ENTRPRENEUR SPECIAL .....................Evolution of the Indian Entrepreneur

 Evolution of the Indian Entrepreneur





How the startup ecosystem has transformed over the decades, and where it is headed

Bengaluru-based Sarthak Paul has some big plans. His startup Mean Metal Motors -founded with two other friends is making India's first supercar. “It will match the performance of a Ferrari at one sixth to seventh of its cost,“ he claims. Mean Metal Motors is working on five concept cars of which two are ready, he adds.

Paul has been meticulously giving shape to his audacious dream over the past two years. He is collaborating with experts globally on some latest technol ogies. “We are focusing on six cutting edge technologies -many not used in cars today in the world,“ he says. For example, with MIT he worked on visible light communication (VLC) technology, a broadband transmission technology yet to get mainstreamed. He has tested new features like fingerprint keyless entry and cross hair technology, which helps im prove aerodynamics.

Paul has found a mentor and cofounder in award winning global supercar designer Pedro Almeida. “Two years back, I pissed the hell out of him. I would have sent him over 45 emails trying to connect. Finally he responded and was happy to help me with the startup,“ he says.

His 42-member team is spread across four countries -Portugal, the UK, India and Italy. While the Portugal and Italy members focus on body and styling, the UK members are working on simulations and the India ones are getting a handle on engines, transmission, aerodynamics, and electronics.

Paul's first prototype should be ready by early 2017; a year later he expects to have one off the assembly line. Four to five investors, including Swedish Hexagon, Grex Capital, and Jayem Auto, have expressed interest in his startup. And, by the way, this 22-year-old first-generation entrepreneur his parents are doctors -is still studying at Manipal Institute of Technology, and will graduate this summer. Paul isn't an outlier with his audacious ambitions. India's startup boom is being fuelled by the brashness of youth brimming with energy and optimism. And investors of all hues -big and small, local and global, angel and late-stage -are buying into their buoyancy. In the process, this startup generation is dramatically reshaping the entrepreneurial DNA of the country.“This is the golden era of India's entrepreneurial journey.

Entrepreneurs are the new celebrated, romanticised heroes,“ says serial entrepreneur K Ganesh.

“Earlier, entrepreneurs were focused on incremental innovations. But now we are seeing bigger and bolder ideas and startups with disruptive potential that are scaling up rapidly,“ says Bejul Somia, managing director, Lightspeed Venture Partners, a venture capital firm.

Ecommerce giant Flipkart, founded by Sachin Bansal and Binny Bansal, both in their early 30s, in 2007, is today valued at $12.5 billion (`79,350 crore). Its rival, the five-year-old Snapdeal, is valued at $5 billion (`31,740 crore). The little over four-year-old online taxi aggregator Ola Cabs, cofounded by Bhavish Aggarwal (29), is valued at over `15,000 crore. And they all seem to be in a hurry.

Vijay Shekhar Sharma, 34, debuted in the mobile wallet business through Paytm in 2010, and now wants to be the largest mobile commerce company in India.

“I don't think I have ever seen so many young people in India -many fresh out of college -with this kind of confidence and ambition to pursue their entrepreneurial dreams,“ says Ashish Dhawan, cofounder of ChrysCapital, a private equity firm. India's Entrepreneurial DNA At a macro level, this fresh burst of energy is altering the entrepreneurial fabric of the country built over decades.

Business historian Gita Piramal likens this period to two phases in modern Indian history: the 1930s -the period between the two World Wars -and the period immediately after Independence. “Both periods were marked by lot of entrepreneurial activity with very little bureaucracy to stifle them. Just like today,“ she says.

After Independence, India had to build from scratch. “There was this can-do attitude,“ says Piramal. Think of all the big business houses in the country today -the Birlas, Bajajs, Goenkas and Mahindras; almost all of them came into their own post-Independence. It is a similar situation today where the entire internet economy is being built from square one.And a new generation of pumped-up entrepreneurs has taken centre stage, with the bureau cracy having little role to play.

Future Brands CEO Santosh Desai sees another important shift. “Historically, Indian entrepreneurs have had a very mercantile mindset,“ he says. The trading mindset is relatively more transactional, less creative, cautious, risk-averse, a lot about managing environment and thinking incrementally. This was in sharp contrast to the disruptive entrepreneurial culture in say a country like the US in the 19th century when everything had to be built from scratch and creativity was at its peak. “The new generation's mindset is different,“ adds Desai. Shifting Landscape The change has been brewing over the last two decades. Since the '90s, post liberalisation, India's entrepreneurial ecosystem has been steadily evolving. “We have all grown up -startups, entrepreneurs, investors and even funds,“ says Ashish Gupta, managing director, Helion Ven ture, an early to mid-stage venture fund.

There have also been some significant qualitative shifts in the way today's entrepreneurs behave and operate.The Indian entrepreneur typically was emotionally attached to his business, nurturing it for life, in fact generations. Operating during the license raj era -an era of restrictions -it was not just business acumen that got him success; he also mastered the art of managing the environment.

Often patriarchal and feudal in his approach, he ran his empire like a fiefdom. The organisational DNA reflected all this. Often, within his company there was a formal and informal organisation. The latter comprised the entrepreneur's inner circle of trusted advisers, or the kitchen cabinet, who often called the shots. Ready for Reforms Economic liberalisation helped change much of that. As the economy witnessed a huge structural shift from the capital-intensive manufacturing sector to asset-light services, a clutch of educated, experienced corporate executives with little financial cushion and business legacy took the entrepreneurial plunge. Many of today's business icons -from NR Narayana Murthy and Sunil Mittal to Ronnie Screwvala and Rashesh Shah -earned their spurs in that era.

Economic reforms also allowed India to embrace the world, giving businesses a distinct export flavour. Cost and labour arbitrage became the buzzword as India became the back-office of the world with IT (Infosys, Wipro, TCS et al) and BPO services (Spectramind, Daksh, Genpact) gaining momentum.

By the 2000s, India's consumption story began to take shape giving wings to many an entrepreneurial dream. From PVR Cinema's Ajay Bijli to MakeMyTrip's Deep Kalra, a new breed of entrepreneurs took wing. Today's breed in the era of increasing internet penetration, ecom merce, social media and smart phones is tech-savvy, deeply networked, collaborative and their ventures have a strong internet flavour. Along with the broader Flipkarts and Snapdeals exist niche, verticalised online marketplaces for everything from furniture (Urban Ladder, Pepper Fry) to food (Zomato, Foodpanda) to healthcare (Practo, Lybrate). For instance Zomato, the seven-year-old online restaurant search and discovery service led by 32-year-old cofounder Deepinder Goyal, today is present in 22 countries, has snapped up nine companies in nine months and aspires to be a global player in its field.

“They [today's entrepreneurs] have an incredible global perspective and are completely plugged into the international ecosystem of investors, business trends and the like,“ says Infosys cofounder Nandan Nilekani. The Old Brigade It wasn't quite like that a few decades ago. When CK Ranganathan started personal products firm CavinKare in 1983 (then known as Chik India), his ambition was modest: to survive and run a sustainable business. Rah-rah growth wasn't an op tion for a simple reason: finding funds for that purpose wasn't easy. It took him three years to get an approval for a `25,000 bank loan (without a collateral).

Pradeep Kar, who founded networking firm Microland in the late '80s soon after returning from the US, recalls his modest ambition at that time -to touch revenues of `25 crore in five years. Few lenders at the time knew how to vet a technology business and lend money to a company that had very little physical assets.

An entrepreneur did not command much social respect either. Ganesh remembers when he quit HCL (Hindustan Computers Ltd then) to start IT&T, an IT services and support company, with a few friends in 1980, most around him were sceptical, including his in-laws. “What if it does not work? That was the big question worrying first-generation entrepreneurs like us,“ recalls Ganesh.

Failure was a stigma. Ganesh, an IIM alumnus, recalls facing interesting dilemmas. Quitting a corporate job meant returning the company car, telephone and other such `perks'. “At that time, in Delhi, there was a 20-year waiting list to get a telephone connection. A car and phone were luxuries then,“ Ganesh laughs as he remembers.

There were no role models. Government jobs were aspirational, and MNC ones a crowning glory. The question perennially was how many years would it take them to reach, as an entrepreneur, the salary one earned as a corporate profes sional. “You should do this when you do not have a job,“ many would advise Ganesh.

Doing business was equally difficult.Mindful of costs, entrepreneurs worked within a very middle-class culture, without taking too many risks. “It was a profit-focussed, very cash flow-driven mindset,“ says Rashesh Shah, cofounder, Edelweiss Financial Services.

With little access to capital, growth -dependent on internal accruals -was conservative and slow. Ajay Bijli, chairman, PVR Cinemas, who introduced India to the multiplex culture, agrees: “My philosophy has been that even at the pilot level we must be profitable. That concept is not relevant perhaps in the ecommerce world.“

It also wasn't a valuation game at that time, what with most businesses being bootstrapped by the entrepreneurs themselves. When Ronnie Screwvala founded media and entertainment firm UTV in 1990, he had no real money of his own, no financial backing from the family and, of course, no angels or VCs to lean on. “So one had to make a plan, hire teams, build a business, look at scale -with the objective of making everything pay for itself,“ he says.

Such tough origins, though, have their payback. “I think because funding was not an option it taught me re silience and the value for costs. It taught me to have a survival plan always and the true meaning and respect for the word `risk',“ Screwvala says.

Young Blood

It is a different world now. Hundreds of educated, young and seasoned executives, many fresh out of college, are looking away from a corporate career to turn entrepreneur. At least 40 students from the 2015 batch across IITs have decided to start their own ventures rather than take up a corporate job. “Today, the sharpest guys who will bring crazy startup ideas and build promising companies are all in their 20s,“ acknowledges MakeMyTrip cofounder Deep Kalra.Agrees Sanjeev Aggarwal, MD, Helion Ventures: “The younger crop's learning agility and capacity to think big is impressive.“

Rajiv Srivatsa, 36, cofounder, Urban Ladder, is one such young gun. Since his IIM days around 2004 he and his friend Ashish Goel wanted to venture out but they felt it was too risky and pursued the usual career track with Cognizant, Yahoo etc. In 2012, they started their online furniture store, which has got investments from Ratan Tata and SAIF Partners. “For us aggressive growth is very important. Forget another generation, we do not know what will happen in the next 10 years. The internet economy is changing so rapidly,“ he says.

For 22-year-old Sidhant Pai, Srivatsa may well seem from another generation. The son of a software engineer, Pai went to MIT for his undergrad and, whilst there, started work on low-cost x-ray machines as part of his research project. “As part of my research work, I met rag-pickers in Pune,“ he recalls.

That set him thinking on ways to improve their livelihood.

With the help of MIT professors and labs, Pai began work on devel oping a prototype machine that can convert plastic waste into high-end 3D printer filaments.

This would help substantially boost incomes of rag-pickers. To day, Pai is running a pilot project with 30 of the lads with the help of cooperative Swach Seva. While at MIT, he used all his smarts and networking skills to raise funds for his venture, called Protoprint. “It was challenging. I was turned down a lot,“ he says. He eventually managed to raise `82.7 lakh from multiple sources including Echoing Green, MIT D Lab and MIT's Ideas Global Challenge competition.

What does his social enterprise mean to Pai? “I am not doing this for money. I do not see an exit in a conventional sense,“ he says. He wants his startup to get on to its feet, become sustainable and improve the lives of rag-pickers. “I will be do ing this as long as I can add value,“ he says. Then he wants to shift his focus to something that he has been passionate about -pollution and climate change.

Investor Ecosystem

If entrepreneurs are evolving, the investor ecosystem too has kept pace. When Saurabh Srivastava started his company IIS Infotech in 1989, banks were not willing to lend and there were no VCs, PEs or angel investors.

The journey has been one of a kind. “In India, PEs came before early-stage investors like VCs or angels. The pyramid was inverted,“ says Srivastava. By 2003, PE funds had bought into the India growth story -a sharp contrast to the scenario three years ago after the dotcom bubble had burst.“Bengaluru was flooded with tech startups for whom second and third rounds of funding were not available,“ says Dhawan. They were gasping for funds. “Today there is a pipeline of funds right from the early garage stage to the IPO stage,“ he adds. India today has over 70 PE and venture funds, 62 angel investors and over 80 incubators and startup accelerators.

Over the last decade these investors have gained experience, made mistakes and learnt some important lessons.“None of us had any clue about investing in India. We all were starting afresh with little experience,“ says Dhawan. Today many have over 10 years of experience under their belt and their value addition is far higher. India today ranks as the fourth largest startup hub in the world with over 3,100 such ventures.

In tandem, a network of mentors and role models is giving wind to the startup wave. For example, The Indus Entrepreneurs (TiE), an India-flavoured network that fosters entrepreneurship, was born in 1992 in Silicon Valley. Since then it has gone global and today has 62 global chapters in 18 countries. TiE helps entrepreneurs network and educates and mentors them. In 2007-08, Indian Angel Network was set up to smoothen funds flow to early stage startups. To day, it has over 350 members and last year they funded around a 30 com panies p investing over o `76 crore after a vetting 4,000 4 entrepre neurs, ne says Sriv astava, as cofound er of Indian Angel Network.

Also, the new breed of en trepreneurs is frequently reaching out to each other for help -far more than they ever did in the past. The network today is a lot more open, democratic and collaborative. Kalra of MakeMyTrip points to fellow entrepreneur Sanjeev Bhikchandani, founder of Naukri, as a great mentor. “I love his brutal honesty. He calls a spade a spade,“ says Kalra.

In 2006, MakeMyTrip was setting up physical stores to comple ment its online portals.

The foreign investors were against this move.

“Sanjeev backed it and pushed it saying India is different and it is impor tant here. His experience at Naukri c ame ver y handy,“ he says. Kalra in turn is now doing his bit to mentor the younger lot.

He keeps two slots a week for this.

Crystal Ball-gazing

Despite the entrepreneurial surge, India is nowhere near Silicon Valley. “In In dia we don't have the framework for cutting-edge technology product com panies. Most of them are copy cats,“ says Dhawan.

It is a question of both quality and quantity of startups. In the US, angel inves tors invest $26 billion (`1.6 lakh crore) in about 50,000 companies annually. After filtering, early-stage VCs invest $25 billion in 5,000 companies. India is a fraction of that. Not many Indian startups are venturing into uncharted territory. While Indian companies are doing well in software services, products are getting ignored.

VCs too are taking the easy way out, says Dhawan. While they have been at it for some time, the community in India lacks the presence of hard-core techies that the Valley has. People like Vinod Khosla, who are not just entrepreneurs but also great techies, bring in enormous understanding. Executives in Indian VC firms do not have that depth of knowledge as not many have worked in the R&D space.

There is hope though. Dhawan says there are some great internet product companies under the radar. “I feel once the current round of ecommerce euphoria dies down by 2020 we will see much more robust and genuine product companies with global ambitions.“

Silicon Valley-based MR Rangaswami is managing director of Sand Hill Group, a provider of strategic management, investment and marketing services. An entrepreneur, investor and also a co-host of the Nasscom Product Conclave for the past six years, Rangaswami sees the technology products wave coming. “That product mindset was missing in India. But I think it is now at a tipping point.“ That will mark the next big wave -and the most significant one yet -in the evolution of the Indian entrepreneur.

Malini Goyal

ETM3MAY15