Indians work on their laptops during an 'Open Hack Day' organized by Yahoo! in Bangalore on July 25, 2010. US tech companies are looking to India for a new wave of tech startups.
Credit: Dibyangshu Sarkar

NEW DELHI, India — The first “Hug A Startup” event is shaping up like the worst frat party ever.

It's close to 8 o'clock on a Saturday night. About 40 guys crowd around a banner reading “Free Hugs” next to a whiteboard. A few others have already taken seats in classroom-style chair-desks and whipped out notepads. In one corner, the only woman in sight is wearing a school backpack and talking to a scruffy looking guy in a dirty blue T-shirt — one of the organizers.

After a moment, he puts two fingers in his mouth and whistles. Then Sameer Guglani, co-founder of Morpheus Gang, a startup “accelerator,” steps into the bullpen.

“This is the first [Hug A Startup] event,” he says. “So you guys are the bakras [sacrificial lambs].”

Hug A Startup is Guglani’s idea. Part support group, part job fair, it's intended to help the so-called “Morpheus Gang” — the 60-odd startups that are part of Guglani's business incubator — overcome one of the biggest hurdles faced by India's fledgling companies. Finding talented staff willing to forego the fat paychecks and stability offered by big IT services firms is tough, as it can mean not only defying your parents but also delaying your marriage.

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Guglani has organized the Hug A Startup as a kind of problem-solving competition. Founders from some of Morpheus Gang companies — Airwoot, iDubba, and One52, to name a handful — step to the whiteboard and lay out a business problem they face. Then the wannabes compete to offer suggestions, and look smart.

The concept is a new one for the audience.

India's startup scene hasn't minted many millionaires so far. But these would-be recruits have given up their Saturday night and made their way to the bleak factory landscape of New Delhi's Okhla Industrial Estate for what amounts to a cattle call.

Get noticed here, and you could be part of the Next Big Thing. Even though parents still pressure young graduates and coders to stick with safe jobs at multinational firms, the enthusiasm is palpable.

For about an hour, the jobseekers brainstorm. The founders of Airwoot — which manages companies' responses to what customers are saying about them on social media — troll for ideas about customer data that their clients would find most useful. Another firm, Learning Outcomes, seeks help getting Indian schoolteachers to adapt their grading techniques to facilitate the company's performance evaluation software. iDubba looks for tips on improving the chat rooms on its TV guide app.

The discussion suffers from a serious lack of focus.

Rather than answer the questions, the wannabes’ “suggestions” tend to challenge business models, or advise the founders of other markets that would be easier to tap. A couple cocky guys with a little work experience, wearing sport jackets despite the 90 degree weather, dominate the discussion.

“As a startup, it's our responsibility to be disruptive,” somebody offers unhelpfully, before arguing for a solution that the company's founders have already taken off the table.

Before long the “breakout sessions” — intended to allow founders to corral promising recruits — have degenerated into a steady roar of cross-talk that interferes with the remaining presentations.

“OK, tell them this is the last one,” Guglani tells one of the other organizers. “Then we'll go upstairs and beer up.”

The Accelerator Boom

If finding talented software and marketing staff is tough for entrepreneurs, signing the entrepreneurs themselves is getting harder, too, as the number of accelerators has increased dramatically over the past two years.

Through other events and an open call for applications, the Morpheus, which Guglani and his wife, Nandini Hirianniah, founded in 2008, is now searching for its 10th batch of entrepreneurs to invest in. 

Over the past two years, as many as 40 privately owned, for-profit startup accelerators have set up shop across India. Hoping to mirror the success of Silicon Valley stalwarts like the Y Combinator and 500 Startups — which together helped outfits like Reddit, Dropbox, Airbnb, Taskrabbit, Twilio and Wildfire — they've already transformed the landscape for Indian entrepreneurs.

Like their more famous Silicon Valley predecessors, these accelerators invite applications from thousands of would-be founders. It shortlists them based on their ideas, education and experience.

Then the top candidates pitch their business plans to compete for spots in the program. India lacks competition anywhere near as fierce as Y Combinator, which invited 47 would-be startups out of 2,633 applications to interview for its latest batch. But veteran outfits like the Morpheus and brand names like the Microsoft Accelerator, in Bangalore, receive hundreds of applications for 10 to 15 spots, and that's not including the work they do on their own to ferret out talent.

Microsoft Accelerator CEO-in-residence Mukund Mohan, who founded and sold Buzzgain before taking the Microsoft gig, attends more than 80 events and meets thousands of entrepreneurs a year, he says.

Winners get money, office space, software tools, access to customers and investors, and business advice. Perhaps most important, though, is a stamp of legitimacy. That’s a big help. The would-be employees at the Hug A Startup have never heard of any of the companies that are hiring. They're here because they know The Morpheus.

The help doesn't come free, of course. The Morpheus, for example, takes a 7 to 12 percent stake in the startups it takes into the accelerator in exchange for an investment of about $10,000 — as well as 10-15 hours a day of sweat equity.

But because it's especially difficult to start a business in India most founders are happy to give their backers a cut. It typically takes a year and a half for a startup to get up and running, compared with six months in Silicon Valley. Where Silicon Valley landlords rent office space month-to-month, landlords in Bangalore, Hyderabad and Gurgaon often ask for as much as 10 months in advance.

“Lots of things are stacked against the entrepreneur,” Microsoft's Mohan said.

Even after the beer gets flowing, the inaugural Hug A Startup event doesn't offer too much evidence that's going to change overnight, even though The Morpheus can boast that most of the companies they've backed are still running and nearly half have secured follow-on financing

With two industrial-sized fans roaring, a few paper lanterns, and mattresses on the floor, it’s more airplane hanger than cocktail lounge. And a little eavesdropping suggests there's not much matchmaking going on — as much because the jobseekers aren't keen on the companies as because the founders aren't impressed with the applicants.

In one corner, a sales guy whose wife sells jewelry through Facebook has buttonholed Morpheus co-founder Hirianniah, trying to talk financing while she tries to keep her four-year-old daughter entertained. Pitch: “It's pure e-commerce, but in a different way, because we don't have a website.”

Near the free grub, three college students admit that startup jobs are still a no-go area where their parents are concerned. “Parents still think getting out of college and getting into a [multi-national company] and getting a salary of 3-4 lakhs [$6000-$8000] is the best thing.”

And Airwoot co-founder Prabhat Saraswat spends a no-doubt fruitless 10 minutes talking business models with a kid who complained downstairs that he wasn't impressed with the companies on display.

“I'm open to options,” the kid says later. “I'm not just looking at startups. But the thing is that at startups you can learn a lot of things.”

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