One of the world’s largest legacy tech companies is going all out to woo India’s startups

Image: Reuters/Hannibal Hanschke
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Nipun Mehrotra works out of a swanky corner office at IBM’s facility in east Bengaluru. His ground floor space—minimally designed, with a standing desk and a mini-refrigerator—stands out compared to the rest of the premises, which have the look and feel of a typical IT office with orderly bays and cubicles.

Mehrotra’s duties are also somewhat unusual. In a company best known for its hardware, servers, and enterprise businesses, he heads a startup engagement programme which is seeking to deepen IBM’s relationship with India’s entrepreneurial ecosystem.

“It is important for us, our market, our business, and our customers that we are out there and work with young companies and learn in the process,” Mehrotra, vice-president for strategy and growth initiatives across Asia at IBM, said. “The best ideas don’t necessarily come from within.”

Here’s the outline of his multi-pronged strategy:

  • Startups: Mehrotra currently mentors over 25 startups. Along with several other employees of IBM, he helps guide and train startups on several aspects of running and growing a business. IBM is also setting up a 10,000-sq ft startup garage at its facility in Bengaluru where the startups that it wants to work with can operate from.
  • Investors: On Oct. 20, IBM India announced a partnership with Indian Angel Network, one of the country’s biggest angel investors groups, wherein the tech major will train the latter’s portfolio companies on design thinking, a methodology for problem solving while working on innovative ideas. The company had formed a similar tie-up with venture capital (VC) firm Kalaari Capital earlier.
  • Academia: Mehrotra and his team hold workshops and mentoring sessions at incubators in institutions such as the Indian Institutes of Management and the Indian Institutes of Technology. The company is also exploring start-up related initiatives with the Indian government.

To be sure, IBM is not the first or only multinational tech giant that has found interest in the Indian startup community. Companies such as Microsoft, Google, and Amazon are said to be much more active participants in the sector than IBM.

“I agree there is a perception that for some years, we did not put as much focus on the (startup) ecosystem as we should have,” Mehrotra said.

Now, IBM’s entry could throw up new opportunities for Indian startups, particularly those in the B2B space, given the company’s experience in working with large corporate clients in India and abroad.

For Mehrotra, and IBM, the logic of working with startups is straightforward.

“Indian startups have the quality and value to help IBM remain agile,” he explained. “Working with startups helps IBM’s employees, techies, and sales staff learn and remain abreast with trends. They need to stay updated about what has changed in the market and where it is headed.”

And although IBM has no immediate plans to begin investing in Indian startups, there is significant value in the partnership that it is offering entrepreneurs.

“An entrepreneur needs resources and capital. For example, you could help an entrepreneur by either writing him a cheque or give him a meeting with, say, the CIO of HDFC Bank. So capital is only one part of entrepreneurs’ needs,” said Vani Kola, founder of Kalaari Capital, which has been working with IBM since March this year.

“From a startup’s perspective, access to clients, access to technology and access to mentoring has a different value and IBM is offering all that without (the startup) paying for it or giving up any equity for it,” Kola added.

But IBM’s sheer size—the century-old tech major has annual revenue (pdf) of over $80 billion—is also a challenge.

“If you want to work with IBM, you need to change your mindset. Like, if you want something on paper from IBM, it could take months,” said Sunil Malhotra, CEO and co-founder of startup incubator Ideafarms, which is working with IBM to offer training and consultation to enterprise and startup clients.

“IBM does not behave like a startup and we don’t expect them to do that. We think of them as a big brother and that’s how the engagement works,” Malhotra added.

For now, IBM is not making money from its startup-related initiatives but there is apparently an internal plan. “I don’t have any revenue pressure right now, but we will make money,” Mehrotra  said. “There is a broad idea we have about what is the scope of this opportunity if we pursue these things in the right way.”