For 1.5-year-old Delhi-based startup GetMyParking, the government’s 100 Smart Cities project is a mouth-watering business opportunity. “Smart city projects are about huge scale. We are talking about 100 smart cities and many more to come,” said Rasik Pansare, cofounder at the 45-people startup that uses its technology to digitize data on parking lots and allow for reservations. The firm is looking to participate in three Smart City projects in Jaipur, Bhopal and Kakinada in partnership with established companies such Larsen and Toubro, Sterlite Technologies and Wipro that are among the leading bidders.
The Union Cabinet has approved a budget of Rs 98,000 crore for the 100 Smart Cities mission that Prime Minister Narendra Modi announced in June 2015. An offshoot of the project is the rejuvenation of another 500 cities. The business opportunity is massive for the scores of startups developing the kind of technology that would make a city smart, as per the guidelines of the Smart City Council India. That includes advanced technology for managing or optimizing lighting, sanitation, pollution, safety and surveillance, and traffic.
The roads to the smart cities, however, are riddled with challenges. Emerging businesses that are focused on advancing technology cannot bid for the projects because of the government’s qualifying criteria that demand years of experience and turnover running into thousands of crores of rupees. Another limiting factor for startups tight on cash is the huge time lag from the tendering to getting the work order.
For some startups, the flipsides have been overwhelming enough to force them to explore greener pastures. Flamencotech, which has built an Internet of Things platform for smart buildings, was gung-ho about the 100 Smart Cities projects but has now decided to work with private companies instead. Among its marquee clients are Volvo, Nike, Wells Fargo, Mercedes Benz, Swiss Re and Essar Steel.
“There is a lot of noise but things move very slowly on the ground. We are all tech folks; we talk to someone, they like your technology and we get started with them. (We would rather do that) than get into these complex projects,” said Sudhir Sarma, chief executive of Flamencotech who had been in discussions with the Telangana government a year ago for a smart city project that hasn’t materialized yet. “Startups need very deep pockets to wait that long.”
GetMyParking’s Pansare said that while the Smart Cities project has the potential to deliver exponential growth for startups such as his it didn’t seem feasible to put all the eggs in that basket. While the startup is still hoping to participate in the government project, it is working on adding revenue streams by selling its parking technology to malls, hospitals, parking contractors and event organisers as well.
“If (the government stipulates a) turnover requirement of Rs 10 crore and past experience of catering to such projects, it has already ruled out all startups from applying,” said Pansare. “Another challenge is (the requirement to deposit) a performance guarantee fee. Startups do not have the muscle to fulfill such criteria.”
Pratap Padode, Director at Smart Cities Council India, the India Chapter of the Washington DC-based Smart Cities Council Global, said the Indian government should tweak its policies to encourage more startups to participate directly in the Smart Cities project.
“So far, there hasn’t been a proper national procurement policy in place for smart cities,” said Padode, suggesting that the government give “brownie points to established companies to form startup consortiums for these projects, working out the terms of the engagement on fair terms.”
The present model of engagement for many of the startups seeking to participate in the Smart Cities projects is to partner with large system integrators— companies such as L&T or Tata Power that are at the front-end of the bidding.
These companies sign up startups as vendors for specific products and technology that would make their project proposals differentiated and stronger.
“Finding the right partner with startups brings us a strong and unique competitive advantage,” said Ankit Agarwal, global head-sales and ventures, at Sterlite Technologies, which is working on the Smart Cities projects in Gandhinagar, Jaipur and Ahmedabad. It has partnered with a couple of startups including GetMyParking.
For startups, working alongside such large companies helps build their credentials early on and opens the doors to more large projects.
“Today, I am not eligible (to bid directly), but once I start building my credentials, tomorrow I will be automatically eligible for it,” said Bipin Chandra, CEO of Esyasoft Technologies that develops analytics technology solutions for power grids.
The firm worked with Tata Power for a smart grid project in Delhi. “They liked our product and the way it works. We bid together in Philippines, too,” Chandra said.
The scale of the opportunity around smart cities is hard to ignore. “For a company like ours, smart city alone could be a $100 million-$200 million market,” said Ankit Mehta, CEO of drone-based surveillance startup Ideaforge, which recently signed up with a public sector company that’s participating in a smart city project.
“It hardly matters whether you are a tier I, tier II or tier III vendor. The size of the project is too huge for startups to handle it alone unless they are a hugely funded startup.”
But getting discovered by large companies is also a challenge, given that a number of such startups are bootstrapped and have low budgets for spending on media outreach.
“Often, system integrators are unable to find us while they are searching for novel solutions and end up buying the same (technology) from foreign manufacturers,” said Ankit Vyas, CEO at Ahmedabad-based OIZOM Instruments, a maker of pollution monitoring technology.
The startups has partnered with larger companies for smart city projects in Pune, Vishakhapatnam, Jabalpur and Jaipur.
Startups have a huge role to play in the government’s Smart Cities project for multiple reasons.
“Every country has certain relevant problems to be solved. We found (in the SmartCity Challenge hosted last year by IBM) startups that are not necessarily taking something that has been done in the western world and applying it here but building something which is very customized and locally relevant… That is what is needed at the end of the day,” said Seema Kumar, country leader, developer ecosystem and startups, India/South Asia, IBM.
“Innovation should be the biggest qualifying criteria if you are stressing so much on ‘smart’ as far as technology, design or aesthetic inputs are concerned,” said Sudhir Rao, managing partner at venture capital firm IndusAge Partners, and an investor in Ideaforge as well as GetMyParking. “Startups can effect the kind of change that the government may not even anticipate.”
Source: Economic Times