Tamil Nadu is home to SaaS unicorns such as Zoho, Freshworks
The startups in Tamil Nadu tend to have strong unit economics, says Omnivore partner Reihem Roy
In recent times, IIT Madras Incubation Cell, Nasscom have emerged as prominent enablers in TN
Indian Startup Hubs
<span style="font-weight: 400;">The series brings a comprehensive overview and deep analysis of startup investments, industrial landscape, prominent startups, and government policies of various startup hubs in India. </span>
Tamil Nadu is a leader in terms of factories and industry workers, because of its rich automobiles and auto components manufacturing base. These traditional industries of the state have also impacted the growth of startups in Tamil Nadu. According to the stakeholders, Inc42 spoke to, the Tamil Nadu government does not recognise the potential of smaller entities such as new-age startups in the face of such manufacturing prowess.
“The state government prefers attracting big-ticket investments into state’s automotive sector instead of promoting startups. They are missing the bigger vision that a small startup can one day provide 10,000 employment opportunities similar to what someone like Paytm or Flipkart have done,” said Rajmanohar Somasundaram, CEO of Aquaconnect.
The Tamil Nadu government launched its Startup and Innovation policy as recently as 2019. The policy was introduced with a mission of creating 100K high skilled jobs, direct and indirect, in the startup ecosystem by 2023. The policy had also set out to create the Tamil Nadu Startup Fund of Funds with a corpus of INR 250 Cr ($21 Mn) for investments in startups.
Chennai has become a hub for software-as-a-service startups with success stories like Zoho, Freshworks, Orangescape and many others. This SaaS revolution has also sort of set the pace for other emerging startups from the state.
“While things like high burn models and consumer-centric models have become popular. In the case of Chennai, with both Zoho and Freshworks, there has been a history of providing high-end value-added services from Chennai,” said Reihem Roy, partner at an agritech-focussed venture fund Omnivore.
He added that one thing that stands out about Tamil Nadu entrepreneurs is their focus on sustainability. Tamil Nadu startups might not scale as rapidly as startups in other parts of the country but their unit economics end up being very strong.
Being one of India’s metros, Chennai is the primary startup hub in Tamil Nadu and is the focal point for startups in other cities when it comes to access to a good talent pool. However, startups told us that hiring top management has been a challenge as most experienced professionals prefer to be based out of Bengaluru or Hyderabad.
Prominent Startups In The State
Chennai is known as SaaS capital of the Indian startup ecosystem because of the successful entrepreneurs such as Sridhar Vembu, Girish Mathrubootham, Suresh Sambandam, Vinod Muthukrishnan, and Krish Subramanian among others. However, there’s also another set of logistics, agritech and deeptech startups that have made their mark in the Tamil Nadu startup ecosystem. Some prominent startups from Tamil Nadu are:
BankBazaar is a fintech marketplace founded by Adhil Shetty, Arjun Shetty, and Rati Shetty in 2008. The company hosts a wide range of financial products from most Indian public sector and private banks, NBFCs, and insurance companies.
Founded by Suresh Sambandam in 2003, OrangeScape is a SaaS-based enterprise-level workflow and business process automation platform. OrangeScape’s flagship product Kissflow claims to have over 10K users across 160 countries.
Founded in July 2015 by Karthik Jayaraman and Sanjay Dasari, WayCool is an omnichannel fresh produce distribution company. It distributes farm-sourced fruits, vegetables and other products to local shops and modern retail outlets. The company claims to process the distribution of 250 tonnes of produce, staples and dairy products every day across its distribution channels to over 8K clients.
Founded in 2016 by Vasanth Immanuel and Jayendran Panneerselvam, FR8 is a technology-driven logistics service provider, offering long-haul trucking solutions to large corporates, SMEs, and the agribusiness ecosystem. It also operates as an online marketplace helping consumers move truckloads between cities.
Enablers In The State
Tamil Nadu was noted as an emerging state in DPIIT’s Startup Ranking 2018. Various enabling networks and investors have set up base in the state to help nurture the state’s startup ecosystem. Entrepreneurship Development Institute of India (EDII) is the nodal body for the state’s government’s startup policy and is working on various pilots to understand the state’s ecosystem trends.
The growth of startups in Chennai will largely determine the long-term success of the startup ecosystem. Among the other top hubs of the Indian startup ecosystem, the investment activity in Chennai’s startup ecosystem is falling at a faster rate. This can be ascertained from the fact that both the value of funding amount and count of funding deals are diminishing at a negative rate (2015-2019) of 9% and 14% respectively.
Some of the prominent enablers in the state include Nasscom 1000 Startups, TiE (The Indus Entrepreneurs), CII (Confederation of Indian Industry), EDII, the IIT Madras Incubation Cell, TVS Capital and Chennai Angels.
In our future articles, we will be taking a deeper look at the enabler ecosystem in Chennai and other cities in Tamil Nadu, which has resulted in the rise of the startup ecosystem in the state. With the government finally instituting a startup policy last year, the investor and startup activity in Tamil Nadu is expected to grow exponentially in the next few years, led by the success of the startups that have already grown to unicorn status.