Target has long looked to India to fuel its software applications and back-office projects. Now, the Minneapolis-based retailer is doubling down on the country’s tech potential.
Come January 2014, Target is planning to launch the Target Accelerator Program, a corporate incubator — complete with funding, and possibly equity stakes in the cohorts — that it hopes will help it tap into the country’s startup culture and engineering talent to better compete against other retail heavyweights Walmart and Amazon. The selected startups will receive up to $30,000 in funding as part of the program.
The plans for setting up the accelerator in Bangalore have been underway for a year now. Over the past few weeks, Target officials have reached out to several startups, entrepreneurs apart from IT industry executives, some of whom have shared details about the accelerator with me.
Beth Jacob, Target’s global CIO, has confirmed to TechCrunch its plans for an accelerator — although it is still fleshing out the details.
“At Target, innovation is core to our culture and strategy and we are always looking for new ideas to enhance the shopping experience of our guests,” Jacob wrote in an email. “We are in discussions with a variety of partners and start-ups for a Target India Accelerator program. We have not yet settled on which start-ups will be included and continue to seek ideas which have the potential to help transform the retail industry. We are excited about this opportunity and look forward to sharing additional details once we launch the program.”
India is no stranger to incubators and accelerators, but Target’s will be the first started by a corporate in Bangalore, India’s tech capital, making it a much-watched test case for other corporates looking to set up similar ventures in India.
To pick up ideas for its new in-house accelerator , and to see more startups, Jacob also intends to plant herself in the front row of demo days across several startup boot camps in India next year, according to sources.
It’s a leap of faith, but if it works, it could encourage more entrepreneurs in India to look beyond simple “me-too” e-commerce plays, and instead work on the latest technologies that could impact outcomes in the global retail war.
This could just be the endorsement India’s $108 billion IT sector is looking for after years of being seen as a low cost, back office for Fortune 500 customers. And Indian engineers are beginning to play a role in the old world retailers versus Amazon battle.
The Target Accelerator Program to be launched in January will work with Indian startups specialising in big data, content aggregation, mobility and search. The accelerator has already invited several Indian startups for a pitching session later this month.
A website is in the works to formally open the application process for startups to apply, but Target wants to keep things quiet until the Black Friday and Cyber Monday are gone past, a person involved in the process tells me.
The accelerator will be managed by Lalit Ahuja, an Indian technology industry veteran who also helped the retailer set up its technology captive centre in Bangalore few years ago. Ahuja runs an accelerator of his own called Kyron, which will run the program for Target. Ahuja did not want to comment.
As part of the program, every year, Target will pick 1-2 product startups, give them up to $30,000 (includes cash and operational expenses) and hope that their ideas are able to help it compete better. Target has not yet made up its mind whether it should ask for equity stakes in return for monies invested in these startups.
Startups selected for the Target accelerator will get to work with one of the world’s biggest retailers and thus have distribution from day one.
So far, Target has invited Dataweave, a Bangalore based startup focused on big data analytics and funded by Blume Ventures, TLabs (Times Internet) among others, and Tookitaki, which combines online behaviour and social media data to offer targeted ads. Tookitaki raised $200,000 in April this year from investors including Blume Ventures.
The Bangalore-based accelerator will also help Target identify potential M&A targets at early, cheap valuations. There are at least a dozen big data, analytics startups launched in India over past two years that could be potential targets. Some of them include Qubole, launched by former Facebook engineers Ashish Thusoo and Joydeep Sen Sarma and Formcept, founded by IBM veteran Suresh Srinivasan.
Dataweave was incubated at TLabs in 2011, and was founded by Karthik Ramesh and Vikranth Ramanolla. The company offers retail analytics solutions such as Priceweave that helps e-commerce firms sift through pricing offered by rivals and compete real time.
Global corporates tapping India’s technology scene
Target is not the only firm planning to incubate the next big ideas in India. Coca Cola too plans to set up its corporate accelerator in Bangalore apart from Berlin and San Francisco, the NYTimes reported last week.
An Indian technology industry executive chasing some of these deals tells me that some Japanese electronics companies too are scouting for startups to partner with in India, especially in the area of display technologies and multimedia.
For Target, the accelerator is a big bet and also coming of age for the retailer’s software outsourcing from India. Target set up a captive technology center in Bangalore in 2005 to support several of its retail processes in the US and also develop custom applications. That centre has come a long way since then. It led the development of Target’s most ambitious IT project Target.com and even helped the retailer with its Canada launch.
All this has led Jacob and her colleagues to believe that Bangalore now has required talent pool and startups that can help it compete with Amazon and even catch up with Walmart Labs faster.
Until a few years ago, engineers in India mostly helped retailers including Walmart, BestBuy and Target run their software applications remotely and offered low-end voice and back-office support.
Jeremy King, CTO of the Walmart Labs, which has dozens of engineering teams in Bangalore working on everything from e-commerce to big data, tells me that this is changing.
“We’ve found the talent in India to be awesome, we run several key projects from WalmartLabs India that require deep engineering and data science talent – not to mention women and men who like to have a lot of fun and love a fast paced test and learn environment.”
With homegrown e-commerce success stories such as Flipkart, which recently raised $160 million from Tiger Global and Morgan Stanley Investment among a bunch of other investors, India now has a pool of engineers who are not just back office experts or coding lines of low end, commoditised software applications but also understand the pain points of modern retailing and software solutions that can solve them.
Walmart’s acquisition of Kosmix – Mountain View-based but founded by two Indians, Venky Harinarayan and Anand Rajaraman — may have played a role in building deeper engineering capabilities beyond vanilla software services in Bangalore. Then in June this year, Walmart acquired the Silicon Valley based analytics startup Inkiru to build newer e-commerce capabilities.