This report originally aired on February 9, 2014.
HARI SREENIVASAN: This city of nearly 10 million people long has been known as India’s Silicon Valley. A place where some of the world’s leading technology companies outsource jobs to educated Indian workers who earn much less than their American counterparts.
That lesson has not been lost on Indian high-tech entrepreneurs, many of whom have faced visa hurdles in the U.S.
Despite dealing with rolling power outages, rampant congestion and the corruption of a developing country, many of these Indians are now returning home after being educated in the United States.
They are benefiting from a culture change around start-ups, but also convinced that India presents a unique set of opportunities.
SHARAD SHARMA: They are really going after moon shots in ways people in my generation have not
HARI SREENIVASAN: Sharad Sharma is an entrepreneur and investor in early-stage startups, who heads a think tank devoted to helping software product companies in India.
HARI SREENIVASAN: The culture here is inherently risk averse, in terms of when people say; go get a job at a fantastic big company. That’s what we’ve prepared you for, that’s what we’ve poured all this love, and affection, and money, and schooling into, right?
SHARAD SHARMA: Right.
HARI SREENIVASAN: What’s changed in India so that people are now turning towards start-ups versus the big established companies?
SHARAD SHARMA: There will be at least one company that will hit a billion dollars in valuation. So, that’s changing the perception, right? I mean, so you can go from– a zero to a hero in a start-up– and there are examples of that. And since there are examples of that– you know, there’s really smart people who are beginning to do that.
HARI SREENIVASAN: We met some entrepreneurs who are taking that chance.
Anshuman Bapna, a Stanford MBA, is the cofounder and CEO of mygola, a travel startup that allows users to browse itineraries already taken by people, customize them, and then book their own trips.
ANSHUMAN BAPNA: We are going after becoming the world’s–obvious destination for starting your travel planning. And that’s as big as it gets. I mean, that’s literally a billion dollar plus kind of a business.
HARI SREENIVASAN: 36 year-old Bapna left a job at Google in New York to launch mygola in Bangalore.
ANSHUMAN BAPNA: We just loved our life in New York. We just loved how multicultural it was, how fast it moved, but honestly– the biggest– the toughest decision that my wife and I have ever taken, aside from maybe marrying each other, was leaving New York.
HARI SREENIVASAN: Why come back to India?
ANSHUMAN BAPNA: I thought the problem that we’re trying to solve, travel planning, is a very hard complex problem that I didn’t think would be solved in three months’ time. So I thought– given the approach that we were taking, which was going be very human-intensive, but also engineering-intensive, it made sense to be in the one geography that I could think of where both of those talents come together, which is India.
HARI SREENIVASAN: The $2.6 million that Bapna has been able to raise from investors has gone a lot further in India, instead of affording a small team in the U.S., mygola has a staff of 17, including 10 engineers. And Bapna says thanks in part to silicon valley-like perks he hasn’t lost a single engineer in three years.
ANSHUMAN BAPNA: You walk in, there are no cubicles. There’s foosball. There’s bean bags, there’s music, there’s graffiti on the walls– there’s free food, and by the way, free food costs exceptionally less in India, as you can imagine, than anywhere else.
HARI SREENIVASAN: And Bapna says when it comes to developing a software product it’s truly a flat world – location is almost irrelevant. He can build a global business as easily from Bangalore as anywhere else.
ANSHUMAN BAPNA: So we’re actually not focused on the Indian market alone. In fact, Indian market is only a quarter of all our traffic, all our users. We think that there are certain advantages– of being in India that allow you to take on global markets much more — effectively
HARI SREENIVASAN: But marketing his business from Bangalore, especially when competing with internet giants like Orbitz, Priceline, and Expedia just isn’t as easy.
ANSHUMAN BAPNA: In reality, travel is an exceptionally hard space.
HARI SREENIVASAN: Right.
ANSHUMAN BAPNA: And I wish someone had told me that– when I started– this company. But– here we are.
HARI SREENIVASAN: So after four years in India, he and his wife and 5-year-old daughter are moving back to the United States. He thinks more people will discover his business once he’s able build partnerships with other travel sites.
ANSHUMAN BAPNA: I love being in India, but I love being in the U.S. as well. So as and when the business demands, and as personal needs– arise, I see myself going back and forth between the two countries. I think India’s a great destination. And I think you will see very high tech companies come out of India much more often than you’ve seen in the past.
HARI SREENIVASAN: Other entrepreneurs like Adhil Shetty, who did his graduate work at Columbia University in New York, say India’s rapidly growing middle class is too tempting a target to resist. By some estimates, the middle class here will more than quadruple over the next decade or so – to perhaps as many as one billion people.
ADHIL SHETTY: I think it’s a very exciting time to be in a young, young business in India.
HARI SREENIVASAN: 34-year-old Shetty is the CEO of Bankbazaar dot com, an online marketplace conceived by his brother who had worked for amazon in Seattle. The 6-year-old company allows Indians to compare and then obtain mortgages, car loans, credit cards, and even insurance online.
ADHIL SHETTY: When this opportunity came up, you know, I hadn’t planned it– or timed it that way. But it was a great idea. And I decided to make– the jump. And– that’s how I ended back in India.
HARI SREENIVASAN: The company has grown to 200 employees with offices in three cities. Shetty says that being in a developing economy means being able to innovate rapidly.
ADHIL SHETTY: For example, in six months we’ve actually launched a product with a large bank which is out in the market clocking revenue. Now could we do this in America? I think it’s arguable, right. Could I go into a Citibank office in New York say, “Hey, I have this, you know, platform which will help you move business faster?” Might have been a little more difficult. I think the opportunity existed here.
HARI SREENIVASAN: The decision means he can be close to family members he might otherwise see once a year. And he says he wants to be part of his generation’s growing awareness and embrace of entrepreneurship.
ADHIL SHETTY: So they feel that, “Hey, you know, I can, you know, get a job with a bank or an insurance company or with a Microsoft or with a Google if I wanted to. But isn’t, you know, I’m doing this is because I’ve done that and I want something more challenging.”
HARI SREENIVASAN: A small community of young American entrepreneurs have pulled up stakes and moved to India as well. David Back and Greg Moran met as undergraduates at the University of Pennsylvania, back attended Harvard Law School, and then both dropped out of business school to start Zoom, a Zipcar-style car-sharing business, in India.
GREG MORAN: So for us, it was sort of like a no-brainer. The size of the opportunity is staggering.
DAVID BACK: Urban density is the single biggest predictor of car-sharing success. So if you’re looking at– large, dense cities where people don’t own cars, the fact that car-sharing has not been done in India already is shocking.
HARI SREENIVASAN: It’s estimated that there will be 68 cities in India with 1 million people or more by 2030. That’s compared to just 9 today in the United States.
Since launching almost a year ago, Zoom has been sold out every weekend in Bangalore and the company is now hoping to expand to Mumbai and Delhi within the next year.
HARI SREENIVASAN: Aside from the business, you’ve made personal sacrifices to be here. You could be making money possibly on Wall Street, possibly in the U.S. Is it a risk worth taking?
DAVID BACK: Well, there’s no– there’s no question that it’s worth taking. Sure, we’d be making much higher salary in the U.S. But it’s personal. You know, it’s being separated from our parents. For me, it’s being– separated from my girlfriend for a year and a half. I think that’s the real opportunity cost. It’s still worth it, though. The scale of the opportunity here, this is a once-in-a-lifetime opportunity.
GREG MORAN: I mean, we are still young. We’re both under 30. We’re not married. But we were very fortunate in the fact that for us at least, it was the perfect time in our lives.
HARI SREENIVASAN: Moran and Back are committed to being in India for at least the next couple of years.
DAVID BACK: I know I sound crazy how ambitious it is. But if you come back to us in five years, there’s– there’s a chance, at least, we could be a billion-dollar company and we could be hugely disrupting the way that people in Indian cities get around.
HARI SREENIVASAN: Besides those challenges we mentioned before – sometimes unreliable electricity, congestion and corruption, angel investor Sharad Sharma says the biggest worries are the same a startup faces no matter where it is based.
HARI SREENIVASAN: Most start-ups fail.
SHARAD SHARMA: Yes.
HARI SREENIVASAN: I mean, it’s just the numbers are stacked against you when—
SHARAD SHARMA: Yes.
HARI SREENIVASAN: –you decide to take on a venture like this.
SHARAD SHARMA: Yes.
HARI SREENIVASAN: So, is there anything different about the entrepreneurship climate here?
SHARAD SHARMA: No. In fact, the failure rates are much higher.
HARI SREENIVASAN: In fact, in 2012 only one Indian company was among the nearly 500 firms acquired by some of the biggest tech companies in the world.
HARI SREENIVASAN: So, as this wave of entrepreneurship in India increases, what does the U.S. stand to lose?
SHARAD SHARMA: There are irritants like these visa issues. But I think in some sense– U.S. has positioned itself as a fountainhead of entrepreneurship, tech entrepreneurship in particular.
HARI SREENIVASAN: And many, from Silicon Valley venture capital firms to international tech giants like Microsoft are betting on Indian entrepreneurs and on India itself emerging as a huge center for innovation.