What is the role venture capital can play in addressing these challenges?
Venture capital in India has to be thought about a little differently from that in developed economies. India lacks not just the ecosystem of seed (and angel) funding, but also a large base of first-generation entrepreneurs and education-industry interaction. In addition, the value chain of entities required to capitalise on the new world being created is also not there. So, how can venture capitalists help build out the Indian Internet and mobile businesses?
The focus in India has to be not just on identifying smart entrepreneurs, but on complementing them with experienced operational teams. In fact, I would go to the extent of saying that given that the Internet space in India is so underdeveloped, it makes sense to just identify people who can be CEOs of companies and give them the capital to build our the business. These people are not necessarily looking to leave their current positions as part of India Incs middle and senior management. They have to be encouraged to leave for the opportunity to build out businesses from scratch. The downside risk financially is limited. The upside can be large. What is needed is a mindset shift from working in a large company to building one from scratch.
I am suggesting this approach because Indias young entrepreneurs have limited operational experience. Passion is important and it will get a venture started. But the ability to execute is even more critical. Only a handful of companies succeed. The difference is not just in the passion of the founding team but in the way the companies execute and meet challenges. Given a couple of ventures, the entrepreneurs will learn the tricks of the trade. But time is at a premium. We have in India the opportunity to build the next Internet and mobile giants for billions like us across emerging markets. India is only the first market.
Being able to combine a passionate founding team with an experienced CEO who can build an execution machine early on will help in creating companies that are built to last (rather than built to flip). To these teams, venture capitalists should give plenty of capital frontloading the venture, rather than giving small amounts of money based on milestones. This approach helps the teams to think long-term and big, rather than focus on short-term goals. It is like building all the elements of a Disneyland together, rather than just building one or two of them.
Tomorrow: Role of Venture Capital (continued)
TECH TALK India Internet and Mobile+T