For the entrepreneur searching for just the right location, there are a host of variables that will affect their final decision. In this continuing approach to the startup hubs around the world, we’ll focus on the famed city of Bombay (now Mumbai). Established in 1507, this port city has remained a central part of Indian history, and promises to play a continuing role in the development of India.
We’ll investigate how the 1) location of the city, 2) tax incentives, 3) legal incentives, 4) investors, and 5) specialization all combine to allow Mumbai to thrive as a startup hub. In addition, we’ll look at 6) some startups already in Mumbai to watch.
The Indian city of Mumbai is establishing itself as a promising location for entrepreneurship start-ups. Already the capital of Maharashtra, it is also the entertainment, commercial and financial capital of India. It makes sense, then, that this thriving city would attract those in search of a location to base their start-up.
As the financial and commercial capital of India, Mumbai is already well on the way to possess the resources necessary to be a startup hub. A vital benefit to choosing Mumbai is the geographical location. Boasting one of the world’s best natural harbors, the island city of Mumbai is located on the Arabian Sea, and has two thriving ports that offer both wet and dry dock facilities. As India’s most modern port, it also is home to the Indian Navy base. These accommodations provide the city with easy water access for shipping and transport needs.
The second busiest airport in India is located in Mumbai – the Chhatrapati Shivaji International Airport – and is expected to expand in the near future.
Public transportation is widely used in the city as well, with the majority of users preferring bus transport for shorter distances, while longer distances are generally travelled via train. In addition, the extensive roadways allow for private vehicles, taxis and auto rickshaws. The number of private vehicles on the road has been rising substantially over the last few years, but taxis, rickshaws and public transportation still remain the premier method of transportation in the city.
Advantages from choosing the city
By utilizing the vast number of transportation options available in Mumbai, it is possible to navigate through the city easily without making a vehicle purchase mandatory. With an established presence in the finance and commercial industry, there is easy access to the resources that an entrepreneur will need. Selecting Mumbai as a hub for start-up, the entrepreneur can be assured that there is a growing network of resources, easily accessible target groups and investors located within the city.
The job market in Mumbai is thriving. As a result, the entrepreneur may find it difficult to keep employees, as workers hop from company to company in as little as three months in search of a raise. This makes it difficult to manage a workforce, and requires companies to take every opportunity to provide their employees with incentive to stay.
Initiatives are underway to improve the tax incentives that currently are nearly non-existent. The current system involves separate tax structures within different states, combined with a central tax process. This creates a climate that is ripe for corruption and inefficiency. The tax hurdles make it prohibitive for companies to start and discourages all, but the most determined investors to choose companies within Mumbai. There is no clear indication of which taxes are required, and many start-ups find it easier to simply pay every tax listed to avoid potential issues. This system is confusing and costly for the entrepreneur who tries to start a new endeavor.
The high rate of service tax is another area where Mumbai can improve. Service taxes are passed on to clients in a flat rate. This reduces the amount of business that individuals are willing to use and can prevent a company from future growth. Developing a graduated tax rate for services will assist in the growth of companies and reduce client taxation.
Offering start-ups exemptions from income taxes and other indirect taxes will increase the draw of Mumbai for entrepreneurs who are looking for a location to settle in.
At present, the process of filing tax returns, the lack of tax breaks and benefits, and the absence of incentives for the start-up all must be addressed if Mumbai wishes to continue its push to become a start-up.
Establishing a start-up in Mumbai can be an exercise in frustration. The paperwork process is wrought with potential pitfalls. Paperwork can be endless and circular as forms are filled out repeatedly and seemingly pointlessly. The bureaucratic hurdles for proper licensing, filings and other needed permits often bring pressure for bribes. It is possible to avoid some of these hurdles by making products that do not need government approval, and by catering their business to private clients who do not require licenses.
The Indian government website provides the essential forms and information necessary to start a business in Mumbai (or any Indian city) in one central location. The classification of companies is one of the primary goals of the agency – which determines the amount of paperwork required by the government. A company is either a service corporation or a product corporation. Within that distinction, companies are classified as micro, small and medium. They offer assistance and guidelines to navigate the lengthy paperwork process, which is essential to trying to know what needs to be completed.
Currently, there are few legal incentives to begin a start-up in Mumbai. Officials and business owners are putting pressure on the government to reduce the amount of paperwork necessary to starting a company, and provide legal incentives to companies to locate in Mumbai.
Perhaps one of the most important advantages of Mumbai as a start-up hub is the large number of potential investors located within the city. Mumbai consistently lands on the chart of the top 10 cities in the world for number of billionaires. That number is expected to double within the next few years, providing a wealth of individuals who are looking to invest. The issue, however, is the process of turning those large money individuals into investors.
Currently, there are few incentives for investors who wish to keep their money within Mumbai. There is a lack of organization, which would provide easy access to companies who are seeking capital. The establishment of venture capital groups would also benefit companies seeking funding, by bringing together investors who are ready to bring their money to Mumbai. Unfortunately, even when funding is available, governmental processes can hold the funding up for years, preventing the company from taking advantage of the money.
Angel investors who are looking to put their money into Mumbai corporations must be encouraged with tax incentives. The current hurdles and taxation limitations prevent the easy investment process that occurs in other locations. Removing the hurdles will open the door for new investors to begin putting their money in start-ups.
Venture capital firms from the United States have opened branches in India, but have dropped the amount of funding being spent in India substantially in the last decade. One of the driving forces in the drop is the difficulty of doing business in cities such as Mumbai – a deterrent to both investor and entrepreneur.
A large concern in Mumbai is the availability of office space. Rents are high, and there is a lack of appropriate space for entrepreneurs to use. Companies can take advantage of using ‘virtual office’ space with mailbox and phone services available for monthly fee. Another alternative to finding office space is office sharing. Co-working hubs provide desks, wi-fi, conference rooms and other services for low fees. The hubs also generally offer networks and professionals who can provide advice, support and help.
The campus of the Indian Institute of Technology (IIT), the world famous technology college, provides one of the biggest reasons Mumbai is an emerging start-up location. This famous college produces highly qualified, technically proficient workers who are leading the transition to a technology center. The multi-cultural appeal of Mumbai is beneficial to providing a depth of workforce that can span the technically minded, the artistic and the business savvy employees.
A diverse talent field ensures that the entrepreneur can find exactly the help needed to establish their company, and the presence of IIT, the business center and the general population of the city provides the diversity needed. These strong factors are helping to give Mumbai the advantage over other cities – even traditionally strong startup hubs.
The extreme between the rich of Mumbai and the poor is vast. A lack of clean water and essential hygiene standards (such as working toilets and sewers) is countered by a work ethic where even the poorest find ways to be productive. While the poor may have disadvantages, even the slum areas of the city are buzzing with economic activity.
Mumbai does face some hurdles as it enters the start-up race. The infrastructure is tentative, wages are traditionally low and rents are high. These factors are not insurmountable; however the entrepreneur must be aware of them.
The trend in Mumbai is toward creative, technologically advanced pursuits. A current list of start-ups in Mumbai reveals a growing number of companies that are based in artistic endeavors, with highly technical aspects, a result of the diversity of the city.
The city ranks high in billionaires, but it also ranks high in the levels of poverty. This disparity has created an environment where even the poorest of the city can aspire to greatness, and it can be seen in the sheer courage of the budding entrepreneurs. There are success stories of entrepreneurs who started in the shacks of Mumbai and began companies that put them on the billionaire list. These types of examples can provide hope to the residents of the city, as well as demonstrate Mumbai’s potential for growth.
As a creative city, entrepreneurs can express their skills through visual media and technology.
Another large area that Mumbai is becoming known for is their role in emerging markets that are both environmentally responsible and humanitarian. Clean technology is a big draw in the heavily populated city, and they are attracting interest from investors and governmental studies. Trying to combat the lack of natural resources and advancements that some of the lower socio-economic areas of the world face, companies that address solar energy, clean drinking water, thermal batteries and other innovations can thrive in Mumbai.
There is no clear specialization within the city of Mumbai at present. There are a rising number of tech start-ups that are developing innovative ways to address the needs of people within the city and these companies are building excitement and interest within the start-up community. As more entrepreneurs begin to establish their companies within Mumbai, it will generate additional interest and innovation. The increased pressure on the government to improve the process of entrepreneurship will also benefit the city overall by attracting funding and resources.
Can Mumbai’s startup ecosystem bounce back?
STARTUPS TO WATCH
Geared towards the elderly, this prescription based service employs a staff of doctors, nurses and physiotherapists who make house visits. The Portea Medical health visits are helping to improve the preventative care and early diagnosis of members at a low cost. Recent venture funding will allow the company to expand its offerings and begin attracting some of India’s 144 million people over the age of 60. Established by a husband and wife entrepreneur team, the company hopes to become a first line of defense for enrollees who want their healthcare to come to them.
Basing a company on the inevitable search for love that a majority of people go through, Floh.in (Find Love Over Here) holds singles events throughout the year in Mumbai, Delhi, and Bangladore. The invitation only service is available to singles on a three month or yearly basis, with a reasonable registration fee that grants the member access to company sponsored networking events. Catering their events toward young professionals
The brother/sister duo of Alpha Cube creates custom, wearable art on shoes and apparel. The team will hand paint custom art work on shoes, bags, t-shirts – anything that can be painted on – for a personalized, one of a kind wardrobe. By combining their artistic talents and the easy ordering process of the internet, they are able to offer customers unique products.
Venturing into a relatively new and unexplored field, FusedCow is the result of six years of research on human centered design. Developed by partners who have experience in both the start-up world and the tech industry, the company explores the connection between architecture, data analytics, product information modelling, and digital distribution.
This innovative app was designed by a computer engineer who was tired of the inefficient cabs he was using. The free app allows Ola Cabs’ users track and monitor their cab through GPS. The goal of Ola Cabs is to launch in ten cities, doubling the number of their current locations within the year.
The city of Mumbai is on the brink of becoming a vital start-up hub in the world. The major pieces needed are already in place: a diverse workforce, financial resources, geographical location that makes the city attractive to entrepreneurs. Currently, entrepreneurs will have to overlook the lack of incentives and be prepared to deal with the issues addressed earlier in order to be successful. There are indications, however, that Mumbai is prepared to make the changes necessary to fully realize the potential the city has. It is an opportunity for entrepreneurs to be at the forefront of Mumbai’s transition and benefit from being already in place when regulations change. Learning the infrastructure, establishing a presence within the city and learning to navigate the Indian marketplace can all generate a successful start-up, in spite of the hurdles.