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TECH TALK: Envisioning A New India: Entrepreneurship

January 30th, 2002 · No Comments

Small and medium businesses are the engine of growth for nation. They are typically run by entrepreneurs, who make up their lack of resources with innovation and passion, along with a deep-rooted “native” understanding of the business. Entrepreneurs are in it not just for the destination (rewards) but because they also enjoy the journey.

India needs to build Innovation Valleys: clusters where entrepreneurship can flourish. Many nations worldwide have tried to replicate the magic of Silicon Valley and failed. Bangalore, to a limited extent, has succeeded in creating a technological hotbed. But unfortunately, ideas and the desire to start-up are only the first requirements. A lot more is needed to build a sustaining foundation for entrepreneurship.

Capital is the first requirement. Indian venture capitalists have gone from one extreme (to funding nearly every company with a business in the early 2000 era) to rejecting almost all. A balance is needed and the funding needs to go beyond just technology and IT enabled services. VCs need to get their “skin in the game”, and think about not living off the management fees they get from the funds but from the “carry” (the profits from the investments).

For India to go from, in the words of an article in McKinsey Quarterly, “emerging to surging”, a lot many entrepreneurs need to be backed with capital in diverse areas. The money required by entrepreneurs is not large (to the order of a few million dollars as the VCs are wont to fund), but smaller amounts (tens of thousands of dollars). What India needs are “microVCs”, akin to the microlending concept pioneered by Grameen Bank in Bangladesh. Today, entrepreneurs find capital almost impossible to get – the banks require onerous paperwork and cannot evaluate non-asset based businesses easily, while the VCs need a business plan and management team which can absorb lots of cash. A middle approach is needed with capital for entrepreneurs in India.

There are three considerations from the entrepreneur’s point of view: building first a base within India, extending to global markets (especially, other emerging markets, which have similarities with India), and using Technology and Knowledge as a competitive weapon in the business.

India has to be the first market – if entrepreneurs cannot win in their own backyard, it is going to be much harder winning elsewhere. Also, the domestic market needs to grow to create economies of scale, much the same way Chinese companies have done. At the same time, they should not be limited to India – competition is global, and we need to go where they are rather than wait for them to come to India. The focus should be on other markets which have similarities with India. Entrepreneurs need to build their businesses assuming the presence of the Internet and other technologies, and leveraging the Knowledge which the Internet makes available. Indians have a natural advantage with understanding English which can be useful here.

Indian entrepreneurs have to also work together better. There is this story about a lab having jars containing scorpions from many countries. All the jars except the one containing the scorpions from India are closed. When asked why the Indian jar was open, the researcher replied that whenever an Indian scorpion looked like getting out of the jar, the others in the jar pulled it down. This attitude needs to change. Co-opetition (a mix of co-operation and competition) is the need for the hour: co-operation so that the good ideas are built upon, and competition to let better ideas surface. Entrepreneurs thrive not as loners, but in clusters.

Tags: Tech Talk

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