised Rs 190 crore of funding, which it plans to invest in 50-60 start-ups in the next two to three years. A joint venture between BSE Institute, Ryerson University's Digital Media Zone, Ryerson Futures Inc and Simon Fraser University, the accelerator was founded in February 2014 and has already assisted about 60 start-ups so far. Here's an edited transcript of BT's interview with the company's Director Ajay Ramasubramaniam.

BT: Bangalore is known as the start-up hub of the country. So why did you chose Mumbai as your location?

Ramasubramaniam: In Mumbai, there isn't any ecosystem as such for start-ups, so instead of being 'nth' incubator or accelerator in Bangalore or Delhi, we rather wanted to be a pioneer one. Additionally all the sectors that adopted technology early on - like banking and financial services, media and entertainment - are situated in Mumbai. So it was a very strategic decision. Also being the financial capital of India there is a lot of investment floating in Mumbai and for an accelerator, access to funds is very important.

BT: Start-ups are hot right now but five years ago nobody would have really wanted to leave a large corporate job and join a new company. Do you think start-up culture is here to stay?

Ramasubramaniam: Five years ago India was not even in top 20 when it came to venture capital investment in the world but today it is at number three.

With coming up of 'Make in India', a lot of policies are being made at state government and Central government level to make it more conducive to start businesses. Also, many academic institutions have come up with their own incubators, so the environment today is more conducive for start-ups.

Today, India has about 110 start-up accelerators and in 2014 there were only 80 of them. The number of platforms where a person can work to build a new venture has gone up significantly, so this is another reason why we are seeing a rise in the number of start-ups.
Overall, it is at a very nascent stage but the ecosystem supporting start-up as a culture has begun and it will take over.

BT: Start-up culture is gaining traction in India and out of every batch that passes out of IITs and IIMs, some want to start a new venture. Out of so many, how do you know which one is going to work out?

Ramasubramaniam: It is true that a lot more people are interested in start-ups these days, but it is more of a myth that many IIT and IIM pass-outs end up starting ventures. Interestingly, most of the start-ups we have been in touch with have founders and co-founders who have 5-10 years of work experience. We work with a start-up for 3-6 months and therefore we are actually like a co-founder working with them. We help them make introductions to customers, help them acquire corporate clients and help them with problems of mentorship, investment and so on. During that period, we observe the performance of the company and if it is performing well, we decide if we can invest in it.

BT: How many start-ups have you assisted so far? How many of these have raised funds?

Ramasubramaniam: We have worked with 63 start-ups so far; in the past six months 10 have raised funding between Rs 50 lakh-10 crore, while 9-10 of them have failed. Reasons for failure are many, like absence of product validation or founders breaking up etc.
Some of our success stories are BabyChakra, which is a product and services discovery platform for young parents. They have raised money from a Mumbai Angels and Singapore angels network. Another one is ePoise, which is a technology company in the HR field; they have raised money from Orios Venture Partners.

BT: What kind of start-ups do you prefer?

Ramasubramaniam: We work with early-stage technology companies, which are beyond idea stage and have a business plan. We also keep taking applications, referrals and keep interviewing start-ups to bring into our accelerator.

We prefer technology start-ups, we look at companies that are in B2B, we look at companies that can operate in a very asset-light way. But we are pretty much open to looking at start-ups from different sectors.

However, we also have very strong rejection criteria; for every 20 start-ups we interview, we select one.

BT: Besides assisting them in getting funds, what else do you offer the start-ups?

Ramasubramaniam: A start-up stage is anywhere from 4-9 months, during which we provide them with office space, mentors - we have 90-odd mentors from the industry. The programme largely thrives on industry connect, so on a regular basis we bring executives from large corporations to come and meet us. We also have tie-ups with Google, Amazon, Microsoft and IBM and every start-up we accept gets about $100,000 of cloud credit in the beginning, which helps them in building their IT infrastructure. We regularly bring in investors, angel groups, individual angels, corporate ventures to come and deal with the start-ups and thereby expose our start-ups to the venture community. We also do a lot of business development and market development for them.