Perhaps you are a bit old-fashioned like me and think that all this is a bit excessive. Maybe like me, you dislike T20 cricket and loathe noisy superbikes. Maybe you are telling yourself that BharatPe is one of those fancy, upstart companies that’s doing this as a splashy publicity stunt. 

Well, that’s what I thought too, until a couple of days back, when I saw the news that HCL Technologies, one of India’s oldest and most storied IT services companies, was taking this one step further. HCL is planning to give its top-performers Mercedes-Benz cars. 

HCL Technologies!

Clearly, there’s something new happening in India’s tech industry. 

Others have spotted it, too. Here’s Manish Singh, who wrote a piece in TechCrunch a couple of weeks back about how, all of a sudden, everyone is struggling to find engineers in India. 

Over the last few weeks, as funding for startups in India surged to never-before-seen levels, and as older startups have started to go public, this has led to several other consequences. One of those consequences is that while capital may be nearly unlimited, there exist other limits which prevent Indian tech companies from expanding. Two weeks back, we wrote about one of those limits—the size of the internet consumer market in India. We wrote about a secret that many in the industry know, but few talk about, that the number of active online purchasers in India is the population of Sweden, and how all consumer internet companies are fighting for these users. 

Today’s story is about another limit—the breadth and depth of engineering talent in India. 

It’s called the 10,000-engineer rule. 

Let’s dive in.

If it’s becoming harder to hire quality engineers in India, it’s fairly obvious that we have a demand-supply mismatch. Engineering salaries, which were already quite high, have now reached absurd proportions. This likely means that there’s a natural limit to quality engineering talent in India, and that we are experiencing it right now. 

This is why we are in the right place and the right time to figure out this limit. We couldn’t have done it earlier because we never knew how deep our engineering reserves ran, but we can do it now because we’re clearly exhausting our reserves. Companies wouldn’t be throwing around bikes and cars as incentives to get talent if this wasn’t the case. 

Also, engineering talent is one of the most important resources that will determine the future growth potential of India’s fastest growing technology sector, so it’s worth calculating. 

But it’s also a hard calculation. 

Calculating the number of quality engineers in India is harder to do than, say, market-sizing and forward projections of the industry, which as it is, is the business equivalent of fortune-telling. To make matters more complicated, there’s a measure of quality in this calculation, which makes the whole thing subjective. There are no research reports which tell you how many good engineers exist in India. There are no industry sources, VCs or founders who know this number definitively. 

But like everything, there are clues. 

We can make some assumptions. We can triangulate. And we’ll probably come close to the answer. You can try making your own calculations, and it’s likely that with your assumptions, you’ll arrive at a different number. But all I can do is show you my math, and hopefully you’ll be persuaded. 

The first clue we have is that this number is small. 

We know this because of BharatPe. 

Initially, my assumption was that BharatPe was creating all these incentives because it really wanted to expand its engineering team by several hundred employees, which meant that it needed thousands of quality applicants, and that’s why it was going all-out with these incentives. 

Turns out, that’s not really true. BharatPe’s current engineering team is about 60 people, and the company has stated that it intends to recruit 100 more engineers over the next year. 

Think about that for a moment. 

All those bikes and Dubai tickets. 

All that fuss for a hundred engineers.

This tells us that the pool of talented quality engineers is small. 

But how small? 

Well, we can assume that good engineers likely end up in places who can afford to pay and retain them, offer a great career and cutting-edge problems to solve. It’s fair to assume that this means that the companies where good engineers currently work are likely well-funded, and are market leaders in some form or the other. 

If we assume this is true, then we have to begin with well-funded technology companies in India, starting with the unicorns—the ones valued at $1 billion or more. Since technology is a foundational aspect to scale, there’s likely a correlation between the valuation of the company and the size of the engineering team. 

We can check if this is true. 

Let’s take the top ten unicorns in India, arguably the hottest clusters of engineering talent. Collectively, these ten companies are valued at a little over 100 billion dollars. If we plot their valuations against the strengths of their engineering teams (as per their respective LinkedIn company pages), this is what it looks like. 

Is there a constant ratio between the valuation of a company against the engineering strength? In other words, what’s the number of engineers needed per billion dollars in valuation?

Well, this is what that graph looks like

This is quite remarkable for many reasons. 

First, it’s obvious that some kinds of technology companies need more engineers than others. Byjus, which has built its valuation on a series of acquisitions and does not necessarily depend on a tech moat, has the lowest ratio of engineers per billion in valuation—38. This partially explains why edtech companies are able to suck up funding like crazy. They need tech to a certain point, but beyond that they don’t need engineers to scale. 

Second, it’s not really clear why Ola, a logistics company, has so many engineers relative to its valuation. There are a couple of explanations. Ola is trying out a range of things, from food to electric cars and many other initiatives, and it’s possible that it has bulked up to accomplish this. Also, there’s the little matter that Ola’s valuation is all over the place depending on who you ask, so maybe it’s best not to read too much into this. 

Third, Swiggy may look like it has a high engineering density relative to Zomato, but remember that Zomato just went public at a valuation of $8 billion and Swiggy is still at a $5.5 billion valuation, so this may be a factor.

In any event, we aren’t trying to analyse individual companies but the entire market, so these variations, while instructive, are also a distraction. If there’s one takeaway, it’s this. 

When it comes to the top 10 Indian startups, the average engineering strength per billion dollar valuation is 77

In other words, if a company wants to increase its valuation by a billion dollars, on average, it needs 77 more engineers. 

There’s a second takeaway. 

The top 10 most valued companies in India have a combined strength of 8,000-odd engineers, most of whom could be assumed to be “good”. 

Cumulatively, this pool has arguably the highest quality of engineers in the nation, most of whom are highly paid, motivated, and talented. Once you add in the Big Tech US companies which aren’t on this list but also employ good engineers in their India development centres—the likes of Google, Amazon, and Microsoft—you end up somewhere close to 10,000 engineers. 

Of course, this does not mean that the engineers who work at other companies are chumps. In fact, one could argue that they are probably better at solving other kinds of problems—things that companies do to evolve into larger, more established outfits. There are a little over 50 unicorn companies in India. Once you get past the top 10 listed above, you encounter companies like Meesho, CRED, Delhivery, Razorpay, Postman, Unacademy, Chargebee, and Groww—all of whom also have a tremendous cluster of engineering talent, but in smaller numbers. 

These 40-odd unicorn companies have a cumulative valuation of around 80 billion dollars.  

The next rung of 150-160 companies are those which aren’t unicorns yet, but are growing rapidly and are on their way to get there. There are companies like Licious. Khatabook. Livspace. Practo. Cure.fit, etc., which are valued between 500 million to a billion dollars. Down the spectrum, it also includes smaller companies, valued at double-digit millions of dollars. It’s reasonable to assume that these companies cumulatively have a valuation of...maybe 40-45 billion dollars. 

Taken together with the 40 unicorns, these 200 or so companies have a valuation of around 120 billion dollars. 

Assuming the 77 engineers per billion valuation ratio still holds, these companies cumulatively employ another 10,000 engineers. 

That’s what the engineering pyramid looks like. 

10,000 engineers in the top 10 companies. 

10,000 engineers in the next 200 companies. 

And likely another 10,000 distributed across the 3,000-odd other funded startups in the country. That’s more or less where the pool of highly-sought after engineers in India comes to an end. The remaining engineers are spread across IT service companies, agencies, support functions like IT, unfunded startups, MNCs, offshore units, smaller SaaS companies, boutique service firms, and the like. 

So what does this tell us about the future? Yes, India’s tech talent is astonishingly shallow right now, but can this grow?

Of course it can. Talent regularly goes through mismatches in demand and supply cycles. In fact, if you ask me, there are two key points to remember about engineering talent. 

Engineering colleges have mostly done a terrible job of creating engineering talent. 

It’s been nearly two decades since engineering colleges started sprouting up left, right, and centre in India, all to take advantage of this massive shift, which was apparent even back then. Since then, it’s fair to say that apart from a few top-tier universities, the remaining institutes haven’t done much to bolster engineering talent in the country. 

A report last year by edtech startup Scaler suggested that just 3% of the 1.5 million people who graduate in India with an engineering degree every year get a job that offers them learning potential. That’s less than 40,000 engineering graduates a year. Over time, a large chunk of these students either choose to go abroad, start up, go to B-school or just pursue other fields—further thinning the ranks. 

Coding and Engineering are not the same thing 

While engineering colleges have mostly failed to deliver, others are stepping in. Take Freshworks*, which has created a program to identify and train people in coding, which it intends to use to address this shortfall. 

The more things change, the more they seem to remain the same. 

But why is this cycle repeating itself? Granted, the number of startups and funded companies in India is far greater than in 2014, but so have the number of engineers who graduate every year. So, why are companies still doing the same things to attract and retain talent?

The answer lies not in the number of ‘quality’ or ‘good’ engineers, but the number of expert engineers in India. 

Ask any company and they will tell you that hiring fresh graduates is never the problem. At an entry-level position in most product companies, the basic requirement from any engineer is a sound knowledge of coding and some semblance of logical and structured thinking. This is in short-supply, but it’s not prohibitively difficult to find. 

The real challenge is what happens when companies start to scale. 

Because once companies scale, the problems start to become more complicated. If you are an e-commerce company, getting engineers to build a system to manage a hundred or even a thousand orders a day is trivial. However, once you reach several hundred thousand orders a day, things become much more difficult. And there are very, very few tech people in India who understand how to do this. Higher order problems require deeply experienced engineers who aren’t good coders, but are masters of what they do. Back in 2014, it used to be Big Data Platform Specialists, Software Architects, and Engineering Managers. These were the key talent who knew how to solve complex problems to achieve scale. The future of companies like InMobi depended on attracting and retaining specialised engineers like this. 

Just like how the future of companies like BharatPe depends on finding and retaining the specialised expert talent that every FinTech company in India is fighting for right now. 

We know that 10,000 engineers reside inside the top 10 companies, and maybe another 10,000 in the 250 companies below that. And the rest spread out across startups and other companies. This includes entry-level engineers, mid-level engineers, testers, front-end developers, managers, architects, and many more. 

But how many of these engineers can be labelled as masters or experts?

Well, I have a number. It’s a guess, but it’s a number. 

One way to measure mastery is the famous (and somewhat controversial) 10,000-hour rule as proposed by author and journalist Malcolm Gladwell. Essentially, Gladwell believes that the key to achieving true expertise in anything is simply a matter of practicing it for at least 10,000 hours. There have been many rebuttals to it, but it’s the best we have. Gladwell suggests that this will take 10,000 hours or put another way, 10 years of training. 

Ten years back, in 2011, InMobi became India’s first unicorn. It was soon followed by others like Flipkart, Paytm, Zomato, and many more. It’s fair to say that a number of expert engineers in India today are a part of that early cohort—the ones who started their careers at these companies, and formed the early ranks and learnt their skills in the first product tech companies. 

These are the engineers who went up the ranks to become architects, managers, and leads. This is the cohort that has spent the last ten years building the foundation blocks, the platforms, and the systems that power India’s entire product tech industry today. They are the ones who scaled companies and propelled dozens of companies to where they are today. These engineers are the experts and the masters.  

How many are they?

I don’t know. But if we graduate 40,000 engineers annually today, it’s not unreasonable to assume that the cumulative number of engineers working at all product tech companies in India a decade back was, maybe, a fourth of that. 

And that’s the 10,000-engineer rule.