Bus. Std: Has Innovation shifted from Silicon Valley to India?

My latest column in Business Standard:

During a recent visit to the US, I spent a week in the Silicon Valley. The Silicon Valley is a hub of innovation. The freshest of ideas and work continues to happen there. In part, it is due to the ecosystem that is already in place the serial entrepreneurs who are on their second, third or even fourth venture, the angels who provide not just the seed capital but also the mentoring, the venture capitalists, the university backdrop (especially Stanford and Berkeley), and above all, the culture of risk. It is this mix that makes Silicon Valley unmatched globally.

The week that I spent in the Silicon Valley was my longest in four years. I did about 35 meetings during this period mix of friends, interesting technology companies, and entrepreneurs. As I look back on my meetings, there is one impression that I find hard to shake off the world’s innovation capital (in technology) is in a holding pattern waiting for the next new thing. Inventing the future, not waiting for it to happen, is something people in the Valley are used to doing.

There almost seems to be a hiatus as venture capitalists and entrepreneurs wonder what is the next big wave. Will it be next-generation search engines? Or web services? Or broadband wireless technologies like WiMax? Or all-in-one personal communicators? Or something different like biotech or nanotech? Whatever it is, it does not seem obvious in the Valley.

Out here in India, we have no such qualms. Outsourcing is In and Hot. Anything and everything that needs people and can be delivered over a wire can now be done from India. A recent Economist business lead story discussed the outsourcing of the IT departments in US companies as part of infrastructure management services. We are delighted about the fact that soon, Bangalore will employ more engineers than the Silicon Valley.

So, has the tide of innovation and entrepreneurship shifted from the Silicon Valley to the Indus Valley?

Far from it. A growth in jobs in and around urban Indian centres does not equate to the coming of age of India as an IT Superpower. There’s a lot more to be done if we have to at the forefront of invention and innovation. We definitely have an opportunity to lead in the next generation of computing and communications technologies, but for that we need to see beyond writing software, managing back offices and networks for international companies. India needs to build an ecosystem of innovation and entrepreneurship to build upon its success in services to occupy centrestage in the world of technology in the years to come.

First, we need entrepreneurs willing to take risk. As it turns out, there aren’t enough of them. Taking risk also means embracing failure. We had a boomlet in dotcom entrepreneurs a few years ago, but that bubble burst quite quickly as the realisation dawned that this was not going to be get-rich-quick phenomenon. Entrepreneurship is not just about making money, it is about inventing tomorrow. And for that to happen, many have to fail for one to succeed.

Second, we need early-stage venture capital and mentoring for the start-ups. Even as plenty of growth capital is available in India, there is very little finance available for entrepreneurs with passion and ideas. Part of the problem in India is that the VC funds have borrowed business models from the West, set up large funds, which in turn require chunky investments. So, even as it is possible for companies to get $5-7 million growth capital, it is nearly impossible to get a fifth or tenth of that amount for technology start-ups.

Third, entrepreneurs with the initial capital will need mentoring. India has a limited history of technology entrepreneurship and as such the bench strength is not deep. Start-ups face all kind of challenges in their early days as they seek to reduce the risk of failure. Advice from experienced entrepreneurs and business people is what they need to make sure they do not make silly mistakes.

Fourth, we need talent willing to join start-ups. This means that people have to look beyond the fat, rising pay packets and be able to share the risk (and reward) of the entrepreneurs in building up the new business. As salaries in the IT industry have risen and lifestyles have grown, it is easy for complacency to creep in. Instead of continuing the climb after reaching the top, we want to take rest! This continued hunger for growth and risk is what will create the success stories that will start the positive feedback loop of entrepreneurship.

Finally, there is a need to focus on the middle of the pyramid market. Between the two extremes of trying to create solutions for global markets from India (highly unlikely it will succeed because of the distance from the target customers) and the bottom of the pyramid (always a very large enticing opportunity), there is a middle in urban and semi-urban India which needs innovative solutions at different price points. As India develops, this is an increasingly promising target segment. Once it can be made to work with this segment, the solution can be extended horizontally to other emerging markets, and vertically to the bottom of the pyramid.

India has an opportunity to replicate the success of Silicon Valley by building its own Innovation Valley. Entrepreneurs seeking to venture out on this road with mountains beyond mountains would do well to remember these words of Dan Bricklin:

In big business, when you need to cross a river, you simply design a bridge, build it, and march right across. But in a small venture, you must climb the rocks. You don’t know where each step will take you, but you do know the general direction you are moving in. If you make a mistake, you get wet. If your calculations are wrong, you have to inch your way back to safety and find a different route. And, as you jump from rock to slippery rock, you have to like the feeling.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.