Bengaluru continues to cement its reputation as India's startup capital. The Global Startup Ecosystem Report (GSER) 2026 ranks it among the top 10 startup ecosystems globally for performance, driven by strong startup activity, funding, and exits. It is also ranked second in Asia for its AI-native cluster and among the top 10 globally for research and development (R&D).
Yet the report also highlights a worrying trend. The Karnataka capital scores relatively lower on talent and Experience, suggesting that the city's ability to generate and retain specialised talent is not keeping pace with its rapidly expanding innovation ecosystem.
The demand for specialised talent is fuelled by the growth of capability areas including platform engineering and cybersecurity risk management. However, there’s a significant supply-demand gap. According to a Q1 FY27 report released by Quess Corp, the largest supply-demand gap, between 36% and 40%, was noted in AI and data and analytics.
From Quantity to Capability
India continues to produce one of the world's largest pools of engineers every year, but employers increasingly say the shortage lies elsewhere.
Sonia Kutty, Senior Vice President of People & Culture at product engineering company Quest Global, believes the conversation must now shift towards capability. She says the next generation of engineers must think across software, hardware, and intelligent systems rather than simply filling technical roles.
"Bengaluru's startup energy shows how strong our innovation ecosystem has become. But demand for specialised, industry-ready talent is outpacing supply, and that's where quality matters most," she tells AIM.
Arjun Vikas, Director of Investments at Avataar Ventures, agrees that the issue is not one of volume. According to Quess Corp's India AI Workforce Analysis 2026, India currently has 920,000 professionals across core AI and AI-embedded talent segments. This number is set to double by next year. Instead, he argues the shortage exists at the very top of the talent pyramid—frontier AI researchers, senior product leaders, and engineers with experience taking products from inception to global scale.
"That is a specialisation and experience gap, not an absence of talent," he says.
Kutty argues that closing this gap requires stronger collaboration between universities and industry, greater emphasis on hands-on learning, and a commitment to continuous upskilling as technologies evolve.
GSER echoes that broader shift. The report argues that ecosystems pulling ahead globally are those able to "mobilise capital at scale, integrate frontier technologies, and align public and private actors around strategic priorities." Talent, therefore, becomes as important as capital in sustaining long-term innovation.
However, Vikas cautions that the ranking should be interpreted carefully. He says the GSER's talent and experience score reflects ecosystem maturity as much as engineering capability, as the methodology places greater emphasis on startup activity and exits than on STEM talent.
Bengaluru, he notes, continues to score strongly on engineering fundamentals, including STEM graduate supply and cost efficiency.
The GCC Effect
The growing presence of global capability centres (GCCs) has further intensified competition for specialised engineering talent. As multinational corporations expand AI, semiconductor, and product engineering work in India, startups increasingly find themselves competing with larger employers that can often offer higher salaries and global career opportunities.
Vikas does not see GCCs taking away tech talent from startups. "On balance, GCCs strengthen Bengaluru's startup ecosystem," he says, arguing that they expose engineers to building global products, operating complex systems, and delivering at scale—capabilities that later benefit startups.
Somshubro Pal Choudhury, Co-founder and Partner at Bharat Innovation Fund, agrees that GCCs are not just competing for talent. “They're also creating talent, customers and partners for India's next generation of startups," he says, noting that many now build global AI products, semiconductor designs, and enterprise platforms from India while increasingly collaborating with startups.
Kutty, however, views this competition differently. "This competition is a good sign. It tells us India is becoming a true global innovation hub," she affirms. "When we build a wider pool of engineering-ready talent, startups, GCCs, and global engineering teams can all keep innovating, without fighting over the same few specialists."
While early-stage deeptech companies undoubtedly face pressure on compensation, she believes engineers are increasingly motivated by meaningful technical challenges rather than salary alone.
GCCs generally offer higher base salaries than startups. According to AIM Research’s GCC Salary Trends in India 2026 report, GCCs now offer ₹18.4 LPA, with the pay gap over non-GCC employers growing from ₹1.3 LPA in 2024 to ₹2.1 LPA in 2026.
Rather than competing on salaries, Vikas says startups differentiate themselves through ownership, responsibility, and equity. The bigger challenge, he argues, is improving mobility between GCCs, academia, and startups, while strengthening research commercialisation, enterprise adoption, and ESOP liquidity so engineers feel confident taking entrepreneurial risks.
Research Remains the Missing Link
For venture investors backing frontier technologies, the talent challenge extends beyond engineering skills.
Sathya Nellore Sampat, General Partner at BoldCap, believes India is not short of researchers, engineers, or entrepreneurial talent. The larger constraint is giving the talent exposure to ambitious environments and building a venture ecosystem willing to back technically complex businesses over longer time horizons.
"The bigger challenge is exposure to high-signal environments that expand ambition, alongside a venture ecosystem that's still learning how to evaluate and patiently back hard technical problems over long time horizons," he notes, adding that India needs far greater talent liquidity and downstream capital to compound the ecosystem at scale.
Vikas echoes that view, arguing that to retain and nurture specialised talent, Bengaluru needs research commercialisation, research funding, affordable computing, access to enterprise customers, patient capital, and stronger quality-of-life infrastructure.
Meanwhile, Choudhary believes that founders need expertise in identifying market opportunities, protecting intellectual property, engaging customers early, and building global go-to-market strategies.
In countries such as the US, long-term support begins in universities and extends into mission-driven research laboratories, creating a stronger pipeline from scientific discovery to commercial innovation. Sampat believes strengthening that pipeline is critical if India wants to produce more globally competitive deeptech companies.
But Jayanth Neelkanta, Co-founder and CEO of AI-native HRtech startup Equip, believes promoting innovation is as important as attracting talent. "The failure is that nobody hears about it. Western founders talk constantly. Ours build and go quiet," he laments.
Bengaluru has been trending in that direction. Karnataka has launched initiatives such as the Centre for Applied AI for Tech Solutions and the ₹1,000 crore Karnataka Quantum Mission, while Bengaluru attracts 58% of India's AI startup funding, with approximately $1.5 billion raised since 2020, per GSER.
But long-term success requires more than just funding. This involves strengthening university research, facilitating movement between GCCs and startups, expanding access to patient capital, and supporting entrepreneurs in commercialising new technologies.
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