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The synergy between Bay Area and India: what the future holds

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Bay Area council economic institute has just released a 2962 pages long ‘Global Reach’ report on ‘Emerging Ties Between the San Francisco Bay Area and India’ and they have also made available a 14 page extract of executive summary [PDF] and both are available for free downloads from their site.

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The summary takes a historical look at the tie-ups between Silicon Valley and India recounting,the early Punjabi immigrants, the Brian drain of IITians and the outsourcing to Indian IT companies due to Y2K scare. Some statistics about the thriving Indian community in Bay Area were simply remarkable.

Fifteen percent of Silicon Valley startups in the 1995–2005 period were founded by Indians—a larger number than for any other immigrant group. California topped the list of states for Indian startups, with 26% of the U.S. total.

By any standard, the Bay Area’s Indian community is successful and affluent. Median income is more than $107,000; 75% of adults have at least a bachelor’s degree, and 70% are in management and professional positions. Roughly half are homeowners.

The trade between India and Bay area has been small but growing, and apart from almonds import and potential from wine import from California, the trade is largely driven by IT products and services. Tourism is not really flourishing as people travel more for work than for pleasure.Students are amongst the most valuable exports form India.

India is the leading country of origin for international students in the United States, with 94,600 during the 2007–08 academic year, surpassing China’s 81,100; 2007–08 was the seventh consecutive year that India has sent the most international students to the U.S.

Many entrepreneurial networks including TiE and their positive effects both in Bay Area and in India were adequately covered.  The major synergistic entrepreneurial and IT cross-bored networks encompass:

    • Indian engineers, programmers and computer scientists in Silicon Valley and the Bay Area,engaged in the forefront of product and technology development;
    • successful Indian technologists and entrepreneurs reinvesting in the region’s economy as venture capitalists;
    • Bay Area technology companies with R&D centers designed to access India’s large, educated talent pool; and
    • Indian IT service and software firms moving rapidly up-market from call centers and basic software coding to provide overseas companies with increasingly sophisticated software and systems integration services, in-depth sector-specific consulting and product engineering, and knowledge process outsourcing.

Many Bay Area companies are having R & D centre in India and also Venture Capital firms are funding start-ups in India, but the focus seems to be on market-driven volumes associated with the emerging market of India,  rather than technology.

While some Bay Area venture firms are retaining their focus on technology, the wider trend is to invest in India’s consumers. Most companies receiving funding from the Bay Area are not creating groundbreaking new technologies, but are providing low-tech responses to the opportunities presented by the India’s fast-growing markets.

This to me seems worrisome; we should attract more capital for innovative technologies and not just based on our market advantage. However, one cannot deny the ground realities of doing business sin India, which the report highlighted and why tech innovation and entrepreneurial spirit may not take off in India.

In interview after interview, successful Indian engineers, programmers and scientists recount a similar narrative—of coming from a culture of bureaucratic obstacles, scarce credit, limited education and opportunities, and power and water shortages, to a place where infrastructure works, advanced research is supported, government generally stays out of the way, new ideas are embraced, and capital is readily available.

It is good that at least the Silicon Valley is providing the infrastructure and innovative environment and ecosystem where Indians can thrive. In the end it is a truly synergistic relationship and hope that with better infrastructure and ecosystem in India , the relationship moves up the value chain.

The Bay Area’s economic and cultural ties to India are unique. Much of this uniqueness comes from the high levels of education, wealth, entrepreneurial activity and business leadership in the region’s Indian community. India’s expanding economy, with its growing business and consumer markets, also anchors the relationship. The Bay Area’s focus on innovation and entrepreneurship is mirrored in India’s deep reservoir of human capital and its focus on technology and other services. Bay Area companies draw on both and have led the world in establishing strategic partnerships with Indian counterparts and service providers. This relationship, properly managed, can play a major positive role in positioning the Bay Area for continued success in the global economy.

With a reverse brain drain and people returning back to India, how do you see the relationship unfolding? Do  let us know via comments!

  1. Madhav Shivpuri says

    Its no secret that NRI’s have either returned to India or invested from abroad (in SNS sites etc.) or extended services from outside to their homeland in the last decade (like Sulekha.com). Though the VC’s are coming to India I think the fear is more of what is called the “ecosystem” – where there is government funding and support for SMEs, talented entrepreneurs are moving between companies, where corporates are actively participating in funding, growing and acquiring companies, where talent is respected and failure is part of the game and does not become a stigma.
    I threw a lot into the brew but those are somethings that could potentially be the factors haunting the development of small businesses in India.

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