Bangalore and Shenzhen: Hotspots for Entrepreneurs

I’ve just immersed myself during the last month in the dense entrepreneurial hotspots of Shenzhen and Bangalore, so I thought I’d offer some comparisons.  I’ll comment on the extent of government support, the role of science, and the sorting of human capital in China and India more generally.

Shenzhen is the most laissez-faire part of China. It’s part of Guangdong province, which, as a coastal province in southern China, is already more “liberal” than the northern ones. But it’s even more so; the city of Shenzhen doesn’t even pay much attention to its own provincial government, let alone to far-away Beijing. Remember that Deng Xiaoping famously included Shenzhen in his southern tour in 1992 that reinvigorated Chinese economic reform, endowing it with a special symbolic status in China (even though it’s not technically in the class of the four uber-cities of Beijing, Chongqing, Shanghai, and Tianjin).

It’s not that there isn’t government activity in Shenzhen, it’s that it takes a particular form. First, one way to think of restrictions in Shenzhen is that there’s probably a set of things that you cannot do, anything else goes (as opposed to the far more restrictive idea of having a list of things you can do, inevitably unimaginative, and everything else cannot be done). The result is that there isn’t much interference. It’s easy to do business in Shenzhen.

Bangalore follows the more bureaucratic approach of rules and regulations that must be adhered to, closer to the “list of things you can do, other things likely are forbidden” approach. It’s improved over time, but still has some way to go, resulting in continued irritation to entrepreneurs.

Further, there’s an obvious way in which the government has contributed in Shenzhen that is utterly missing in Bangalore: the presence of amazing physical infrastructure (even if it is aesthetically unimaginative!). In Shenzhen this has facilitated the buildup of massive manufacturing facilities. Some might even say that Shenzhen is overbuilt. For example, the empty apartments in some places, means that rent-subsidized quarters are often offered to those who set up shop in Shenzhen, as an example of an inducement that was offered to a company I was looking to incorporate in China (ultimately we set up shop in Beijing, though that’s a longer story). Certainly Bangalore has the opposite problem, perpetual traffic jams, insufficient and expensive housing, and so on.

What’s clever in Shenzhen additionally is that not everyone gets these subsidies. As one Chinese entrepreneur explained to me, these are sort of offered to “survivors”. That is, you have to survive the rough-and-tumble of early-stage activity, a period of high mortality for startups anywhere, to prove your mettle enough to qualify. This sort of principle means that one successfully avoids various forms of corruption associated with the somewhat centralized handouts of subsidies and “freebies”.

Let me turn to the potential for science in startup activity. Here, I think the stock of raw scientific insight might well be greater in Bangalore than in Shenzhen. Bangalore has pure research in the Indian Institute of Science, a recent efflorescence of life science research (for example in the National Center for Biological Sciences, NCBS, among others), presence of some of India’s best space and satellite related science, and has capitalized on other institutes of learning in southern India such as the Indian Institutes of Technology.

Shenzhen has its excellent local university, but the science-density did not seem to be as great. Neighboring Hong Kong has fabulous science in several fields (Hong Kong University of Science and Technology as one example), but the political barriers between these proximate cities are much too high to allow for free-flowing ideas across the Hong Kong-mainland China border, a loss bemoaned to me by my entrepreneur friends both in Hong Kong and Shenzhen.

Lest Bangaloreans celebrate this, let me say that it’s possible for them to do much better with the science at their fingertips. There are poor linkages between the universities in Bangalore to both established industry and to the startup ecosystem. The plethora of incubators in Bangalore (including one whose founding team I’m part of, Axilor) are trying to bridge this gap. If Bangalore embraces its increasingly cosmopolitan DNA – it has a leg-up on Shenzhen here as well – this could improve, but it’s still a slow process.

Lastly, the density of talent seemed greater to me in Shenzhen. In Bangalore, there are clusters in Koramangla and Whitefield and so on, but Shenzhen seemed like one giant cluster! The entire city is consumed by startups interspersed with manufacturing plants, with deal-making intense in many locales. One entrepreneur described it to me thus, “talent flows like water here” from one entity to the other. (The blindingly simple point here is that it helps to be able to physically get around Shenzhen easily, hardly the case in infrastructure-starved Bangalore.) The density has translated into a faster average pace; it’s harder for laggards to survive in Shenzhen. So those disinclined to deal with the pace, and the raw and naked ambition, simply don’t come to Shenzhen, or just leave. There is a sorting of the talent pool, with the risk-lovers gravitating to Shenzhen, at a scale that you don’t yet see in Bangalore.

Both super promising cities, though!  I enjoyed my recent romp through them both and intend to revisit shortly.



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