Emergic: Rajesh Jain's Blog

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Entrepreneurship in India

February 10th, 2009 · 14 Comments

Sramana Mitra wrote to me saying that Forbes has requested her to write a series on Entrepreneurship / Innovation in India, and she was keen to get more inputs from me and Emergic’s readers. Here is a discussion on her blog about the theme.

My thoughts:

  • Entrepreneurship is happening in India, but there isn’t enough of it and there isn’t enough of capital being invested into early-stage companies.
  • There are two issues: lack of angel funding (whatever little was there has now almost dried up) and lack of the first-round funding. Ventures need about Rs 1-5 crore to get started, and about Rs 5-15 crore in first-round funding. Most VC funds in India are either not investing in tech-focused cos. or need to invest $5 million (Rs 25 crore) given their fund size and the commitments they can make. India needs smaller funds with smaller overheads, with more operationally focused partners to mentor and guide early-stage companies.
  • The digital opportunities in the Internet and mobile space both have challenges. The Internet cos. are dependent entirely on advertising (which has stagnated) and the mobile cos. are hamstrung by low revenue shares from mobile operator payouts.
  • I continue to believe that the big opportunity in India is in building direct-to-consumer cos. in the mobile space, but this requires courage and capital.
  • Also, exits in India are few and far between. M&A needs to be part of the process and that is simply not happening in India.
  • Result: we have lots of small companies (since one can start) but few achieve scale. That is what needs to change.

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14 responses so far ↓

  • 1 Kumar // Feb 10, 2009 at 9:30 am

    Rajesh,

    I added couple of comments on Sramana’s blog.One of the things I mentioned is the tremendous opportunity in rural and semi-urban areas targeting specific sections of the economy..just wondering if it is worthwhile to look at synergies between BSNL, Novatium, MyToday Mobile VAS and Zoho suite of apps..there is opportunity to create hundreds of rural entrepreneurs who can act as Hubs to deliver this as an end-to-end service to consumers.

  • 2 Entrepreneurship in India | DesiPundit // Feb 10, 2009 at 9:44 am

    [...] Rajesh Jain at Emergic adds his thoughts. [...]

  • 3 Swaroop // Feb 10, 2009 at 12:02 pm

    Totally agree, especially the lack of angel investment / early-stage funding, speaking from personal experience.

  • 4 Siddharth Chawla // Feb 10, 2009 at 8:03 pm

    Largely the VC funds which exist for startups are focused on IT or mobile solutions. But very few seem to entertain startups which are offering products to healthcare or energy sector.

    With growing India there is huge demand for products and services in these sectors.

    The entrepreneurship ecosystem is really bad in terms of support (Legal, IP protection, accounting, mentorship).

    Besides these there is the factor of slow velocity of business compared to US.

    And I agree that M&A activity is rare in India and going public is difficult. These restrict exit options.

    Siddharth

  • 5 What Ails Entrepreneurship in India? A Demand Side Perspective | Gauravonomics Blog // Feb 13, 2009 at 7:20 am

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  • 6 Vishal // Feb 15, 2009 at 10:20 am

    It could be entrepreneurship in India is focused on solving the wrong problems. May be the fixation on solving every problem with Mobile and internet is not working.
    What are the local problems which entrepreneurs should solve and make money also.
    1. There is a huge population which earns very less but desires to grow in life.
    2. They do not want their children to lead a life which they are leading.
    2. They live in extremely poor conditions.
    3. They are mobile and keep moving from city to city.

    Is there not a business model to fulfill the needs of this huge market and also make money till these people become middle class ?

    Vishal

    Vishal

  • 7 Vishal // Feb 15, 2009 at 10:42 am

    Also, is there not a huge market of not so poor in India- the mom and pop stores, the small towns of India, the middle class of these small towns.
    Is there no business model which can help tap that market ?

    Vishal

  • 8 Sundar // Feb 15, 2009 at 8:51 pm

    1) Entrepreneurs from Metros and cities do well. They tend to be well connected
    2) Entrepreneurship is very hard for those in Tier II cities and below unless they have strong family / peer backing. Typically they could think of very small scale only
    3) Lack of acceptance of failure puts off many. Many brave souls without adequate knowledge of business env. have lost a lot and struggle for a living.
    4) Not easy to sell Indian product to Indians. Invented here (or we can not invent) syndrome is very strong (we tend to love American / British products more than Indian products and buy Indian only when it is cheap; still tend to look with suspiction)
    5) Not much high quality guidance /mentoring available
    6) Ecosystem is nascent and government support is minimal.
    7) There are too many micro issues in the ground level and provides effective entry barriers
    8) Working abroad provides deeper insight and confidence. Expecting lots of future entrepreneurs from this group.

  • 9 Kavita Monani // Feb 23, 2009 at 3:17 pm

    How supportive is the ecosystem in India – do investors, the government, and society provide for a foundation on which entrepreneurs can grow and flourish? It is a big question mark! Infact, there are immense opportunities in the education industry. The present vocational training institutes lack the elasticity to respond to labour market demands and a recent CLSA Asia-Pacific report revealed that only 23% of graduates were industry-ready.

    There is an international conference that is going to be conducted in the month of June which covers this topic which might be of interest to you.

    The conference website is http://www.isb/wced/isb-randconference

    Kavita

  • 10 Pramod Dikshit // Jun 28, 2009 at 12:17 pm

    Hello Rajesh,

    I totally agree with you. That is one of the reasons why we are not able to innovate to a great extent. India has to move on from an outsourcing hub to an innovation hub. Adding to your reasons, i would say we have to seriously revamp our education systems. In the US most of the start ups do come from Schools. Either Phd students or Masters Students. We will have to inculcate research and creative thinking mindset to be innovative which is seriously lacking. It also has to do with poor faculty(who mentor students in the US when they want to innovate)

  • 11 vikas shah // Oct 22, 2009 at 9:13 pm

    Rajesh,
    You have mentioned very less amount of M&A happening in startup field in India.Earlier also you have mentioned startupexchange concept.I want to start a exchange like that.I called u too.If you think it is a do-able and work-able business ,pls mail back.

  • 12 Robert // Nov 18, 2009 at 11:05 am

    I agree with you on the lack of angel funding and first round funding. Even with lots of business plan contests around, when it comes to obtaining funding, it is tough going for an Indian entrepreneur. The huge challenge is finding early stage funding so that s/he can scale up the company.

  • 13 Shankar // Feb 25, 2010 at 9:03 pm

    Hi, I’ve seen all the comments and there is a large stress on why Indians cant be inventors / innovators. Thats the crux of the problem. The moment you turn that around and think “I can be successful in India because of X reasons and for these Y problem I have the following mitigants.”

    Understandibly India is the envy of a number of entrepreneurs around the world.
    - 300 million middle class population
    - An economy getting richer every year and growing at 8-9% p.a.
    - Increasing investments per year to the tune of 30 billion USD
    - 5th largest internet users in the world
    - 2nd largest mobile phone user base in the world

    What else do you need? Think beyond angel funding and VC money. If your idea has legs, Indian banks will lend you money. The Indian family structure is such that raise your voice a bit, and most fathers will shell out half their life savings for their child’s development (albeit with a frown)

    It’s time for serious entrepreneurs to stop quibbling and start out .. one step at a time.

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