Higher employee costs of Mumbai is better than high attrition rate of Bengaluru: Startup founders

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Mumbai-based startup founders have voiced their preference for slightly higher employee costs as a strategic move to combat soaring attrition rates and the persistent threat of talent poaching, particularly in cities like Bengaluru and Gurugram. They made this comparison while comparing the thriving startup ecosystem in the financial capital, Mumbai, with the country's startup and tech hub, Bengaluru.

According to Mayank Kumar, co-founder and MD of UpGrad, the office infrastructure costs in Mumbai are now on par with Bengaluru.

“Office space cost is not an issue in Mumbai, per seat cost is similar to other cities. The payroll cost is slightly higher than cities like Gurugram but not Bengaluru which I think is at par. In comparison to Gurugram, probably we are seeing 5-10 percent increase in costs, but even with this the attrition rate is much lower in Mumbai,” he said speaking at TiE Con Mumbai 2023.

Kumar was in conversation with Ashwin Damera, co-founder of Eruditus; Aakrit Vaish, co-founder and CEO of Haptik; and Sreevathsa Prabhakar, founder and CEO of Servify - all members of the newly-formed Tech Entrepreneurs Association of Mumbai (TEAM).

Vaish concurred with Kumar's comments, saying that while building an AI company in Mumbai, he used to say that the cost of attracting talent here was okay because when they would go to other cities, there would be five other recruiters standing at a tea stall, ready to poach them.

Prabhakar highlighted comparatively lower layoffs in Mumbai and limited hiring to Bengaluru startups’ ongoing blood bath. “Building with efficiency is ingrained in Mumbai,” he said.

In Mumbai, UpGrad had laid off around 120 people earlier this year, though it continues to share its hiring plans. The edtech unicorn said earlier this week, that it plans to add around 500 employees abroad over the next three months.

Damera believes that, contrary to popular belief, founders do not need to be in Bengaluru to raise funds. He personally never felt the need to do so.

“Being in Mumbai has been a great advantage in terms of talent. For sectors like edtech, gaming, etc. we find a lot of design talent here for AR, VR, content, etc. Talent doesn't get poached here easily either,” he added.

Damera also shared that Naveen Tiwari, the founder and CEO of InMobi Group, was his classmate during their MBA days in 2005. Both of them lived in Andheri, but Tiwari eventually had to relocate to Bengaluru to raise capital.

In fact, Eruditus' current office in Mumbai is where Ola used to be located before it shifted its headquarters to Bengaluru, he said.