High-tech innovation now a two-way street

The migration of Indians to California has led many to become leaders in US technological advancement and they have started to take that expertise home.

Throughout history, diaspora have reflected economic or political disruptions, ultimately enriching the receiving countries. California's Silicon Valley's dynamic churn is the latest example, just as many Chinese and Indian migrants are returning home, ready to lay a new foundation for technological innovation and economic growth.

For some Chinese, immigration to the US reflected despair in the wake of Tiananmen; for others, it represented economic opportunity at a time of economic stagnation. Indians left for similar reasons, although less political: India's economy offered little future for the talented and ambitious, while opportunities abroad promised a better life. Seeking jobs and education, many of the best and brightest came to Silicon Valley.

Powerful push-pull dynamics made California a draw. Its universities offered world-class education. Programmes in engineering and computer science drew Indians in particular. This coincided with the run-up to the dot-com boom and was accelerated by the Y2K scare, which generated huge demand for programmers to fix the predicted problem. The gap was filled by importing engineers, primarily from India.

By 1986, almost 60 per cent of Indian Institute of Technology engineering graduates were migrating overseas, mostly to Silicon Valley. Research by AnnaLee Saxenian at the University of California's Berkeley School of Business found that by 1990 a third of the San Francisco Bay Area's science and engineering workforce was foreign born. A quarter of its engineers, some 28,000, were Indian, more than half of whom held advanced degrees. By 1998, as the tech boom neared its peak, 774 of the 11,443 tech firms started since 1980 had Indian chief executives. Between 1995 and 2005, 15 per cent of Silicon Valley start-ups were launched by Indians - the largest number for any immigrant group.

Today, about half of California's 475,000 Indian immigrants live in the Bay Area, making it the second-largest Indian community in the country after New York. Its profile is unique: median income is US$107,000 (Dh393,032); 75 per cent of adults have at least a bachelor's degree; and 70 per cent are in management or professional positions. The economic contributions are impressive: immigrants from India have founded well-known Silicon Valley companies such as Sun Microsystems (Vinod Khosla, Andy Bechtolsheim and Scott McNealy ); Brocade (Kumar Malavalli with Seth Neiman and Paul Bonderson); Cirrus Logic (Suhas Patil); and Hotmail (Sabeer Bhatia and Jack Smith). Indians have also provided pivotal contributions to technology innovation, including ethernet (Kanwal Rekhi), fibre optics (Narinder Singh Kapany) and the Pentium chip (Vinod Dham). Many Indian entrepreneurs, having achieved success, have gone on to become venture capitalists, investing in and supporting a new generation of start-ups.

Now a new migration is under way, which promises to spark fresh innovation in India. It has three drivers: reduced opportunity in the US after the dot-com collapse and the global financial crash; sustained economic growth of 8 per cent to 9 per cent in India, which may now offer more entrepreneurial opportunity than the US; and India's development as a technology platform and market with global scale.

Students are part of the story; India sends more students to the US than any country, including China. Most study computer science, business and engineering at graduate level. But while many of the best students continue to come and Silicon Valley remains a draw, perspectives are shifting. In the past most planned to stay indefinitely but many now arrive expecting to return home, perhaps with a few years' work experience. Regressive US immigration policies are a factor but opportunity is the driver.

Those who return home - and others assigned there by their companies short-term - find a receptive environment. While not lacking for business leaders or entry-level engineers, India is short on middle and upper-level managers with the skills needed by global companies. Venture capital is also in its infancy. This is where Silicon Valley comes in. In addition to employing tens of thousands of engineers, companies such as Intel, Google, Cisco and Oracle are staffing top levels of their India teams with California employees of Indian origin. The India offices of venture companies such as IDG Ventures and Sequoia Capital are also led by returnees who have teamed up with local partners. As many as a third of the participants in entrepreneurial forums such as Delhi's "Startup Saturdays" are returnees. Conversations readily turn to schools, colleagues and favourite restaurants in San Francisco. Flights between San Francisco and Bangalore, where many Bay Area firms have research and development centres, run full as entrepreneurs, employees and investors travel back and forth. Lufthansa's "Bangalore Express" is one of the airline's most heavily trafficked routes and its second-largest long-haul market.

Institutional intermediaries also play a role. The Indus Entrepreneurs (TiE)started in California, in San Jose, in 1992 as a dinner group of Indian expats, with the idea of supporting local entrepreneurs. Eighteen years later, TiE runs a global network of 53 chapters with 11,000 members in 12 countries. The largest contingent outside the US is in India, supported by active links to the "mothership", TiE Global, in Santa Clara.

The Bay Area-based Wadhwani Foundation, led by the Aspect Development founder and Symphony Technology Group chairman Romesh Wadhwani, also promotes entrepreneurship. Projects include the Wadhwani Centre for Entrepreneurship Development at the Indian School of Business in Hyderabad and the National Entrepreneurship Network, which has offices in Bangalore and Mumbai. The network, which aims to help Indians start companies, engages 233 institutions, 350 instructors and 250,000 students. Officials from Stanford and other US universities help with curriculum and development.

Another Silicon Valley resident and the co-founder of the Indian IT giant HCL is Yogesh Vaidya, who runs a national network of schools in India to train recent graduates in the skills needed to work in global enterprises. This combination of money and experience can be potent. Bala Manian, a founder of six Bay Area companies, is a case in point. His latest start-up REAMetrics, based in Silicon Valley and Bangalore, employs a team laced with returnees. Mr Manian moves between the Valley and Bangalore every six weeks, focusing also on his role as the investment committee chairman of the India Innovation Fund. Most of the entrepreneurs approaching the company have US and Valley roots.

Through all this a cultural conversation is taking place: despite its success in IT, an army of engineers and world-class educational institutions, risk-taking in India is not part of the business language and failure is usually permanent - as opposed to Silicon Valley where risk-taking is expected and failure is accepted. Few technological breakthroughs have originated in India and an entrepreneurial innovation culture has yet to take hold because the highest goal of university graduates is typically to work for a major IT firm, not start a company.

Silicon Valley venture funds and advisers such as Silicon Valley Bank aren't just bringing capital and supporting entrepreneurs, they also bring the experience, networking and hands-on support that helps convey the Valley's entrepreneurial ethos. Recent beneficiaries include: the first consumer internet company in India to go public Naukri.com, funded by Kleiner Perkins; India's first online gaming company Kreeda, funded by IDG Ventures; India's version of Expedia , Make My Trip.com, funded by Sierra Ventures; and Café Coffee Day, India's answer to Starbucks and funded by Sequoia Capital.

With its large market and many low-income consumers, India is developing its own brand of innovation, based on effective and low-cost services and technology deployment. Initially targeting domestic markets, potential applications are global. This home-grown entrepreneurship will gather momentum of its own. But for now, India's Silicon Valley diaspora is proving a key resource for both countries, recycling to India much of the energy, creativity and experience that made the Valley a global technology leader in the first place.

Sean Randolph, the president and chief executive of the Bay Area Council Economic Institute, is the author of a recent study called Global Reach: Emerging Ties Between the San Francisco Bay Area and India Yale Global