ENTREPRENEUR SPECIAL..................... BUILDING A NATION OF ENTREPRENEURS

ENTREPRENEUR SPECIAL BUILDING A NATION OF ENTREPRENEURS  Many crucial pieces needed for a vibrant entrepreneurial ecosystem are slowly falling into place, but only in a few big cities. The action needs to reach smaller towns and rural areas too.     These days much of Mindtree CEO Krishnakumar Natarajan’s free hours are taken up by Nasscom and, specifically, the 10,000 Startups initiative that Nasscom kicked off a year ago to help aspiring entrepreneurs. Before its launch, Natarajan, who is currently chairman Nasscom, says he was wondering what kind of response the programme would get. But nothing prepared him for the eventual response, which he puts down to nearly 7,000 applications. After several rounds of screening and filtering, the list was whittled down to 332. The 332 startups then pitched their business plan to over 50 angel investors, accelerators, angel groups, venture capitalists and mentors. Over 100 made it to the next stage, where they moved into accelerators and received mentoring to fine-tune their business plans and scale up. Elsewhere an ambitious project called the Startup Village — an incubator devoted to internet and mobile startups spread over 1,50,000 sq ft in Kerala — has been inundated with nearly 2,000 applications. “We have processed 542,” says its chairman 29-year-old Sanjay Vijayakumar, founder of a mobile startup himself. A charter member of TiE or The Indus Entrepreneurs, a not-for-profit dedicated to fostering entrepreneurship, which catalysed some of the changes that made entrepreneurship socially acceptable and desirable, says India is where the Silicon Valley was in the 80s. “There is still not enough of a critical mass,” says Sandeep Singhal, a TiE charter member and founder of Nexus Venture Partners, which has invested in ventures such as Snapdeal and NetMagic, now part of NTT Communications. The promise of building a country of entrepreneurs has never been this close or real, and convergence of multiple factors, including a growing population of young that is bold and willing to experiment, is making that possible. “The Indian entrepreneur is now released,” says Ravi Gururaj of Harvard Business Angels and head of Nasscom’s product council. “The young people today are spirited, determined, and willing to make sacrifices. There is little baggage of failure — although it’s not zero it has reduced dramatically,” he says. The events have aligned to create an environment that’s the right launch pad for millions of entrepreneurial ambitions. Aspirations have shifted from cracking a job with a multinational firm to staying hungry, staying foolish. From a dearth of role models to when the only success stories were of Indian entrepreneurs in the US, there are now enough Made in India entrepreneur successes to inspire cheering audiences. “Earlier, audiences were only interested in Indian entrepreneurs who came from the US. Now, they are more interested in Indian entrepreneurs coming from India,” says Saurabh Srivastava, who started TiE in India in 1999. TiE has seen attendance at its events and conferences go up several notches and the average age of the attendees fall down a few notches. P K Aggarwal, CEO, TiE Global and former chief technology officer of California state, puts the average age of the audience at its last TiE Entrepreneurial Summit at 26-27 years. “Talk about high energy — energy was bursting at the seams,” he says. According to Venture Intelligence, a research firm, the number of active angel investors and venture capital firms has increased from 51 in 2004 to 202 currently. But the dark side to the rosy story is that India is a tough place for entrepreneurs. A World Bank study ranks India at 134 in the ease of doing business, lower than its neighbours — SriLanka, Pakistan and Bangladesh. Silicon Valley investor Kanwal Rekhi says public policy under the current government has also been very poor. “They stopped exits on foreign exchanges early on. Unclear tax laws and random application of tax policy has stopped many foreign takeovers as huge money is held back in escrow for unknown future tax liabilities a la Vodafone,” says Rekhi. The bubbling energy and potential make for a strange contrast with the environment, which needs tweaking in some places and fixing in others. For instance, the Indian Angel Network (IAN), the country’s first angel network and Asia’s largest, invested in 18 ventures last year — higher than the global average for angel groups, which is 3-4 investments, says Srivastava, cofounder, IAN. But the quality of innovation and R&D coming out of major universities and finding its way into hot new startups in cities like London is far superior to those coming out of Indian universities, says Srivastava, whose angel network recently opened a London office and invested in a venture there. “Our universities are not the hotbeds of great ideas of innovation and entrepreneurial activity whereas globally, universities are a big source of many ideas. It is not just Stanford which has helped create Silicon Valley but even a MIT, Harvard, Cambridge, Oxford — these are places where phenomenal R&D is happening, where academia is interacting very closely with industry,” says Srivastava. He recommends that the Indian government give research grants, rewarding universities which do cutting-edge work with higher grants. “Today, entrepreneurship is beginning to be the preferred choice as compared to earlier when it wasn’t considered the best choice. We need to have enabling provisions which encourage investing in a startup instead of in buying a house,” he says. Ironically, in an effort to curb corruption, the government has introduced a provision in 2012 that could tax angel investments received by a company at 30%, which will have the opposite effect, says Srivastava. In a report created for the Planning Commission, Srivastava, who is a member of the National Innovation Council, also recommended that pension funds, insurance funds and provident funds be permitted to invest a small part of their corpus in early-stage venture funds, and banks also be encouraged to invest in these funds as part of their ‘priority sector’ funding to boost domestic capital investing in startups. The report recommends the creation of a fund of funds to seed other early-stage venture funds and setting up a National Entrepreneurship Mission with the mandate of being a nodal point for promoting entrepreneurship in the country. India is still early in the entrepreneurship evolution curve, according to Rekhi, who says it needs to see big exits like Baidu, Alibaba and Tencent in China. “We need more of everything. There is a special crunch for follow-on financings. In our case we saw over a thousand proposals and we invested in only six last year,” says Rekhi, who is also MD at Inventus Capital, a venture capital firm focused on Silicon Valley and India and whose investments included RedBus, now part of Naspers. Nasscom’s Natarajan says one of the common bottlenecks they found when working on the 10,000 Startups programme was that while people were interested in entrepreneurship they didn’t know how to go about building a company. As part of the its 10,000 Startups initiative, Nasscom has now put up over 75 videos that give aspiring entrepreneurs practical guidance on everything from creating sales teams in North America to how far they should go with angel investors. It also found that early stage support system — from converting a business idea to a viable proof of concept and scaling it up — was very fragile. “You need to build up entrepreneurial capability not just angel funding,” he says. There haven’t been efforts to evangelise entrepreneurship and implement changes to encourage innovative thinking and an entrepreneurial mindset in schools and colleges and people like Vijayakumar are acting like change agents to make that happen. Infosys vice-chairman Kris Gopalakrishnan who is a chief mentor at the Startup Village and who has also given it a grant, says even if only 3-5% of the startups registered with the Startup Village succeed, they would create innovative products and services and provide jobs to many others. “We need to encourage students to take up entrepreneurship, especially in a state like Kerala which does not have students starting businesses. Parents and family discourage them,” says Gopalakrishnan. Vijayakumar has worked with the government to bring about changes that allow students to get attendance credits for time spent in the Startup Village — much like the 20% time Google employees get to tinker with their own ideas. Like Nasscom, the Startup Village is also working to build closer connections with Silicon Valley to expose entrepreneurs to innovation and the way of work there. While Nasscom is doing a roadshow with 15 startups, the Startup Village has set up a permanent ‘landing pad’, office space and an apartment for about 50 people in Silicon Valley. Additionally, the Startup Village plans an academy of leadership in collaboration with Stanford and Harvard. To get students to start thinking like entrepreneurs and even start ventures while they were still studying, the Startup Village has introduced startup bootcamps in colleges where students play roles such as CEO, CTO and CMO. “College is the most creative period in life. It is also when people can take the maximum amount of risk,” says Vijayakumar. To date, a majority of the efforts to create an entrepreneurial culture have largely been concentrated in urban areas, thus excluding nearly 70% of Indians living in rural areas. A survey by Head Held High, a startup focussed on tapping rural India’s potential, found that even in small towns like Hubli and Dharwad (UIDAI chairman Nandan Nilekani hails from here) there were fewer than 1,000 jobs. “If there are no career paths, the only way is to create entrepreneurship as a career path,” says Madan Padaki, founder, Head Held High Services and cofounder of MeritTrac, which was acquired by Manipal Education. Most agencies, including the National Skill Development Corporation, working with rural people are focussed on creating job seekers, not job creators, he says. “There is talent, entrepreneurial spirit and huge aspiration but 100 kms out of Bangalore, there is no ecosystem for entrepreneurs.” For instance, the manufacturers of ‘Appu’ washing powder in Gadag district sell more than Surf or Nirma. They want to scale up and also leverage their distribution channel better. Padaki’s organisation is working with them and others like Manju, who owns a chain of tea shops that rakes in 40,000 - 50,000 in monthly turnover and looking to expand to nearby villages, by educating them through workshops. Singhal of Nexus says 20%-30% of traffic on e-commerce sites today comes from tier-III towns, where people access the internet on their mobile phones and through cybercafes. “TV has shown rural markets what you and I are consuming. TV created aspirational buying and the internet is enabling those transactions,” he says. Recently, Aggarwal came away impressed after witnessing a team of girls from Chennai in action at a TiE youth entrepreneurship event targeted at high school students. The girls, who he says were South Indian and shy, pitched a business plan for a venture on medical tourism that solved a world problem. “They had done the analysis, gone through the data-collection and worked out how they can reduce costs. They were fearless,” he recalls. Today, as Rekhi says, India is still crawling, while Silicon Valley is sprinting but if there were many more such stories, they could create bigger stories and bigger ventures. Then, India may well move to a trot and then, sprint. The size of the prize if India bets on its entrepreneurs, according to Srivastava’s report, could be 2500 new, successful, high-growth ventures with a combined revenue of over $ 200 billion by 2020. Creating a Culture of Entrepreneurship Forge links with entrepreneurial hubs such as Silicon Valley, London and Tel Aviv for knowledge-sharing and collaboration Promote closer connections between industry and academia and provide research grants based on quality of research work Incentivise angel and early-stage funding through tax credits along the lines of Singapore and the US Permit pension funds, insurance funds and provident funds to invest part of corpus in early-stage venture funds. Set up a fund of funds Provide platforms for collaboration between established industry players, start-ups, mentors and investors Tap into young talent in schools and colleges to create innovative cuttingedge start-ups Create a culture of innovation in education institutes by encouraging experimentation and removing stigma of failure Make investments and exits less cumbersome to create a vibrant ecosystem Create an environment to promote more inclusive entrepreneurship across rural and urban India and gender diversity KRIS GOPALAKRISHNAN Vice-chairman, Infosys & Chief Mentor, Startup Village “We need to encourage students to take up entrepreneurship, especially in a state like Kerala which does not have students starting businesses” KANWAL REKHI Founder, TiE, MD, Inventus Capital “We need more of everything. There is a special crunch for followon financings. We saw over a thousand proposals and invested in only six last year” SAURABH SRIVASTAVA Co-founder, Indian Angel Network & Member, National Innovation Council “Earlier, audiences were only interested in Indian entrepreneurs who came from the US. Now, they are more interested in Indian entrepreneurs coming from India” SANDEEP SINGHAL Co-founder, Nexus Venture Partners “TV has shown rural markets what you and I are consuming. TV created aspirational buying and the internet is enabling those transactions” KRISHNAKUMAR NATARAJAN Chairman, Nasscom; MD & CEO, Mindtree “You need to build up entrepreneurial capability not just angel funding” N ShivapriyaET140313