It is rightly said that Ideas are nobody’s property. They are like free oxygen moving here and there. They need to be grabbed and thus parented by people for giving them life. Very few people realize themselves as parents of ideas and become entrepreneurs. Also ideas do not belong to rich, educated or powerful individuals, they can come from anywhere may be big town or smaller towns or even villages. Every individual has natural ability to think and ideate. We are born to be creative and ideate. So we could easily say that Ideas have no biases. But is it really that way?
Lets look at some statistics. In 2013, 280 start-up ideas got funded in India with total funding of 1.6 billion USD. This looks very encouraging and healthy for India. Finally the start-up culture is making inroad to this soil where more and more people are deciding to become creators and not just followers. But the percentage from smaller town is very small. Removing the 7 metro cities from this list (NCR, Mumbai, Pune, Hyderabad, Bangalore, Chennai and Calcutta), we would be able add up just 20 start-ups being funded from smaller towns with just 16% of funding reaching them. The ideas come from people and if we make an approximation of source of ideas in terms of population then almost 90% of idea sources (people) live in Non metros. There is some room for improving this equation for sure.
On one side there is huge cry on saturating infrastructure in metros with more and more emphasis given to smaller towns for future development. Even the new league of premium institutions are extending to smaller towns with number of Non Metro IIT’s and IIM’s double than the metros. So there is Talent, there is ecosystem and surely there are ideas but probably not the eyes of investors.
We all have seen that all the new things come up in the big cities or metro cities first and subsequently to smaller ones. The latter is always the second choice when it calls for putting in money, be it any retail giant, a fast food chain, a reputed instituteor even venture capitalist for that matter. It’s not that the tier 2 cities or small cities do not need these or cannot understand the purpose of these, but in fact it’s the socio-economic inequality which creates this divide. It’s the lack of confidence amongst the financially powerful bodies in these areas of vast potential. As India is already one of the youngest countries in the world, more and more bright minds are starting new ventures and this will continue in future.
There is big opportunity for investors to specifically hunt for promising teams and ideas from smaller towns. The ROI would be high for similar ideas in metros and non-metros bring worked upon. The cost of operations is low and in case of start-ups where it is like an experiment with all risks in place, it makes good sense to minimize the financial risk. Arithmetically let’s look at a simple example. With ‘X’ investment , if a start-up in metro can sustain for ’ A’ months then in non-metro location this would be ‘A+ N’. This ‘N’ could be anywhere between 10% to 30% depending on the size of operations and type of the skills, resources required. A business man’s point of view would be “this makes sense”. The target consumers/customers for these start-up ideas in next to metro cities is good enough and moreover with less or no competitions.
Angels, small investors and High Net worth individuals (HNI’s) have a promising opportunity in smaller towns to invest and mentor some “big ideas”. This would also help aspiring founders from small towns to build confidence and increase their aspiration index and compete with shoulder to shoulder. There could be small gap in skill level when average is compared for talent in metros and non-metros but the best in smaller towns could match the requirements of litmus test for “entrepreneurship”. Ultimately these would always be small numbers and not masses.