It used to be if you were a start-up, you headed to Silicon Valley. But, now, the world’s your oyster. The tech revolution has spread to cities like London and Frankfurt and even further afield to Singapore, Melbourne and Manila. Our own Bengaluru is high up in the world of technological start-ups.

And like the places these start-ups are basing themselves are different, the new wave of technology firms are more “real-world” based, attempting to change the way every industry functions — in fact everything around us, whether it’s ride-hailing, medtech, fintech and adtech.

AOL founder Steve Case calls what’s happening now the Third Wave of the Internet revolution. (The first revolution, of course, was the establishment of the Internet itself and the second wave was social media, Internet search, apps and suchlike). This Third Wave is creating specific industry verticals and these niche outgrowths are very different kettles of fish from what went before.

Industry focus

The 2018 Global Startup Ecosystem report, a wide-ranging and comprehensive overview of start-up trends, says what’s happening now is a break-away from the tech label to players defined more by their industry focus like Uber in transportation and Airbnb in hospitality. These Third Wave verticals and start-ups relying on Deep Tech — which builds businesses through breakthroughs in areas like AI — now are the fastest-growing sectors in tech, outpacing First and Second Wave start-ups, the report notes. What’s interesting, too, is that this new tech era is being driven by entrepreneurs who’re older — nudging 40 — and who are more likely to have advanced degrees. And as tech spreads to every walk of life, cities in every part of the world are trying to get a slice of the action.

So what’s that royal jelly a city needs to be a tech hub in this new era? Well, Bengaluru was lucky as it became home of many global corporations in the early days of the tech revolution.

“Bangalore’s start-up ecosystem was built up gradually over the past two decades with greater acceleration in the past decade and big venture capital/private equity money flowing in over the last three-to-four years,” says tech policy consultant Prasanto Roy.

Bengaluru has never really received sizeable government subsidies or help. It still has a salary advantage over most parts of the world but while that helps it isn’t such a clinching factor any longer. And the big edge which Bengaluru has in spades, according to the Global Startup Ecosystem report, is its “engineering prowess.”

In fact, a massive 94 per cent of start-up founders in the city have an engineering background — higher than anywhere else in the world. Also notable is that India has more than 1,000 companies involved in IoT (Internet of Things), with over 500 of them based in and around Bengaluru.

Roy says it’s natural that people in Bengaluru “would get inspired by the ecosystem this has built up — for instance, techies meeting in coffee shops and working out of co-working spaces.”

Delhi/NCR, too, he observes, “has a thriving start-up culture and ecosystem and many co-working spaces, both possibly more than Bangalore.” Still it’s tough to isolate any overriding element that turns one city into a winner and leads to another being a tech backwater. The Swedes believe being a small country actually helped because their companies have been forced to think beyond their own country and look at how to be global. Also Sweden, home to big names like Skype and Spotify, was early in the tech game and offered government grants to buy computers and also laid down fibre networks.

The Swedes, incidentally, are such enthusiastic tech adopters that thousands of them have had microchips inserted into their hands to make it more convenient to do such things as access their homes, offices and gyms. (In fact, the country’s main chipping company says it can’t keep up with the number of requests from Swedes wanting to get micro-chipped). Stockholm is also home to some of Europe’s biggest tech funds.

Additionally, it helps if a city builds on its strengths. Frankfurt, for instance, is Europe’s biggest financial centre after London, and is base to several fintech start-ups that are attempting to change the way financial transactions are carried out.

Other cities like Singapore and Dubai are drawing on their reputation for efficiency and safe-living conditions. Singapore, which aims to position itself as the tech hub for Southeast Asia, is so alluring that ardent Brexiteer James Dyson has just chosen the city-state as the manufacturing centre for his new electric vehicles to the chagrin of fellow Leavers who believe he should have chosen the UK, if only out of loyalty.

Tax breaks

Attractive tax breaks also play a key role. London, has offered smart breaks for private investors putting their money in start-ups. The UK’s been so successful in this aspect of the tech game it’s home to 13 unicorn firms with valuations of over $1 billion.

One of the stars is Deliveroo, valued at $2 billion, which is an online food delivery service that’s been expanding this year by opening pop-up kitchens in half a dozen countries. Then there’s a start-up centre that may be more surprising: Malta, the tiny Mediterranean island, which is a part of the EU, has two cryptocurrency exchanges and is being called “Blockchain island”. When Britain exits the EU, Malta will be the only English-speaking country in the trading bloc. What’s most apparent in this Third Tech wave, the Global Startup Ecosystem report notes, is that tech entrepreneurship is steadily shifting to Asia and the US’ pre-eminence is starting to fade. The US — and specifically Silicon Valley — is still top-value creator in the global start-up ecosystem.

But for the last half-dozen years, the share of funding going to Asia-Pacific countries grew while the US’ share declined. And looking at unicorns, in 2014, only 14 per cent of current ones were from China.

But in 2017 and so far in 2018, that number stands at 35 per cent while for the US, it’s fallen to 41 per cent from 61 per cent. Decidedly, the old order changeth.

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