Bangalore - An Outsourced Plateau, not a Silicon Valley

Guy Kawasaki recently posted about "How to Kick Silicon Valley's Butt". It's about how cities can strive to become a silicon valley.

I live in Bangalore, India - known as the Indian version of Silicon valley, though neither "silicon" nor "valley" make any sense here. My thoughts on whether Bangalore qualifies to become a silicon valley.

1. Bangalore is beautiful, fun, and overpopulated. The city has too much traffic and is polluted, but just an hour away south or west is a great countryside. Oh and the weather is just brilliant.

2. Bangalore has high housing prices, one of the highest in India.

3. There are very few finance companies (other than the call centers) that operate from Bangalore. India's financial hub is Mumbai. But there are tons of MNCs. And the biggest threat to entrepreneurship is that these MNC's - Accenture, IBM and the like - and LARGE Indian Software firms are offering ridiculously high salaries. Startups can't hire good people with stock (pooh poohed) and cash is scarce.

4. We have no known enemies other than our politicians. But they are more than a handful; who needs enemies when you have our politicians!

5. Bangalore has great education - the state with the highest number of engineering colleges and high quality training institutes. The bad side of this is: We have a dearth of good teachers, because they're swallowed by the higher paying industry. And most colleges don't even have industry cells for sponsored programmes.

6. Bangalore's a great immigrant place: There's more migrated population here than "locals". Not just from India, but from the US and Europe as well!

7. Bangalore's had a huge "return from the silicon valley" reverse exodus, and entrepreneurial ambitions run high. And are infectious. (We have a club called eClub-Blr - at www.eclub-blr.com - got a few of the silicon valley "graduates")

8. Forgiving failures and celebrating heroes: Happening more now than earlier. Saying "I moved on" is no longer a bad thing, and would even land you an opportunity because "she wouldve learned what NOT to do".

9. Bad thing: The local government celebrates when a Microsoft or Google opens it's branch office. And sulk when a Dell or a $1 billion fab goes to Hyderabad. Really stupid, this whole sulking/celebrating thing. What's the big deal if you offer those people carrots you don't give to local industry?

10. The local govt. focusses on the wrong things; Job Creation, Tax Exemptions, VC Funds (the govt has like fifty of them) and cheap infrastructure. Tax exemptions are the worst - zero tax for software exporters.

Guess what, I calculated that infosys, one of bangalore's largest software companies, pays zero tax on its net income of nearly $600 million. It's 50,000 employees pay a total of $50 million in tax. What a ridiculously dumb trade-off.

Recently another city has built a "tech park" and offered lowered rents of Rs. 10 per sq. ft per month. And yet another offers cheap land, incubation space etc.

But the biggest problem in Bangalore is the absense of "deal flow". No one likes to trade capital - if you get in, the only way to get out is the IPO or an acquisition. No wonder VCs shy away from smaller aggressive companies, and that brand of entrepreneurs almost exclusively service US investors.

In all, I think Bangalore is not any Silicon Valley. At best it's an Outsourced Plateau, with mediocre entrepreneurship support. Startups survive not because, but inspite of government initiatives.