The future of Kerala is startups: Saji Gopinath, CEO, Kerala Startup Mission

As CEO of Kerala Startup Mission (KSUM), the state government’s nodal agency for fostering entrepreneurship, Saji Gopinath’s job is to execute on the government’s mandate without diluting the state’s inclusive developmental ethos.

While neighbouring states such as Karnataka and Andhra Pradesh are associated with startup-led innovation and initiatives more often, Kerala was the first to formulate a startup policy and set up the country’s first  technology incubator independent of any academic institution, back in the early 2000s.

In an interview with TechCircle on the sidelines of KSUM’s recently concluded Women Startup Summit, Gopinath, an alumnus of Indian Institute of Science, Bengaluru, and a former professor at Indian Institute of Management, Kozhikode, spoke about the opportunities and limitations of the state’s startup mission.

Edited excerpts:

KSUM has undergone a number of iterations to get to its current form and structure. Tell us more about that journey.  

It all goes back to 2002-2003 when a few people at Technopark Trivandrum, the country’s largest technology ecosystem at the time, came forward to explore how they could leverage the collective expertise of this digital hub to inspire young people in colleges across Kerala to embrace entrepreneurship. 

Thus, a non-academic technology incubator, Technopark Technology Business Incubator (Technopark TBI), was born on-campus -- the first of its kind in the country at the time. It started as a very small business centre. In 2004, they approached the Department of Science and Technology (DST) to get a formal approval and it became the country’s first non-academic incubator in 2006. Later, Technopark TBI and DST inked a public-private partnership with one of the startups in its program called MobMe to create Startup Village, a business incubator. 

Within a short span of time, Startup Village became a well known name across the country. It served to glamourise the concept of startups in Kerala and raised capital from a slew of prominent names including (Infosys co-founder) Kris Gopalakrishnan. 

What happened to Startup Village?

While it was successful from a startup evangelisation perspective, it wasn’t sustainable. In 2015, Startup Village became a virtual incubator but not before creating some noise. The government then decided to leverage this momentum and create an agency to further nourish the startup culture. Thus in 2014, the government came out with a startup policy framework. MobMe pulled out of the venture in 2015 and the government created an agency to combine Technopark TBI and Startup Village and the Kerala Startup Mission or KSUM was born. It became a state initiative, with the chief minister as the chairman. The mandate was to create an inclusive entrepreneurship ecosystem in the state.

Inclusive growth is a somewhat unusual concept in the startup universe. Tell us more about the philosophy behind that concept.

Mature startup markets such as Bengaluru and Hyderabad have a strong presence of non-linear growth companies. The Amazons, Microsofts and Googles of the world have operations there. They drive the ecosystem. Unfortunately, Kerala does not have that advantage. So, we need a substantial number of startups to come up from within the state. When you are inside out, you require a pipeline development from the state itself, which demands an inclusive model. 

In addition, Kerala doesn’t have those typical one-off large cities. We don’t have much smaller cities either. As a society, socially and infrastructure-wise, what we have is an overall developmental model. That’s our philosophy as well. Whether it is good or bad is a different debate. When it comes to startups, we were only focused on Trivandrum and Kochi initially, but we are now taking it across the state.

We want to look at all sections of society. In fact, this program (Women Startup Summit) is part of our inclusive agenda. We have close to 6 million women, educated but not taking up any career activity. If we can actually convert a portion of this population into startups or entrepreneurs, the resulting economic value is tremendous, and it’s possible today. We aim to create a comprehensive ecosystem and we have created a multi-layer model to achieve this.

Could you elaborate on this multi-layer programme? 

As a state with these unique challenges, the role we need to play has to be very different from any other state government. With that realisation, we have formulated a five-layer model to create a comprehensive ecosystem.

First, there’s the evangelisation layer. Our first attempt was to create a sense of innovation and entrepreneurship among the youth. We started with giving small engineering kits to schools. Today it’s happening with other tinkering labs as well. We run electronics programmes and have introduced effective curriculum to get our students familiar with the concepts, technologies, equipment, and systems. We are trying to take away the fear of the unknown from our children. In colleges, we have introduced something called Innovation and Entrepreneurship Development Centres where students with innovative ideas are supported with small funding so that they can convert those ideas into prototypes. Even if they fail, they become good employees and prodigies. 

Then there’s the knowledge layer. Here we coordinate with people and organisations who can supplement these entrepreneurs with the right technology. Our first tie-up was with Massachusetts Institute of Technology (MIT) to set up Fab Labs, their state-of-the-art digital fabrication facilities. MIT has set up two large Fab Labs and 20 mini Fab Labs across the state. MIT’s first ever super Fab Lab is coming up at KSUM’s Kochi centre. Such partnerships help people to convert their ideas to prototypes in real machines. We have partnered with Unity Software. They are setting up a Unity Centre of Excellence (CoE) in Kochi, which will train people on artificial intelligence (AI) and virtual reality (VR). We are also in talks with Cisco and Check Point for cyber security CoEs. Many such tie-ups are in the making which will ensure that our entrepreneurs receive the right skills from the best in the industry.

The third layer is incubation. The ideas that we fund at colleges transform into startups and are admitted to our incubation program. Initially most of our startups were from colleges, but today a majority of startups graduating from our centres are launched by experienced professionals. We have set up incubation centres across the state. The Integrated Startup Mission Complex is the largest, with about two lakhs square feet at present. We have two more buildings coming up, so the total facility will be about half a million square feet. The other incubation centres are anywhere between 5000 and 50,000 square feet.

We are now focusing on setting up incubators for specific verticals. We have an incubator coming up in Trivandrum for space technologies, an electronics incubator and biotech incubator in Kochi, and mobile technology in Kozhikode. Apart from this, we are also developing accelerators with private players such as Hong Kong-based hardware accelerator Brinc. 

Next is the funding layer. Our aim is to support startups at different stages of growth. Early stage funding is provided through grants and via links with CSR (corporate social responsibility) funds. We also operate a fund-of-funds. We do not have many venture capitalists in the state. We have selected a set of SEBI-approved angel funds such as Unicorn Ventures, SEA Funds, Speciale Invest, IAN and Exseed Electron in order to invest in them as limited partners. The condition is that they invest double the amount back to startups in Kerala. Across these five funds, our startups now have access to a total corpus of over Rs 1,000 crore. KSUM will invest Rs 100 crores across these funds in a phased manner. Our first challenge was to bring early stage funds, which we are successfully addressing now. The next phase is where we need larger funds and we are slowly moving in that direction. 

Finally, there’s the business engagement layer. Here we try to connect these startups with potential customers in India and international markets. Besides, we have a very successful government procurement model. State government departments can procure up to Rs 20 lakhs worth of any product or services and up to Rs 1 crore worth information technology (IT) products and services without any tender processes. About 42 departments have already procured close to about 60 IT products from startups, worth in excess of Rs 10 crores over the last one year. This offers a first line of customer base for our companies. We are now talking to the Panchayat department. The opportunities are huge. We also send our startups on international business visits, of which we fund anything between 60%-80%.

How startup-friendly is the state from a regulatory standpoint?

Kerala has a space constraint coupled with an extremely strong sense of environmental consciousness. We do not support large industries to come here. However, today, I can create a billion-dollar business within 10,000 square feet, thanks to technology. The future of Kerala is startups. We cannot think of large industries here. Rather we will have a lot of deep-tech companies emerging from here. 

The regulatory regime for startups is very friendly. The procurement policy is an example. Government departments often approach us for technology-enabled solutions for critical problems. For instance, one of the problems the chief minister, Pinarayi Vijayan, himself brought to KSUM’s notice gave birth to the origin of India's first 'manhole cleaning robot' Bandicoot. The semi-automatic robot is developed by Genrobotics, a startup at KSUM incubation. Genrobotics was selected for Google’s Launchpad Accelerator programme. The product has got pan-India acceptance and today many municipal bodies in Kerala, Tamil Nadu, Andhra Pradesh and Delhi have commissioned it for sewer cleaning.

There seems to be a bit of competition among state governments on building local startup ecosystems? How is KSUM catching up?

We are very clear about our strengths. Electronic hardware is something we are good at. We do not have much strength in ecommerce. Every state has its own advantages. There’s no point in trying to mimic what others have done. We are trying to create a model that suits our ecosystem and gels with our developmental agenda. As mentioned, we are focused on areas such as space, medical AI and electronics because such sectors are quite sticky. If I try to create an ecommerce-based ecosystem, companies will slowly move out when they grow to their next phase of growth.

What sectors look the most promising?

Hardware, biotech, AI, VR, space-tech are showing huge opportunities for us. AI will play a huge role across sectors including tourism and healthcare. We need to grow and it’s a long road. The advantage of working with the venture capital funds I mentioned earlier is that they bring mentors and experts to the state. We are working with many startups AI to explore how they can enable our tourism and healthcare sectors.

The absence of a good mentor base and a healthy angel investor community is a critical challenge common to budding entrepreneurial markets. How’s KSUM addressing this challenge?

We have a good set of prominent mentors, including top executives, investors and other subject matter experts. We require a lot more, and we are working on it. In the electronic hardware space, we now have a pretty good mentorship structure. We have multiple smaller angel networks spread across the state, but we need more. We are making huge efforts in the area of education programs. We are evangelising the angel investment concept, conducting programmes in almost every district. Our target is to create at least 10-12 angel groups in the next one year.