WHEN YOU DON’T HAVE THE ALUMNI ADVANTAGE

Entrepreneurs from colleges in tier 2 and 3 cities who don’t have the network that comes with graduating from an A-list institute say they’re more resilient to changes & challenges


When Rajveen Khandelwal, founder of customised apparel brand Wear Your Opinion, started his business in August 2011, he found that the “startup ecosystem is networked in a certain way”. He had graduated from Pune’s Maharashtra Institute of Technology in 2004 and worked at KPMG, but found it hard to get investor meetings. “Fund managers are from IITs and IIMs. Most founders are alumni of the same, and have inroads through first and second degree connections,” he says. “It happens in every industry — familiarity and connections help close business deals quicker.”

DOORS OPEN UP


Girish Mathrubootham, founder and CEO of SaaS (software as a service) startup Freshworks, which entered the unicorn club this week with a valuation of $1.5 billion on the back of its latest fundraise of $100 million, graduated from Shanmugha Arts and Science Academy in Thanjavur in southern Tamil Nadu. He says he’s never considered not being from an IIT or IIM a problem.

“I have, however, seen that young founders from premier institutes have a favourable environment for funding and a lot of times they can also use their alumni network to hire top talent as they scale their startup. Fortunately, having worked for a good 10 years in learning the business, getting funded or being able to attract talent wasn’t very difficult,” he says.

About 44% of the startups created under the government’s Startup India scheme are in tier 2 and 3 cities. That’s what Prime Minister Narendra Modi said recently while interacting with young entrepreneurs from across the country, including Dehradun, Guwahati and Raipur. The government’s initiatives, he claimed, had helped entrepreneurs in smaller cities, towns and villages, and these areas were emerging as vibrant startup centres — but entrepreneurs in these cities say starting up is just half the battle won.

For entrepreneurs from colleges in tier 2 and 3 cities, the challenges are many when one doesn’t have the pedigree and network of an A-list college or a job stint in a multinational. Many say it’s harder to land meetings with VCs, who are inclined toward founders from startup hubs with degrees from IIT/IIMs and a history with a large corporate.

“That bias is definitely there right now because in India we do not work by selection but by elimination,” explains Shashikant Chaudhary, cofounder of Nagpur Angels. A founder from an IIT/IIM “gives investors a lot of comfort” as the investor is sure that certain fundamentals with regard to expertise, network, knowledge and work ethic are in place. “Unless the criterion changes from elimination to selection, this bias will remain for some time,” he says.

NETWORK MATTERS

Investors say a founder or a team from a prestigious institute has advantages as the startup ecosystem is still evolving. “IITians are able to use their network of peers and alumni better than entrepreneurs from other institutes. The speed at which they can build an efficient team — that really opens up a lot of doors,” says Vivek Lath, founder of content distribution company Go-Quest Media, who also invests in startups.

Another challenge, say founders, is that most startup events are held in Bengaluru, Delhi-NCR or other metros and founders from colleges in these cities have the advantage of an existing network. “In terms of getting opportunities to pitch in front of investors, there are fewer in small towns. There are a lot of business contests now and accelerators are waiting for good ideas independent of location but it’s still a struggle,” says Chaudhary of Nagpur Angels.

“Most startup networking events take place in metros, but founders from smaller cities are able to hold their own,” says Jaison Jose, co-founder and COO of startup incubator Xelpmoc, adding that startups from cities such as Bhopal, Patna and Jaipur are making their mark.

Accelerators, many think, are changing the game. At Hyderabadbased T-Hub, 10% of founders are from tier 1 colleges. “While it is true that founders from IITs/IIMs probably have an easier time getting through the door, investors are always looking for great startups, and where the founders are from is never a barrier,” says Srinivas Kollipara, CEO of T-Hub. If the founder is able to demonstrate that he or she understands the problem intimately, has deep insights into potential customers, knows the market, and can show a viable solution, the money will follow.

REDEFINING SUCCESS

Suresh Kumar G, CEO of Chennaibased Macappstudio, agrees that “the system is pre-loaded in favour of those from IITs and IIMs”. So he makes it a point to hire candidates from tier 2 and 3 cities. “They work hard and are disciplined,” he says.

Prasen Lonikar, founder of Nagpur-based fintech firm Klathrate, says founders from tier 2 cities are more resilient. “They’re better at handling business as they do not have the advantages that are handed to founders from large colleges,” he says.

For him, place or pedigree do not come in the way of a great idea. “What startup founders need is paying customers rather than investors or network or pedigree. Today, raising money is seen as success even if you are not earning money. That needs to change. A startup is all about solving a problem. When a problem is solved, customers are ready to pay,” he says.