Better funding, exposure have startups moving to tier-1 cities

The main reason for Kerala-based startups moving to tier-1 cities is the easy access to an investor community.
Image used for representational purpose.
Image used for representational purpose.

THIRUVANANTHAPURAM: Despite the Kerala government’s proactive steps to ensure infrastructure facilities for a robust startup ecosystem, the startups seem to be moving to greener pastures such as Bengaluru and Hyderabad as they grow, in search of funds and markets. 

In the last two years alone, nearly 100 homegrown startups have shifted operations to Bengaluru, mainly for marketing and sales purposes, according to industry officials. These companies, however, retain offices in the state for technology development due to the rich talent pool here, be it in Thiruvananthapuram or Kochi, they said.

The Kerala Startup Mission (KSUM) acknowledged the trend, with a tint of concern. Its CEO, Anoop P Ambika, said the trend will end only if Kerala creates a good ecosystem by attracting bigger IT companies and generating the required employment.

“We have a good talent pool here. If some startups want to get good business and their market is in tier-1 cities, they move there and set up offices. It is true that cities such as Bengaluru have a very strong ecosystem because of their organic growth. Our state can also follow suit and build a good ecosystem through investments by big IT companies. This will also result in more employment,” he said.

Greenikk Sustainable Ventures Pvt Ltd, one of the startups that recently shifted its base to Bengaluru, said the company’s growth in the initial phase was confined to Kerala.

“But when we started to expand, we had to move to Bengaluru to get our hands on good investors and a wider market. Bengaluru has a robust ecosystem in place. So it is easy for us to meet investors and get business. But that does not mean we have fully relocated. If we need to expand our business, we have to move to tier-1 cities,” said Previn Jacob Varghese and Fariq Naushad, its founders.

According to V Sreekumar, secretary of GTech (Group of Technology Companies), a collective of IT companies in the state, the main reason for Kerala-based startups moving to tier-1 cities is the easy access to an investor community.

“It is true that cities such as Bengaluru, Chennai, or Hyderabad have good investor communities. Ambitious founders move to such places to project a good valuation for their companies. But many startups are moving out to get a good valuation at an early stage. It is unhealthy and hasty on their part. GTech is mentoring startups to move to a Tier-I ecosystem only after getting a good foundation,” he said.

'It's only natural'

Robin Alex Panicker, chief product officer of Bengaluru-based Finotes, said the migration of IT firms to tier-1 cities as part of business expansion is a natural phenomenon. “There are many companies functioning in tier-2 cities in other states, including Coimbatore and Vizag, that are also expanding to tier-1 cities. It is good for companies to get exposure in business and in a good market,” he said.

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