Part 2: How Bengaluru Became India’s Silicon Valley

Watch Part 1 of this video here: https://www.youtube.com/watch?v=C5u5mmVwDrE

In today’s video, we continue the story of how Bengaluru became India’s Silicon Valley.

00:00 Y2K Bug – a $308 billion mistake
02:00 Engineers in Bengaluru help prevent the Y2K crisis
03:59 The dotcom bubble brings jobs to Bengaluru
05:53 Rise of internet and economic prosperity
07:45 Bengaluru’s startup ecosystem takes its baby steps
09:39 VCs flock to Bengaluru

Y2K Bug – a $308 billion mistake: If you were born in the 21st century, then there’s a good chance that Y2K doesn’t mean anything to you, but it was a big deal. It was the Year 2000 problem, the Millennium Bug, a $308 billion mistake caused by short-sightedness. Computer programs at the time shortened four-digit years to the last two digits. This wasn’t a problem in the 20th century. As these programs started approaching 99, people realised that there wasn’t anything after that. At the turn of the century, computer clocks would reset to 00, and this was a big problem, because United States which was the centre of the digital world back then, was heavily reliant upon computers at - industries like transportation, energy, and banking needed their digital clocks to be accurate.

Engineers in Bengaluru help prevent the Y2K crisis: The clock struck midnight. The new century began. And the world stayed the same. There was no apocalypse. And whether the world knew it or not, they had an Indian city by the name of Bangalore to thank for that. Today, we know Bangalore as Bengaluru, the capital city of Karnataka and the centre of India’s startup ecosystem, but on January 1st of the year 2000, the world knew this city as Bangalore, the city that still understood COBOL. Estimates put the number of lines of code required to avoid the Y2K crisis at 180 billion - it would require roughly 1.1 million COBOL programmers, and that is where Bengaluru comes in. COBOL was still actively being taught in Indian colleges, there were tens of thousands of Indian engineers who were proficient in this language, and while American COBOL programmers were expensive, Indian ones were cheap. From $100 million in 1990, India’s IT sector grew 80X by 2001 - becoming a $8.26 billion industry.

The dotcom bubble brings jobs to Bengaluru: In March of 2000, America’s dot-com bubble burst - in the subsequent months, many prominent US-based internet companies would go bankrupt as venture capital dried up and their businesses disintegrated because of unsustainable burn rates. The survivors of this crash had a harder time raising funds from investors, and many of them came up with strategies to reduce spending on salaries and to diversify their customer bases, and one of these strategies was international expansion. And this international expansion brought tech giants like Yahoo, Google, eBay and Amazon to Bengaluru between 2000 and 2004.

Rise of internet and economic prosperity: The government of India’s 2004 broadband policy established 256 kilobit per second internet as the minimum speed. This increase in internet speed coincided with another increase that happened in India between the financial year of 2003 and the financial year of 2007: real GDP growth averaging close to 9% a year. In this time period, the number of Indian households with more than $10,000 in disposable income roughly doubled. This financial prosperity, paired with India’s increasing internet connectivity, gave rise to one of the most crucial components of any market or industry: demand.

Bengaluru’s startup ecosystem takes its baby steps: By 2003, Bengaluru’s startup ecosystem was taking its first baby steps - entrepreneurs had begun to see an opportunity in India’s increasing spending power and deepening internet penetration. Early trailblazers like ngpay – which was acquired by Flipkart started and defence startup Tonbo Imaging were founded in 2003, MuSigma – one of India’s first unicorns in 2004 and iD Fresh Food was founded in 2005 – all in Bengaluru.

VCs flock to Bengaluru: After the Financial Crisis of 2007-08 in the United States, the VCs were looking to take their money out of the US and found Bengaluru to be a perfect opportunity for growth. As the money started to pour into Bengaluru’s startup ecosystem – startups like Flipkart, Myntra, mKhoj, which would later pivot into InMobi, Verse Innovation, CommonFloor and RedBus were all founded in 2007. And this was the beginning of the entrepreneurship wave in Bengaluru.

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