Article: Startup success mantra: Investing where the talent is

Entrepreneurship

Startup success mantra: Investing where the talent is

Do the young, fledgling startups always manage to get access to the right talent? People Matters shares its findings on the matter.
Startup success mantra: Investing where the talent is

As startups today become an increasingly integral part of the business ecosystem in India, their growth depends on multiple factors; not the least important of which is getting the best-fit people on board. Finding these people is always a tricky task, and it becomes all the more challenging in a scenario where the concentration of talent pool is shifting geographically, and so are their preferences for relocation. The startups, however do not always have the scope to have a presence in multiple locations, especially in their early stages. In addition to that, the decision to select a base location is not taken by the founders alone, and is often dictated by where the investment is made.     

The question that arises, then is: How do these young, fledgling startups get access to the right talent?

Startups get set up where VC firms reside

It has often been observed and hypothesized that the location where a startup gets funded to commence its operations, coincides with the city where the respective venture capital (VC) firm is headquartered or located.  

In order to ascertain the veracity of this hypothesis, we looked at the portfolios of some premier VC firms that operate in India, and matched the headquarter location of the startups, with that of the VC firms.

VC Firm Location Startups funded Location

 

Accel Partners

 

Bangalore

Flipkart

Commonfloor

Probe Equity Research

Swiggy

Bangalore

Bangalore

Bangalore

Bangalore

Helion Venture Partners Gurgaon

Yepme

ShopClues

MakeMyTrip

Gurgaon

Gurgaon

Gurgaon

Zodius Mumbai

Pepperfry

Culture Machine

Bigbasket

Mumbai

Mumbai

Bangalore

Nirvana Venture Advisors Mumbai

Housing

Transverv

Jombay

Mumbai

Mumbai

Pune

Unitus Seed Fund Bangalore

Caravan Craft

Curiositi

Milaap

Bangalore

Bangalore

Bangalore

VenturEast Fund Advisors Bangalore

Portea

Atyati

Bangalore

Bangalore

Seedfund Mumbai, Bangalore, Delhi

Carwale

Chumbak

Edusports

Afaqs

Mumbai

Bangalore

Bangalore

Delhi

Bessemer Venture Partners Bangalore

Medi Assist

Innoviti

Bangalore

Bangalore

Not surprisingly, we found that for a majority of the startups, the base location did indeed match with the location of the corresponding VC firm which funded it.   

But is that where the talent is?

However, the location where a startup begins its operations may not necessarily be the most suitable place for it to source its talent. 

Let us take a look at the IT jobs, for instance. Because of a heavy concentration of IT companies in Bangalore, the city accounts for 40 per cent of the total IT talent demand in the country, comfortably beating other major cities like Delhi and Mumbai. Of a total of 78,984 Bangalore jobs listed on naukri.com, 52 per cent (40,926) are ‘tech’ jobs. For Delhi, on the other hand, only 36 per cent (29,870) of the 81,689 jobs listed are classified as tech jobs.

This has lead to a higher percentage of skilled IT professionals being based out of Bangalore than Gurgaon, even though the latter consistently leads the former in funding deals, as well as the total funding raised. 

Furthermore, while Bangalore has been widely seen and recognized as the largest hub of tech talent in India, can it also provide a similar inflow of skilled FMCG sales professionals (for example)? If a startup is based out of a city where there is a dearth of its core talent needs (which are specific to that company), it will find it hard for it to build a winning team and grow organically.    

Conclusion

When a VC firm chooses to back a company, it invests a lot more than just its financial capital in it. Therefore, it makes sense to also factor-in aspects like the company’s talent requirements, and the availability of that talent pool, in order to fuel the first level of scaling up, when the time arises. In the long run, it would be a win-win for both - the VC firms and the startups - to assess the accessibility to relevant talent, before finalizing the operating location of the startup. 

Topics: Entrepreneurship, Talent Acquisition

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