Why startups are exiting Bengaluru’s Koramangala

Bengaluru: In south-eastern Bengaluru, adjoining the road to Electronic City, is a four-storeyed hotel called Inn@Silicon Valley. The Silicon Valley reference is jaded in a city that is itself called India’s Silicon Valley. But the hotel, which is affiliated to Oyo Rooms, serves as the western entrance to HSR Layout, a sprawling suburb that is replacing its neighbour Koramangala as the main startup centre of Bengaluru.

Increasingly, new startups are choosing HSR Layout (Hosur-Sarjapur Road) over Koramangala, which until recently was the default choice of starting place for entrepreneurs. Even Indiranagar is emerging as an alternative to Koramangala.

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HSR Layout offers things to startups that Koramangala did in the 1990s and early 2000s when it gained popularity as a tech hub: suburban geniality, relatively low rents, free-flowing traffic (by Bengaluru’s dreadful standards), easy access to important areas of the city and, most importantly, a large population of young engineers.

Meanwhile, Koramangala’s infrastructure, which was already sagging with the untrammelled growth of the past two decades, has collapsed several times in the past 18 months because of poor drainage, heavy traffic, overcrowding and littering.

The rise of HSR Layout

A reliable mark of HSR Layout’s popularity with the startup crowd is Third Wave Coffee Roasters, a hip coffee shop that started out in Koramangala in 2016. Earlier this year, Third Wave opened an outlet in HSR that, like the Koramangala shop, has quickly become a popular meeting spot for entrepreneurs and investors.

“For us, HSR was a natural choice especially because hiring engineers is very easy if you’re based there,” said Ankit Nagori, co-founder of healthcare and fitness startup CureFit Healthcare Pvt. Ltd, which started out of an apartment in HSR in 2016. “A very large chunk of engineers at Flipkart and Myntra were based around HSR-Sarjapur. It’s also a unique landscape—there’s no other part of Bengaluru that has this kind of look-and-feel. HSR is definitely the new startup hub now. There are many small co-working spaces, food options are numerous.”

For us HSR Layout was a natural choice especially because hiring engineers is very easy if you are based there– Ankit Nagori, co-founder CureFit Healthcare Pvt. Ltd

Before co-founding CureFit, Nagori was chief business officer at Flipkart, which moved out of its Koramangala home to the Outer Ring Road area in 2015. CureFit and Flipkart represent two linked trends. First, new startups are increasingly choosing HSR over Koramangala. Second, startups based in Koramangala are shifting out as the suburb cannot accommodate their growing size.

In the past three years, apart from Flipkart, some other prominent startups including Ola, BigBasket and Swiggy have also shifted out of Koramangala to business parks in adjoining areas or other localities that have better infrastructure.

Earlier this year, Udaan, a business-to-business marketplace, was looking for a bigger space. The start-up chose to move to HSR Layout from its launchpad at the heart of Koramangala. “The traffic in Koramangala is a big issue and HSR has better infrastructure for now. Rentals in HSR are also at least 20-25% cheaper than in Koramangala. Plus, it’s very difficult to find medium-size and large office spaces. The real estate market in Koramangala is saturated, with few new constructions,” Udaan co-founder Sujeet Kumar said.

Nandan Nilekani, non-executive chairman at IT services firm Infosys, said pricier rents in Koramangala had driven startups to look at other areas.

In the past three years, apart from Flipkart, Ola, BigBasket and Swiggy have also shifted out of Koramangala

“The whole thing boils down to real estate. We started the practice of building a campus way back in 1992—as companies became bigger, they built campuses on Outer Ring Road and other areas. But in those days, if you were a company looking for office space or a four-five storey building, Koramangala had an abundance of those buildings. But the rents are much higher now than they used to be before. If you ask me, HSR is the new Koramangala because there’s a lot of development there, lot of buildings are coming up, rentals are cheaper,” said Nilekani, who is a prolific start-up investor and a long-time resident of Koramangala.

According to real estate consultancy Knight Frank, the rentals in Koramangala are ₹60-95 per sq. ft. In HSR Layout, the rentals are ₹55-75 per sq. ft.

Fittingly, for a startup hub, HSR Layout is one of the newest localities in the city. It was developed in the 1980s by the Bengaluru Development Authority (BDA), a government body responsible for city planning. Given its location and similar characteristics, HSR is a natural successor or extension to Koramangala.

The Koramangala story

Until the 90s, when Infosys had offices there, Koramangala was an undeveloped suburb that was defined by a few industrial units, a few houses and its water tank. (Water tanks were the major source of water in the city since it was founded in the 16th century). In the 90s, the old suburb, which is located in the cantonment part of the city, was quickly gentrified.

This gentrification was unintentionally kick-started by Infosys opening offices there, and pushed along by Koramangala’s proximity to Electronic City, the IT nerve centre of India. The construction of the National Games Housing complex, the launch of a fancy new mall (Forum Mall) and the decision by top IT executives like Nilekani and Ashok Soota to reside in Koramangala helped transform the area.

The next phase of Koramangala’s rise was in the early part of the past decade. Two young engineers, Sachin Bansal and Binny Bansal, left their jobs at Amazon to set up an e-commerce firm, Flipkart, out of their apartment in Koramangala in 2007. As Flipkart rose to become India’s leading internet company over the next few years, it helped create an ecosystem of tech startups in the suburb. Flipkart’s first investor Accel Partners later opened an office there. By 2011-2012, the tech and startup crowd had become entrenched in Koramangala and nearby areas. As it became the pre-eminent cluster of startups and of their employees, Koramangala also turned into the ideal launch markets for food delivery, grocery delivery and other startups like Swiggy. Who would try out unknown, newfangled apps if not the people who were building them?

Things came to a head last August-September when heavy rains caused serious flooding in Koramangala, not just on the roads but in the homes of hundreds of people

At the same time, malls and shopping centres as well as well dozens of restaurants and bars and hawkers sprang up to satisfy the consumption needs of the area. All this frenzied activity in less than 5 square kilometres of land in such a short span of time would have tested any kind of infrastructure. But Koramangala, whose ecological system had been tampered with during the construction of the National Games complex, was especially vulnerable. Things came to a head last August-September when heavy rains caused serious flooding in Koramangala, not just on the roads but in the homes of hundreds of people. The floods were so severe that some people used deflatable boats in order to get around, video posts on Facebook showed.

Problems of growth

The ensuing panic only highlighted how Koramangala’s infrastructure had been overwhelmed by the parasitical growth in the area. Another ugly side-effect of the growth showed in early 2013, when hundreds of slum residents near the National Games Housing Complex were forcefully evicted by the Bruhat Bengaluru Mahanagara Palike, the city’s municipality body, to make way for a mall and new residences for some of the residents.

“Infrastructure is a consequence of the growth and attractiveness of this ecosystem which attracts more people, more companies, more housing, more cars, etc. It’s a consequence of the success. The reality is that the growth of the ecosystem has been so fast that the infrastructure has not been able to keep pace with that change—and that’s true around the world, not just here. But the fact is that talent trumps infrastructure every time. The ecosystem and the talent in the ecosystem, people are willing to put up with bad infrastructure for that,” Infosys’ Nilekani said.

As he suggests, it’s not like startups have deserted Koramangala. Co-working spaces operated by WeWork, Bhive and others in Koramangala are bustling with young companies. Social networking app Sharechat, the latest investor darling, is also based in Koramangala as are other companies like Instamojo, HackerEarth and RedSeer Consulting.

HSR is new Koramangala because there’s a lot of development there, lot of buildings are coming up, rentals are cheaper– Nandan Nilekani, chairman of Infosys

Apart from Accel Partners, two other venture capital firms, Lightspeed India Partners Advisors and Pi Ventures, are based in Koramangala. When Lightspeed, headquartered in Delhi, was looking to set up an office in Bengaluru, choosing Koramangala was a no-brainer. “For us, the decision to set up shop in Koramangala was helped by the fact that it would be easy for entrepreneurs to come here. Koramangala is a very centrally located place that is relatively easier to reach from places like Indiranagar, HSR, Sarjapur, etc. And while Koramangala real estate prices have increased a lot, it’s still cheaper than CBD (central business district) or Indiranagar,” said Akshay Bhushan, partner at Lightspeed.

Additionally, Koramangala, HSR, Sarjapur, Indiranagar are seen by some as a continuum, thriving startup areas that together comprise a virtuous cluster that is host to, and drives, tech innovation, not just in Bengaluru but in the country. “The critical mass is here in these neighbourhoods. If you take Koramangala and HSR as one ecosystem—and then we have the path to Indiranagar through Inner Ring Road—this whole thing is the startup ecosystem of Bengaluru. And which itself is the start-up ecosystem of India. The centre of gravity is here,” Nilekani said.

Evidently, for startups like Swiggy and CureFit, the importance of the Koramangala-HSR-Indiranagar tract is immense. “The high density of paying customers in the area is hugely attractive for consumer startups,” CureFit’s Nagori said. “Today, between HSR, Sarjapur and Koramangala, we have six Cult centres, two Mind.fit centres, two football turfs and two kitchens. Out of the 100,000 paying customers that we have, 25,000 are in these three areas alone. So the paying propensity here is very, very high.”

Bengaluru is now more often described as an urban nightmare than the Pensioner’s Paradise or the Garden City

Still, there’s no doubt that Koramangala is a microcosm of the troubles faced by Bengaluru. Because of a mix of factors including its pleasant weather, the emergence of large state-run companies and textile mills, both blue-collar and white-collar immigrants rushed to the city, even before the IT boom took hold.

According to Census data, Bengaluru’s population jumped to 5.7 million in 2001 from 0.8 million in 1951, transforming what was a small city into a metropolis. It again rose sharply to 8.5 million in 2011, the data shows. The attendant urban problems—lack of water, choking traffic, ever-reducing green cover, predatory construction, high levels of pollution—have ensured that Bengaluru is now more often described as an urban nightmare than the Pensioner’s Paradise or the Garden City.

Koramangala has both contributed to this state of affairs and suffered badly because of it. In less than two decades, it has gone from being a tech centre and suburban exemplar to a hotbed of frustrations and, at times, health hazard, for its residents.

The travails of Koramangala are also instructive for other areas like HSR and Indiranagar: can they avoid Koramangala’s fate? Going by the unstoppable start-up and tech boom, the answer will be evident soon enough.

source: livemint

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