AP & Telangana vying for top honours in start-up ecosystem


Last month Andhra Pradesh’s coastal city Visakhapatnam, or Vizag, was buzzing with financial technology startups showcasing products, competing in front of various stakeholders and help ring in Chief Minister Chandrababu Naidu’s vision to make Vizag the fintech hub of India. “By 2019, Vizag will become the financial technology hub of India and by 2023 it […]


chandrababunaidu-bcclLast month Andhra Pradesh’s coastal city Visakhapatnam, or Vizag, was buzzing with financial technology startups showcasing products, competing in front of various stakeholders and help ring in Chief Minister Chandrababu Naidu’s vision to make Vizag the fintech hub of India.

“By 2019, Vizag will become the financial technology hub of India and by 2023 it will become the financial technology hub of the world,” said Naidu presenting his optimistic outlook. Andhra Pradesh and Telangana were restarting life as independent states missing the start-ups, innovation and disruption boom set across the country.

“When a state is bifurcated, economic advantages and disadvantages are divided between the two states,” said professor K Nageshwar, political analyst and editor of the Hyderabad-based Hans India newspaper. “When the IT sector is concerned, the entire advantage went to Telangana through Hyderabad.”

He further added that Vizag doesn’t have the technological foundation Hyderabad does. Naidu, former chief minister of united Andhra Pradesh, played a major role in bringing Hyderabad to the map as a major IT hub. Now he has to recreate the same magic without Hyderabad.

Though many believe that while Hyderabad has an advantage over Vizag, the city [Hyderabad] nevertheless missed out on opportunities due to the political upheaval leading up to the bifurcation of united Andhra Pradesh.

“Hyderabad took a massive backseat during that time — everyone acknowledges it, including the government,” said Srinivas Kollipara, COO of T-Hub, the Telangana government-backed startup incubator. “There was instability, bandhs all the time — the start-up activity came to a halt for almost four years. Before the political upheaval, I don’t think Hyderabad was too far behind Bengaluru.”

In 2014, the year of bifurcation, Hyderabad founded 340 start-ups, according to the data-tracking platform, Tracxn. Presently, the city boasts of a total 1895 startups founded till date and a state government which has made innovation as one of its priorities.

Hyderabad has the advantage of leveraging the infrastructure and the IT industry already established, while for Vizag it is being built one block at a time. Vizag has only founded 57 start-ups till date and Naidu intends to change that.

Vizag, The FinTech Capital?

After a series of experiments, Andhra Pradesh government recently adopted a single-sector focus approach by taking up the ambitious task of turning Vizag into the fintech capital of India, a title currently reserved for Mumbai.

“Financial technology is growing at 26% the world over, which made it the obvious choice of focus for us,” said JA Chowdary, IT advisor to Naidu. “We will make Vizag, which is our business capital, into the fintech capital.”

The Vizag event saw the fintech stakeholders from the across the globe converge. But how does the government plan to achieve their vision of making this city a hub of financial technology?

The first leg of this process includes creating manpower. The state has signed MoUs with HSBC, Thomson Reuters and Visa to set up financial technology academies within the current academic institutes in the city. “We have to get senior and most established people from the industry to Vizag and only then would we be able to attract investments and create a fintech ecosystem,” said Chowdary.

The state is inviting established fintech startups and companies to set up their centres in Vizag — with online payment company Paytm being one of them. “We sincerely appreciate Mr Naidu’s efforts to develop Vizag as a fintech valley by offering world-class infrastructure, important facilities and necessary guidance to companies like ours willing to set up offices in the city. This will go a long way in setting up an industry-friendly environment at par with metropolitan cities,” said Amit Sinha, senior Vice President, Paytm.

The government also plans to set up a repository of use cases to provide startups with its lifeblood. “Use cases are what startups would need to survive,” added Chowdary.

Does Vizag Have What IT Takes?

“Fintech is scattered around in India. Other countries like Israel and Australia have one specific hub for fintech. India doesn’t have an equivalent of that. Vizag could be the one for India — and Mumbai and Vizag could have a twin city approach. They could be virtually connected. Fintech needs an ecosystem — Vizag can provide that by bringing all the stakeholders together,” said Neha Punater, partner and head of Fintech at KPMG, which was involved in organizing the Fintech Valley Conference in Vizag last month.

But there are others who are not as optimistic. An expert from one of the big four accounting firms is not too convinced Vizag has it. “While it may be a good idea to bring necessary fintech stakeholders to Vizag, accessibility is an issue. What would make them drag themselves to a small city in India for financial technology now that the entire world is virtually connected? I don’t see a good frequency of flights to Vizag, which is not the case with other cities like Hyderabad, Bengaluru, Mumbai and Delhi,” said the analyst, requesting anonymity.

Professor Nageshwar echoes similar concerns. “You may have a leader in Chandrababu Naidu. But political leadership and business policies are just one aspect of developing an economy,” he said. Connectivity and climate conditions are other factors that contribute to the growth of a sector in a state, he added.

“AP can focus on logistics, agroprocessing, and food processing. They have more promise in these areas and should capitalize on the same,” said Nageshwar, though he feels the idea of making Vizag a fintech hub is a good one. He just fears the state should not put all its eggs in one basket.

This is why Hyderabad’s T-Hub, which runs a host of corporate innovation programs with companies like Intel, Qualcomm, and Novartis, among others, has decided to diversify its bets.

“It’s a little too early to say what Hyderabad would be known for. However, agriculture and life sciences seem like the ones standing out. Also, smart cities and IoT (Internet of Things) are what the state government is focusing on, so those could be sectors of expertise as well,” said T-Hub’s Kollipara, who believes that the startup ecosystem in the city has come alive in the last two years. “It’s not just T-Hub. The city has so many incubators and co-working spaces that have come up in the last two years.”

Telangana government is trying to reshape the Hyderabad start-up ecosystem after Silicon Valley — bringing together academic institutes, start-up incubators, and mentors.

“We have invested Rs. 40 crores in the first phase of T-Hub and Rs 180 crore for its second phase. A lot of states may talk about helping start-ups, but which other state has put over Rs 200 crores in startups?” questions Telangana IT secretary Jayesh Ranjan. The state also set up a Rs 100 crore fund for start-ups with a fifth of its money from the state government.

“AP tried to come up with a startup incubator called Sunrise Village, but it comes as no surprise that it has been shut down now,” added Ranjan.

“The cities are moving in the right direction, but it will surely take time. Such visions are usually 5-10 year plans and not short term,” said investor Sateesh Andra of Endiya Partners, the Hyderabad-based early-stage investment firm which has only two companies from the city in its portfolio of six.

While it can leverage the presence of companies like Google, Facebook, Amazon, among others, Hyderabad does have its share of challenges. “In every start-up ecosystem, one company has done very well and helped the others out. Chennai had Zoho. It was the semiconductor companies in the US. Hyderabad doesn’t have any such company yet. That is a major challenge. We need to find our Zoho,” said T-Hub’s Kollipara.

So, Who Is Likely to Win?

As both the state governments go all out to make up for the lost time and become prominent players in the start- ecosystem, it remains unclear if they will succeed. Hyderabad’s already established infrastructure gives Telangana an edge over Vizag, which is starting with a clean slate. However, Andhra’s Naidu has the legacy of accelerating development of a city, which makes his vision of making Vizag the fintech hub plausible.

When it comes to IT, Professor Nageshwar believes that Telangana and Andhra Pradesh cannot compete. He said that Naidu doesn’t have the same advantage he had with Hyderabad during the 1990s.

“IT was an upcoming industry at that point. However, Naidu has to build it now in a saturated IT economy. Vizag doesn’t have the IT strong foundation like that of Hyderabad.”

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