There’s an unspoken class system in Indian startups: First comes IIT and then everyone else

For years, graduates of the Indian Institutes of Technology and the Indian Institutes of Management have been treated as the holy grail across India’s industries – all the more so in its startup ecosystem. But as the sector matures, this seems to be turning into a problem.

From struggling to find investors to being sidelined at work, products of institutions other than the top rung feel they’re being treated unfairly.

Arpita Ganesh, a hotel management graduate from Hyderabad’s Osmania University, says she had a tough time setting up her online lingerie brand, Buttercups, back in 2013. “Another lingerie startup founder with the same idea managed to raise millions with her BITS [Birla Institute of Technology and Science] Pilani connections versus me, who had a good two to three years of experience in the field,” Ganesh told Quartz.

As of a year ago, nearly half of the startups in India had one or more founders who studied in one or more of the country’s top four engineering and management colleges: the IITs, IIMs, BITS, or the Indian School of Business.

This proliferation is unsurprising, given the hyper-competitive environments of these campuses. However, many believe ideas cannot solely be judged on academic pedigree – or rather, the lack thereof.

The struggle

A degree from an elite institute is often a ticket to success in India’s tech startup industry, and those lacking one can find it hard to get backers.

“When [non IIT-IIM founders] get attention or funding, it’s usually because they already have a successful product or a track record. IIT-IIMers are likely to attract attention even before that stage,” said Prasanto K Roy, who works with industry bodies such as The Indus Entrepreneurs and Nasscom.

Because of these unfair advantages, the ecosystem can seem like an exclusive club of sorts where “relationships rule supreme in the business world and often outweigh excellence,” said Sujaya Banerjee, founder and CEO of Capstone People Consulting, a management consulting firm. Entrepreneurs who are not alumni of elite schools but are receiving funding on the strength of their ideas are “too few and far between,” she said.

Venture capital firms value the products of these top colleges highly since their top brass itself often comprises of such alumni.

“These managers can’t accept that a person from a lesser-known institute or without a degree can come up with a great idea,” said Vishwa Vijay Singh, co-founder of Salebhai.com, an Indian sweets and snacks delivery startup. “In India, a chaiwala (tea vendor) can become the prime minister but a chaiwala can’t get funded.”

Some investors themselves admit their community’s guilty. “We are lazy to access the length and breadth of our vast country to back good people and spend additional time and effort with them to ‘polish their rough edges,’” said Japan Vyas, co-founder and managing partner of venture capital firm Sixth Sense Ventures. Investors must stop being starry-eyed about a founder’s alma mater and focus on the substance instead, he added.

However, the bias is not limited to investors.

At least two second-tier college graduates now working with startups in Bengaluru spoke to Quartz about feeling sidelined by their bosses who are more keen on hearing out the IITians on the teams. The two did not wish to be identified for fear of reprisal.

“A closed bubble is never good for any industry. An idea can come from anywhere and India is a great example of the same,” said Geetika Dayal, executive director of he Indus Entrepreneurs Delhi-NCR. “Many social entrepreneurs [from beyond the IITs and the IIMs] have been successful because they worked on their own insight and problem to solve it for the rest of the community – they were their own target audience.”

After all, even India’s largest e-payments platform, Paytm, was founded by Vijay Shekhar Sharma, a product of the lesser-known Delhi Technological University.

The other side

However, graduates of top-run colleges, who turn successful entrepreneurs, believe their education deserves some credit. Among other things, they highlight the exceptionally hard acceptance rate at IITs – a minuscule 2% – which ensures that the students are top-notch.

“These colleges have a self-selection bias. It’s a fact that it’s tougher to get into a top IIT or IIM than most leading international colleges,” said Deep Kalra, co-founder and global CEO of online travel bookings site MakeMyTrip. Kalra went to IIM Ahmedabad.

Along with their rigorous academic environment, students also benefit from strong alumni networks of influential investors and industry veterans. So it’s often easier for these aspiring entrepreneurs to get access to funding and mentorship.

Yet, connections can only take one so far.

“Degree only gets you the meeting, not funding,” said Harsh Snehanshu, CEO of writing app YourQuote.com. He and his co-founder Ashish Singh – both IIT Delhi alumni – bootstrapped from 2015 until late 2017, during which time they built three products that failed. “All those three products landed us meetings with top investors, but none of them invested – primarily because the traction or revenues weren’t up to the mark,” he said.

The silver lining

Meanwhile, there are a few who see merit in products of smaller institutes.

“Such talent is more stable at jobs, more willing to listen, and mostly cost less,” said CyberMedia founder-publisher Pradeep Gupta, an IIT Delhi and IIM Calcutta alumnus and co-founder of Indian Angel Network.

Others insist that the hardships that alumni of colleges with lower profiles face often make them better at their job.

“Entrepreneurship is also about art, about imagination, and intuition,” said Venkatesh Iyer, founder and CEO of Mumbai-based fast-food chain Goli Vada Pav. He studied at Mumbai’s Mulund College of Commerce and today runs over 300 stores across 100 Indian cities. “Entrepreneurship is also about trying new things and handling failures.”

This article first appeared on Quartz.