Why Tech Giants Like Facebook and Google Are Flocking to a Small Suburb Outside Mumbai

Impact

There's an emerging class among millennials that you either hate or love. Yes, these are the self-styled entrepreneurs that have started some mobile app or social networking platform that tells people where you drank last night, or even better, predicts who you can hook up with this weekend. 

Here's my advice: Stop paying attention to those apps and move to India.

First, let's clear the air. In one way or another, India has come up short in meeting the expectations of entrepreneurs, multinationals and institutional investors alike. Things haven't been pretty for a few years. The country has faced a stubborn slowdown in GDP growth, an unmanageable current account deficit, high inflation and now an upcoming general election that many are predicting will be a massive changing of the guard. 

However, a little-known suburb outside Mumbai may be the only hopeful aspect of an otherwise distressed state of affairs.  

Powai, or Powai Valley as it's now being called, is home to 50 burgeoning companies in the mobile and Internet space. This new hotspot is buzzing with startups for a few reasons:

1. It serves as the backyard for the Indian Institute of Technology Bombay (IIT-B), where startups have access to research, technology and human capital.

2. With cheap housing and close proximity to railway stations, the area is convenient and also has a low cost of living.

3. Powai is just outside India's financial capital where startups not only have access to early stage funding, they're able to pilot their products and services to prospective clients who live and work in Mumbai. 

And tech giants from across the globe are noticing the success of startups in this area.

Earlier this year, Facebook purchased Little Eye Labs, a company that analyzes the performance of Android apps, for a reported $10 to $15 million. Around the same time, Google acquired Impermium, a cyber security company started by three former employees of Yahoo, for an undisclosed amount.

The city is exploding.

Harshil Karia, co-founder of FoxyMoron, a Mumbai-based digital ad agency founded in 2008, told PolicyMic that the city is practically exploding. "We have done reasonably well in our local base, the question is how do we do extremely well nationally and then take the next step internationally … we've been approached by a lot of global ad agencies because the acquisition market is heating up."

FoxyMoron is the golden child of successful Indian startups with 175 employees and two offices. With no assistance from business accelerators or venture capital firms, the company is an outlier in what has become a thriving ecosystem for entrepreneurs.

India's first angel-backed accelerator Venture Nursery opened its Mumbai office in 2012 with the hope of reversing what had then become a common trend. "In 2012, we realized that the mortality of startups was really high," said Apoorv Sharma, executive vice president of Venture Nursery. "By creating a strong networking platform, we could ensure that they have a longer business lifecycle."

In its first round, Venture Nursery took in fewer than 500 applications from startups. This year, the company expects to receive applications from more than 2,000 people from 42 different cities across India.  

Fortunately, there are now more than 40 accelerators in India in Mumbai, Bangalore, Delhi, Chandigarh, Hyderabad and Pune.

The investment landscape is evolving.

Sasha Mirchandani, managing partner of Kae Capital and co-founder of the Mumbai Angels investor network, said that the investment landscape is evolving. "There is a big Series A gap for entrepreneurs in India — and even in the United States. Early stage startups with good traction are running out of cash, but they're still a bit early for the VC community. Therefore, as an investor, I can help them take it up to venture."

Anil Joshi, who stepped down from the Mumbai Angels last year, has already started to bridge that funding gap. Joshi's proposed fund plans to raise $25 million in pre-Series A money with 60% coming from domestic sources and the remainder from overseas investors. 

Judging from the current scene, it may be the right time to raise money. As the Fed taper casts a shadow on equity markets in India, marquee acquisitions by Facebook and Google are perhaps the only silver linings for fund managers looking to divest into alternatives like startup-focused funds. For investors, there's potential for success in Powai Valley that you can measure not just by the fervor within it, but by the void you find without it. 

So go build and sell a consumer mobile or Internet company in Powai Valley where the engines of entrepreneurship are working. With easy access to human capital, business expertise and early stage funding, this is the time to get aggressive.