Kerala has long been branded unfriendly to business. Despite its excellent human development records and successive governments' efforts, Kerala continues at the bottom among states in industrial growth and ease of doing business. Various theories have been touted for Kerala’s “business hostility,” ranging from Communist hegemony and militant labour to an alleged dearth of entrepreneurial genes.
But a fast-growing phenomenon, largely unnoticed by these critics, media, and society in general, may prove these doom-sayers wrong. Kerala’s startup community has been silently involved in making a bloodless revolution of innovation and enterprise. In contrast to its puny space on the country’s industrial map, Kerala is among the top ten states in India’s startup ecosystem, which is the world’s third-largest. Kerala now has nearly 5000 registered startups, which have attracted investments of more than Rs 2000 crores since 2015. Kerala is also one of the three states -UP and Haryana are the others- in the top ten list without a single Tier 1 city. Kerala has also been selected as a “top performer” consecutively for the third year in the states’ startup ranking by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Union Ministry of Commerce and Trade. Unlike in the past when many Kerala startups migrated to Bengaluru and other metros once they grew wings to fly, many now choose to stay in the state thanks to good infrastructure and talent base, says Anoop Ambika, the enterprising CEO of KSUM.
Kerala’s vibrant startup community was present in full force at the three-day Huddle Global Summit in Thiruvananthapuram. The fifth edition of the Huddle Global, organised by Kerala Startup Mission (KSUM), was held for the first time on the virgin beaches of Adimalathura, an obscure seaside village in the suburbs of the capital city and was labeled as India’s largest beach startup festival.
The massive, air-conditioned tents on the beach witnessed a grand convergence of all the stakeholders and even enthusiasts. Innovators, entrepreneurs, venture capitalists, angel investors, mentors, corporates, officials, and tech evangelists from and out of Kerala were present. Young men and women from their teens onwards dominated the event and were seen gripped by a passion for the frontier technologies that are redefining our lives. The reigning spirit at the Huddle was creativity and entrepreneurship. The panel discussions, workshops, interactive sessions, coding contests, etc were imbued with energy and excitement. The summit appeared to be a celebration of technology on par with Kerala’s contemporary festivals of cinema and art, like the International Film Festival of Kerala or the Kochi Biennale.
The event also witnessed the launch of new and existing startup products registered with and incubated by the KSUM based on cutting-edge technologies like AI, electric vehicles, robotics, AR/VR, Internet of Things, etc. They came from a wide array of various sectors like space tech, agritech, fintech, edutech, food and beverages, etc. On display were the snazzy electric superbikes and scooters assembled in Perumbavoor, which its makers -Hindustan EV Motors- claimed as India’s first of its kind or the mini version of the Bandicoot, the scavenger robot, developed by Genrobotics or robots that made farming easy, enjoyable and attractive to the young. Equally impressive were the wearable cardiac monitor, sustainable waste management platforms, online fashion stores, immersive virtual experiences based on metaverse that redefines ways of seeing, etc., showcased at the summit.
The consensus at the event was that India’s ongoing startup revolution’s future is in tier-2 and tier-3 cities, which will receive 50% of the funds by 2025. Already, 50% of the startups are from these cities. Kerala would be at the forefront of this new wave, said V Anantha Nageswaran, Chief Economic Advisor to the Government of India at the summit. He particularly appreciated the government and KSUM for catalyzing Kerala’s growth in this field.
Investors like Anil Joshi of Unicorn Ventures, who is the largest and earliest investor in Kerala startups, said he was firmly bullish on the state. “I would increase my investments from the present Rs 60 crore to Rs 100 crore in Kerala startups,” said Joshi, who has invested in 12 Kerala startups, representing 40% of his total investments. According to Joshi, Kerala’s image of being anti-business was a vestige of the past. “Labour militancy may have been right at a time when employees were brutally exploited. It doesn't apply to the new industries based on frontier technologies”. Backing Joshi was John Kuriakose of Dent Care, the founder of the “world’s largest dental care laboratory” in Muvattupuzha, who said he has never faced labour strikes in his company in the last thirty years. Joshi, however, was surprised that Malayali investors do not yet invest in startups or funds like his, which invest in them and earn attractive returns. Unlike in other states, Joshi says credit goes to the government and KSUM for catalyzing the state’s startup scene.
The ongoing “funding winter” was one of the hot topics at the summit. Funding, which peaked before Covid-19 struck, has been waning since then. However, according to most experts, investors were not without funds but were more discriminating and diligent now than in the past and kept away from reckless entrepreneurs and unsustainable projects. Though the crisis-ridden BYJU’S -India’s largest Malayali startup- was not mentioned by name, it was clearly the elephant in the room. Joshi held that the so-called winter never affected startups in tropical Kerala, which largely required only seed funding and angel investing, unlike large enterprises that looked for Series A, B, and C funds in exchange for equity.
The Huddle also revealed the waning of the glamour of unicorns (startups with a valuation of over $ 1 billion). Until recently, startups craved unicorn status, which marked the ultimate triumph and the qualification for top-level funds. Investors at the summit said they were now more keen on long-term valuations, sustainability, scalability, and profitability. The BYJU’S ghost was lurking again from the shadows.
But the declining interest in unicorns may also be a sour grapes story. India’s unicorn rain has now petered out, thanks mainly to the funding winter. The rain started thanks to COVID-19 when digital businesses boomed, and funding went wild to cross $42 billion in 2021. That year, India added a record 42 unicorns, and twenty more next year to strike a century. By then, with its nearly 1 lakh startups, India had the third-largest startup ecosystem globally, and one of every ten unicorns was Indian. But 2023 marked a watershed with just a single unicorn -Zepto, the online grocery store- founded two 20-year-old Stanford University dropouts who have been born until now. The prediction that India, which now has 112 unicorns, will hit a double century by 2025 looks doubtful. Karnataka is the home for half of them, followed by Maharastra and Delhi. Kerala’s distinction was to provide India’s centurion unicorn -Open, a fintech startup founded by Aneesh Achuthan and three others- last year. However, it remains Kerala’s only unicorn. According to 2022 statistics, though Kerala is among the top ten startup states, it is at its bottom. Maharastra (15000 startups), Karnataka, Delhi (9000 each), UP (7500), and Gujarat (5800) hold the top five ranks. Tamil Nadu, Haryana, Telangana, Kerala, and West Bengal occupy the bottom five slots.
The infectious enthusiasm at Adimalathura indicates that the Kerala startup ecosystem will forge ahead even without unicorns or decacorns along the lines of the Kerala Development Model, where small has been proven beautiful. Hopefully, KSUM will soon reveal if the actual results of the Huddle, in terms of new collaborations, funding offers, investment, etc, could match the excitement. But, even the sheer energy visible at the Huddle was no small deal for a state unfamiliar with anything similar in the field of entrepreneurship.
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