In 2014, venture capitalists invested nearly $5 billion in Indian startups, mostly across metro cities. Hyderabad, with less than 10% of the pie, was miserably behind Bengaluru, Mumbai, Delhi and Chennai. Founders would often relocate to Bengaluru and engineering graduates would skip town at the first chance.

The trend had to be reversed. But Andhra Pradesh had been in a state of political disarray for long now. An era of political instability ended that year when Telangana, India’s 29th state was born.

The newly formed government, led by chief minister Kalvakuntla Chandrashekhar Rao (KCR), was keen on building a legacy. Part of the big plan was to put Hyderabad at par with global startup ecosystems. KCR’s son, K T Rama Rao, was anointed the minister of IT and industries amid charges of nepotism.*

Around the same time, Srinivas Kollipara, who was running the IIIT-H incubator in Hyderabad, had been contemplating his next move. He met K T Rama Rao (KTR), eager to restore Hyderabad, its biggest city, to its former glory.

“I’ve always stayed away from the government,” says Kollipara. One of the lessons he says he’s learned is that if a government runs such programs, it doesn’t work. “Ecosystems need to be run by entrepreneurs — not academics, politicians or bureaucrats,” he says.

But a week after meeting the minister, Kollipara was in KTR’s office with a plan. The idea was to take the government’s support to begin operations and create an incubator which could sustain itself without being a drain on state finances year after year. Soon after, T-Hub was born.

Spread over 70,000 square feet, with over 200 startups, it is already India’s largest startup incubator.

But that’s not good enough when you are up against Bengaluru, the centre of the flat world, often cited as one of the best startup ecosystems in the world. The state now has set in motion an ambitious plan to put Hyderabad on the global startup circuit and also make Bengaluru, ‘India’s Silicon Valley’, sweat a little.

In the next 18 months or so, Hyderabad wants to be home to the world’s second largest startup incubator. The centre piece of the second phase of T-Hub will be 3.5 lakh square feet (the size of 6 football fields) building named the Reactor building in the middle of Hitec city, the IT cluster in Hyderabad. The government has already sanctioned Rs 180 crore (about $30 million) for the project.

The largest startup incubator in the world is being built in Paris, by converting a 35,000 square meter (3.7 lakh square feet) abandoned railway yard.

“It is going to be a fancy place… we’re looking at the global stage,” Kollipara told FactorDaily. “We’ll have incubators, accelerators, service providers, corporate innovation divisions and everything that takes to build a startup ecosystem,” he said.

If all goes according to plan, the building to be readied in time for the World IT congress in Hyderabad in 2018, will host nearly 5,000 startups. The building, cantilevered off four large pillars, is designed by Korean architecture firm Space Group.

To be sure, fancy buildings and political will won’t be enough to guarantee success. One of the challenges for KTR and Kollipara will be to lure startups and investors away from Bengaluru, which is only an hour’s flight away. The garden city not only attracts the largest amount of venture capital funding, but also offers access to talent.

Also see: Google selects six Indian startups for accelerator programme

The other challenge is to demonstrate political stability. “Both are not a challenge honestly. Nowhere in the world has it happened that an ecosystem didn’t come up because it is close to another,” says Kollipara who points out that Boulder, Colorado is a good startup ecosystem despite its proximity to the Bay Area in California.

“If you are going to compete directly with other guys, you’ll lose,” he says. To that end, the plan is to find gaps that exist and address them. “For instance, talent is a big problem now,” he says. The availability of talent was what gave Bengaluru its edge earlier.

“A city like Bangalore can boast of talent liquidity,” says Nikhil Jois, the cofounder of Bengaluru-based Eventosaur. Jois runs his startup out of the 10,000 Startups incubator in Bengaluru. As Karnataka’s IT minister Priyank Kharge pointed out in his interview with FactorDaily, Bengaluru has invested in engineering talent for many years now. But with many deep pocketed startups in the city, the competition for a limited set of high quality engineers is much more intense in Bengaluru these days.

Telangana is off to a good start though. “The role government can play is in market-making and removing irritants to doing business. Hyderabad leapfrogs ahead of any government in India in doing this. So T-Hub gets full marks for that,” says Thiyagarajan M of software product think-tank iSpirt.

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Kollipara says that since T-Hub has “unprecedented” political backing, its ability to help create startup friendly policies is higher than other states. Peer-to-peer lending, for example, or block chain technologies currently operate in the grey areas when it comes to government policies. “What we’re proposing to do is that we put these out to the Telangana government and measure impact… check out how did fintech pick up after this new policy was put in place,” said Kollipara.

“I’d argue that Telangana is one of the most stable states now,” says Kollipara.

Building a culture of “paying it forward,” will be crucial for Hyderabad. “As someone who has grown up in both Bangalore and Hyderabad, I can tell you that the tendency towards the ‘GRE+ MS in the USA route’ is what has hurt Hyderabad the most,” said Jois.

A few startups that went to Bengaluru have started going back to Hyderabad. “That has never happened before. People would go to Bangalore and stay,” says Kollipara. Marketing software maker AppVirality and photography marketplace FlatPebble are among the ones that returned. Mobile commerce company MartMobi Technologies Inc, the first Indian startup that got into US-based accelerator program Techstars, was from Hyderabad and was later acquired by Snapdeal.

But these are still green shoots. If T-Hub lives up to its promise, it could be a big deal for Telangana, the newborn state trying to project itself as an attractive investment destination.

*Note that Karnataka has appointed Priyank Kharge, the son of senior Congress leader Mallikarjun Kharge, as minister for IT.

Update: 7 June 2017, 12.59 PM IST: Earlier version of the story said Karnataka has set in motion an ambitious plan to put Hyderabad on the global startup circuit. It is in fact Telangana which set the plan in motion. The error has been fixed.

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