Before you start reading this, I recommend you read Paul Graham's "Why Startups Condense in America" because I keep referring to it in this post.
So, can we ever have a Silicon Valley in India? As Paul says, to create startups the basic ingredients that you need are nerds and rich people. I've been to both Bangalore and Hyderabad - both have great schools (granted Bangalore has IISc and that's one of a kind on the planet so it has an edge over Hyderabad - but this is not about Hyderabad vs. Bangalore) and both have rich people from the IT boom in India - so is that enough to create a right mix to start startups? No, not quite.
There are a couple of things that going for America: they are not too fussy and they have a huge domestic market. In India to start a company you have to jump through hoops - at least that was my experience back in 1997, I was just out of school and I remember all the hoops that we had to jump through to incorporate a business. And then India has no domestic market, not yet at least. Even if you want to start a company that targets international markets you need exposure to the right problem set in right time - which is impossible to get when you are in school. Even after joining a company as an employee after schooling, mostly we teach how to build a software services company but not a startup or a software products company. So the typical formula that Paul Graham sets for startups, that startups are started by young people that target a domestic market falls apart for India. So how do we create right environment with right nerds that are backed by right investors?
In my mind, to create such an environment, you need keep this following three things in mind:
1. Products not Services: Indian software market is solely made up of services - not products; to create a startup environment, we need to think of more products than services. Knowledge in this area is a must for India to build right products for right markets in the right time. The only way for India to grown in this area is to see an influx of successful NRI's (preferably from valley) either moving to India or sharing their knowledge in Indian schools by being part of some sort of "visiting staff". Services business does not scale well if you are into creating value instead of generating $.
2. Wealth not Money: Services business create money (in Rs or $) for each line of code you write - but a great product creates wealth (and money as a return) over a period of time by proving its value in the market. Most of the young engineers in India fall for "making money" game instead of thinking of creating wealth (and value) in the software markets. Nothing wrong in making money, but creating wealth is far more powerful than creating money. Creating wealth reflects on the society and lives of others, where as money only creates better living for individuals.
3. Entrepreneurship not Employment: Indian schools teach us a great deal about how to get a job - but I have rarely seen focus on entrepreneurship (even in business schools). Even in IIMs, to my surprise, the focus is on campus placements rather than bootstrapping companies and building businesses. It almost seems like we have given up the idea of creating employment and look for employment. I think this is where the schools should perhaps revamp their curriculum to coach students to think towards creating wealth instead of making $100K straight out school. The only way you can do this is by creating an environment around schools where rich and nerds can hang-out (like restaurants in Palo-Alto in the Valley).
We have many smart people that are driven and risk taking - but very few of them actually venture into starting their own companies because there is no proper coaching either from schools or from the society to think in that direction. If we cannot parlay our success in software services into building global software products, we simply cannot sustain the growth. To see a better India, I think we need to focus on building value in our software sector that leads to the creation of nerds-rich-startup cycle. Hopefully, we are not too far from it.
