Properly defined, a startup is the largest group of people you can convince of a plan to build a different future.

― Peter Thiel

The Indian tech startup space exploded in 2021 with over 2,250 tech startups and 42 unicorns added in a year’s span. India is now the third largest startup ecosystem in the world after the US and China. According to the Economic Survey 2021-22, 555 districts in India had at least one startup. While most founders prefer Tier I cities to launch their startups, the pandemic has brought a paradigm shift as companies have moved to a remote or hybrid working model.

We have parsed scores of data and research, and sounded out key stakeholders to understand if location is an X factor in the success of a startup. We looked at parameters such as infrastructure, state policies, quality of life, educational institutions and talent pool etc to arrive at our outcomes.

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Number game

From a numbers perspective, Bengaluru is leading the way with 1,064 AI startups, followed by Mumbai (363), Delhi (317) and Hyderabad (287). Bengaluru has close to 256 pure-play AI and analytics startups, followed by Delhi NCR (190), Mumbai (120), Pune (78), Hyderabad (74), Chennai (53), and Ahmedabad (26).

India has the third highest number of incubators (250+) in the world. Incubators and accelerators are growth engines of a good number of startups. Incubators play a huge role in mentoring budding startups, and provide funding, technical support and access to resources. The founders factor in the location of incubators and accelerators while setting up startups.

India has over 3,500 engineering colleges, and most of these institutions offer courses in AI, ML and data science. Plus, India has about 23 centres of the Indian Institute of Technology spread across the country, and a bulk of AI startup founders are IIT alumni.

According to Shiksha.com, around 463 colleges offer AI, ML, and robotics courses in India. Out of these colleges, 90 per cent are private, around eight per cent are public, and two per cent are public-private partnerships.

Bengaluru

“Bengaluru has been synonymous with innovation and research and development. Since the inception of Infosys in 1981 to date, we have thrived as a market that fosters entrepreneurs and an ecosystem that ensures their success,” said Gunjan Krishna, the commissioner for industrial and development and director – department of industrial and commerce of Karnataka. 

Bengaluru has a strong ecosystem complete with thought leaders; government-based incubators such as ELEVATE, or Idea2PoC; venture capitalists and angel investors; a rich talent pool, alongside a vibrant and energetic culture of creative thinking and strategic risk-taking, she added. 

“Bengaluru has a world within a world,” said Madhusudhan Anand, co-founder and CTO, Ambee, a Google-backed analytics startup. He highlighted the major features of Bengaluru:

• Talent availability
• Startup events (investors, tech events, hackathons, design, founder meetups, etc.) 
• Accelerators (from Techstars to Google startup) 
• The founder community (startup leadership programmes and founder connects)

“While Delhi leads in sales talent, Bengaluru leads in tech talent,” he added. Many founders also prefer Bengaluru for its low cost of living compared to cities like Delhi and Mumbai.

The cofounders of conversational AI startup Yellow.ai–Jaya Kishore Reddy Gollareddy, Raghu Ravinutala, and Rashid Khan– said Bangalore is the real deal for AI startups.

“The exposure I received just by virtue of being in Bengaluru was one of the major factors that gave me the boost of confidence to start a SaaS company back then,” said Ravintula. 

Dr Nikhil Agarwal, CEO, C#iHub, FIRST at IIT-K, said that Karnataka is doing a great job of creating a nurturing environment for launching AI startups. “They have launched various programmes which have an AI component in it so that startups registered in that state can apply and provide solutions to such startups,” he added. 

Bengaluru, in particular, has a total of 168 engineering colleges (156 private and 12 government colleges). The well-known computer science and AI institutions in Bengaluru include the Indian Institute of Science (IISc), RV Engineering College, BMS, and PESIT. 

According to CS Murali, chairman of the entrepreneurship cell, SID at IISc, the educational institutions play a crucial role as AI is a relatively new field and requires active collaboration between academics and industry.

The popular incubators and accelerators for AI and analytics startups in Bengaluru include Google Launchpad Accelerator, GSF Global Accelerator, Microsoft Accelerator and T-Labs. “Come to think of it, being a part of the Microsoft Accelerator Program was a big push for us. With Microsoft’s help, we could connect with some big brands and close deals with them. So I would say networking is crucial for establishing a strong base for your startup. In a city like Bengaluru, founders are presented with so many opportunities to successfully build a robust business network,” said Yellow.ai CEO Ravinutala. 

The prime spots to set up an AI & analytics in Bengaluru include: Marathahalli, CV Raman Nagar, Indiranagar and Whitefield (Bengaluru East); Mysuru Road, BEML Layout, and Kengeri (Bengaluru West); Nagawara, Hennur, RT Nagar, Yelahanka, and Hebbal (Bengaluru North); Koramangala, JP Nagar, BTM Layout, HSR, Electronic city, and Bannerghatta Rd (Bengaluru South); and Domulr and MG Road (Bengaluru Central). 

In terms of investment deals, Bengaluru grew 5.4 times from USD 1.3 billion in 2016 to USD 7.2 billion in 2020. In 2021, 16 new unicorns came from Bengaluru. 

Delhi NCR

The state government has laid out plans to make Delhi a global startup hub through collateral-free loans, world-class infrastructure, and best quality human capital. Last year, at the Tie Global Summit, chief minister Arvind Kejriwal said Delhi has over 7,000 startups with an estimated valuation of about USD 50 billion. 

Further, he claimed Delhi-NCR is set to become one of the top five global startup hubs with 12,000 startups and 30 unicorns, with a cumulative valuation of about USD 150 billion by 2025.

In terms of educational infrastructure, around 50 institutes offer AI courses in the Delhi NCR region including IIT Delhi, NIT Delhi, Sharda University, apart from training institutes like ExcelR, SimpliLearn.

Infrastructure wise, the Delhi government is setting up a high-tech business park at Rani Khera sprawling across 150-acres of land and 15 minutes away from the Delhi International Airport. 

Delhi is also home to many incubators and accelerators including Jaarvis Accelerator, ITBI (Information Technology Business Incubator) JSS, IAN (Indian Angel Network) Incubators, TBI IIT Delhi, and Pitney Bownes India Accelerator. 

Pay wise, Delhi NCR has one the highest average salaries for AI professionals, with INR 68, 400 per month. 

Mumbai

Mumbai is home to Dalal Street, the Indian equivalent of Wall Street. Easy access to capital makes Mumbai a favourite of founders.  In addition, major banks and financial institutions have their central administrative offices in the city. In other words, the processing rates of loans, mortgages, and equity financing are higher in the financial capital of India.

“We are an AI PaaS for BFSI. And Mumbai has the most density of customer base as compared to any other city,” said Vinay Kumar Sankarpu, founder at Arya.ai.

Mumbai has about 77 engineering colleges; IIT-B, Quest Institute of Knowledge, and Amity University offer AI and machine learning courses in Mumbai. According to Glassdoor, the average salary for ML engineers from Mumbai is about INR 71,800 per month. 

While the cost of real estate is rising significantly in the city, Mumbai offers unmatched access to suppliers, capital and customers. 

Mumbai’s major strengths include:

• Abundant talent pool
• Cosmopolitan status
• Women safety
• Cultural diversity 
• Hub to giant corporations 
• Networking opportunities

To work around this challenge, the Mumbai startup ecosystem created technology/research and development opportunities to attract talent. “We gave them many unique problems to solve with real-life data which otherwise would not be accessible anywhere else,” he added.

Ajeet Khurana, CEO of the society for innovation and entrepreneurship at IIT-B, said Mumbai is a great city for startups as the business environment is vibrant here. He said the cosmopolitan nature of the city makes it easier for outsiders to come here and set up a base. “All cities have their problems, but compared to the top two hubs – Bengaluru and Delhi – I find that Mumbai is more accommodative and secure for women in the workforce,” he added.

Maharashtra runs a venture capital fund with Sidbi, and has invested in 20 startups. The government is also planning to start another venture capital fund to bankroll more than 100+ companies. 

Poyni Bhatt, the CEO of the Society for Innovation and Entrepreneurship (SINE) IIT-B, said, “With the new normal and more and more startups and enterprises adopting phygital (physical + digital), the destination is no longer limited to city boundaries.”

Further, he said fostering partnerships that enable access to strong research capability and context-specific data that can augment the strengths of the existing talent is key to boost the AI startup ecosystem.

Mumbai also houses plenty of incubators and accelerators including Million Minds, and Z Nation Labs and others. “The surge in demand can be seen in the recent hiring increase in Mumbai for tech and DS roles. This will help us tremendously as the ecosystem is growing,” said Arya.ai’s founder. 

Mumbai is the ideal place to launch AI startups around financial services, pharma, manufacturing, energy & consulting.

Pune

Pune mirrors Bengaluru in every aspect, except the traffic. According to Glassdoor, the average salary for ML engineers is INR 26, 154 per month. The major positives of Pune include:

• High-quality talent: Pune has the highest number of youngsters in colleges and universities. 
• Best place to test your MVP because of its diverse culture and demographics
• Seamless transportation and connectivity
• Low cost of living
• Cheap real estate

The city has seen funding worth USD 1 billion through 132 equity deals between 2014 and 2018. Pune is ideal for agritech, health tech, automotive technology, deep tech, software, and analytics startups.

Pune has around 114 engineering colleges. The College of Engineering and Vishwakarma Institute of Technology offer AI/ML courses. The city boasts a few notable incubators and accelerators for AI startups including Guild, Startup Bay, Bhau Institute of Innovation, among others. 

Hyderabad  

Hyderabad has all the right ingredients for a thriving startup ecosystem – good infrastructure, talent, and government-backed incubators. 

Hyderabad has large operational centres of Google, Uber, and Amazon and educational institutions like IIT Hyderabad (IIT-H), ISB, and NALSAR. The average salary of AI professionals in Hyderabad stands at INR 32,364 per month. Meanwhile, the average salary for ML engineers is INR 62,689 per month. 

Ramesh Loganathan, Professor of co-innovation and head of research/innovation outreach, IIIT, Hyderabad, said, “I would think Bangalore (given its large industry base) and Hyderabad (given its second-largest IT industry status. And a very strong academic and research labs’ presence )… while Bangalore does have IISc. Hyderabad has IIITH, IIT, BITS, UoH… all of whom have very strong Cop SC and AI research groups.”

Research plays a critical role in shaping emerging technologies. IIIT-H is one of the top institutions in India for computer science.. “Our UG and PG students are widely regarded as the best of the graduating batch in the country, with most of them engaging in research works in AI and related areas. We are also home to the oldest and largest academic incubator in the country (CiE-IIITH). With capacity for over 150 deeptech startups, this is a great ground to nurture and grow AI talent,” said Loganathan. 

Hyderabad’s major incubators and accelerators include D Labs, IIIT – Hyderabad CIE and Technology Business Incubator (University of Hyderabad).

Conclusion

Most experts AIM spoke to picked Bengaluru as the perfect place to launch an AI startup. Prof Mausam, Founding Head of the School of Artificial Intelligence and Professor of Computer Science at IIT Delhi, said Bangalore has the maximum number of software engineers. 

Of the 13,900 AI professionals we found on LinkedIn, Bengaluru had the biggest number, with 4,900 (35% of the total figure). Delhi NCR came second with 3,300, followed by Hyderabad (2,100), Mumbai (1,900) and Pune (1,700). 

“Climate wise, Bangalore is way better than Chennai and Delhi. Yet the city’s infrastructure is not properly developed, thus traffic is very high compared to other places,” Prabu Palanisamy, an ML Engineering Lead at JIFFY.ai in Bengaluru, said. 

While the average pay for AI professionals in Bengaluru is INR 32,096 per month, the paycheck is not the biggest motivator for AI professionals. In fact, for ML engineers, Bangalore has one of the lowest average salaries, with INR 47,536 a month compared to INR 53,700 in Mumbai. 

Dipesh Lakhotia, Head of Analytics at Britannia Industries Limited, said the city’s IT infrastructure is a huge plus. “Bangalore has been a rich community of like-minded professionals coming together and aspiring to break new grounds. Such has been my journey in this city which has helped me learn, grow and mature as an analytics professional over the last decade,” he said. 

In terms of career scalability, Lakhotia said Bangalore is the safest bet. “Analytics has always grown well in Bangalore and continues to do so. While many other cities have emerged over the last five years, it is safe to say that Bangalore remains a lucrative career choice for data science professionals.” 

Contributed by Ebin K. Gheevarghese, Amit Raja Naik, Poornima Nataraj, Poulomi Chatterjee, Sreejani Bhattacharyya, and Sri Krishna.