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In 1978, when Kiran Mazumdar-Shaw was just 28 years old, she decided to start a biotechnology company in the basement of her rented house in Bangalore with 10,000 rupees, or about $200, in seed capital – she had approached banks to lend more to her company Biocon but most bankers didn't even know what biotechnology meant.

"I faced multiple challenges: For one I am a woman, for another I was trying to set up this unknown type of company that would invent new molecules – no one was willing to fund it," she said.

"Then there were other factors: There was no startup culture in India, no concept of entrepreneurship, power supply was erratic, no infrastructure for labs and so on," she said from her offices in Biocon Park, a 90-acre campus in Bangalore that now houses the company's 5,000 employees. Today, Biocon has a market capitalization of more than a billion dollars.

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The company's major areas of research now include cancer, diabetes and other autoimmune diseases, such as psoriasis. The company had a breakthrough in 2013 when it announced the launch of Alzumab, a novel biologic drug that can treat psoriasis. The molecule is now being tested to see if it proves effective for other autoimmune diseases such as Type I diabetes and multiple sclerosis.

Although Biocon is a pioneer here, in the short span of less than a decade biotechnology has emerged as one of the fastest growing sectors in India, with the industry holding about a 2-per-cent share of the global biotech sector. According to a report published by the Indian Brand Equity Foundation (IBEF), India is ranked 12th in the world in the biotech sector and third in the Asia-Pacific region. It is estimated that, by 2017, the size of India's biotech industry will increase to $11.6-billion, almost tripling itself in five years.

Ms. Mazumdar-Shaw credits the sector's success to a variety of factors, including forward-thinking government policies, a ready pool of skilled and affordable talent, and, above all, the availability of infrastructure. In a country where the government is renowned for its inefficiency, the Indian government's Department of Biotechnology (DBT) appears to have made all the right moves. Set up in 1986, the DBT invested heavily in setting up world-class institutions of research in its early years. From setting up the National Institute of Immunology in 1987, to launching a national biotechnology strategy in 2007, the DBT is that rare government institution in India that created an environment for industry to flourish, say analysts.

"The Department of Biotechnology was spending lots on research but they realized that there was no connect with industry. So, taking a cue from the IT sector, which had shown great results by creating a startup culture, a decision was made to set up an autonomous body, outside the ministry that would fund innovative ideas and provide support and mentorship to take a product to the market – the Biotechnology Industry Research Assistance Council [BIRAC]," said Renu Swarup, managing director of BIRAC, created in 2011.

In four years, BIRAC has funded more than 300 new ventures and aims to scale up startups in biotech to at least 1,500 in the next three years. Most of these startups are aimed at creating innovations in the health and agricultural sectors.

"Given India's population of 1.2 billion, there are huge challenges for us to address in both health and agriculture," said Dr. Swarup. "We need frugal innovations. So, therefore, it's also a huge market for an entrepreneur looking to solve crucial problems."

To capitalize on the huge research potential in India, BIRAC, the Department of Biotechnology and the Bill and Melinda Gates Foundation launched the Grand Challenges India Initiative in 2013 to promote health innovation in the country. Under the initiative, both the DBT and the Gates foundation will invest $25-million each over the next five years to promote innovations in vaccines, drugs, agricultural products and interventions related to improving maternal and child health.

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"Our vision is clear: We want a $100-billion industry by 2025 and to that end we are also creating an equity fund," said Dr. Swarup.

Another institution set up by the Department of Biotechnology has also gone a long way in promoting biotech startups. The Centre for Cellular and Molecular Platform (C-Camp), set up in 2009, is a state-of-the-art facility that acts as a provider and developer of high-end technology in life sciences. The goal is to enable not just scientific research but also entrepreneurship. It is situated in the same areas as the National Centre for Biological Sciences and the Institute of Stem Cell Biology and Regenerative Medicine. As such, this part of Bangalore is now called a Bio cluster.

So far C-Camp has incubated 47 startups, including Bugworks Research Inc., a company that has generated a lot of excitement in the two years of its existence. With a staff of just 17 people, the company is doing groundbreaking research into the next generation of antibiotics using novel techniques that combine computational and biological techniques. It is a company that would not have existed were it not for C-Camp.

"It's incredible that everything I need to run a biotech startup, including regulatory filings in the U.S., is within a five-kilometre radius from my offices in C-Camp," said Anand Anandkumar, one of the founders of Bugworks, who explains that the company outsources everything, including the use of laboratories. "We have very little infrastructure costs because we use the C-Camp campus. Essentially, we are just a bunch of guys with laptops."

For Dr. Anandkumar, who worked for many years in Silicon Valley before returning to India, the availability of world-class infrastructure, combined with the government's willingness to ease the way, has led to a reverse brain drain.

"The last few years have seen top scientists come to work in India because everything they need is here, and it's more affordable than doing research in the United States," he said. "Talent does not come cheap but it's far more affordable here."

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Bugworks has just received a $2-million grant from a silent investor, and Dr. Anandkumar explains that kind of money would last just four to six months in a Western country; in India, it can keep Bugworks afloat for nearly two years. The company hopes to launch a product on the market within the next five to seven years.

Last year, Dr. Anandkumar, along with the CEO of C-Camp and a few others, created Escape Velocity Accelerator, a company that aims to accelerate biotech startups.

"The idea was to take brilliant ideas which are in research and mentor the researchers to take their ideas to the market," said Ashok Vohra, one of the founders of Escape Velocity.

"One of our challenges in India was that academia and industry were working in silos, so our attempt is to bridge that gap."

Mr. Vohra and his team now mentor four startups, including i-shield, a company that is aiming to fight infections through textile-based solutions.

"Imagine it as a pillow cover or a bed sheet that would be fused with a molecular agent that can fight off infections," said Mr. Vohra.

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Despite the excitement generated by the biotechnology sector, formidable challenges remain, say insiders. The one thing that worries most players is the lack of funding.

"It's still very difficult to get funding for a biotech company," said Ms. Mazumdar-Shaw. "The government has done its bit but most venture capitalists will still look at you in shock when you tell them the gestational period to discover a new molecule."

"So while BIRAC and others can do early-stage funding, the industry will grow only when there is serious capital," she added. "Most venture capitalists are too risk averse and still favour IT companies over biotech."

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