Sunday, 20 January 2008

On the state of Indian entrepreneurship

A couple of weeks back I wrote this piece for The Mint newspaper on the state of Indian entrepreneurship.


It has been 17 years since I quit my marketing job in a well known MNC to embrace the topsy turvy world of entrepreneurship. At that time it was rare for a somewhat educated young Indian to pursue a career that did not offer the security of an assured monthly pay check. Those of us who decided to take the road less travelled were considered oddballs by people of my parents’ generation: “Arre Sanju itni acchi naukri mein tha, IIM ke baad ye sab karne ki kya zaroorat thi”, was the question my parents would often be asked.


The contrast with the early 1990s is visibly stark now. Just a month back, Hitesh and I spoke at the Tie Entrepreneurial Summit in Delhi attended by more than 1,600 people—many of them start up entrepreneurs and an equal number aspiring to be entrepreneurs. Every month at our company we get dozens of requests for mentoring, funding, partnerships and alliances from young entrepreneurial companies. The start up scene in India is buzzing.


Today, when I meet parents of young entrepreneurs they don’t hesitate to tell me--and it’s with a tinge of pride--that their child is doing a start up with a couple of his friends from business school: “aajkal start up ka bahut trend chal raha hai, you know.” It is now socially acceptable, perhaps even respectable, to be a struggling entrepreneur.


In 2008 we can expect this trend to continue unless there is a global meltdown like the one in the year 2000.


There are a number of other, related changes that have also taken place. Organisations such as Tie have created a platform where start up and wannabe entrepreneurs can network, learn and receive mentoring from successful entrepreneurs, investors, consultants and domain experts.


An entire entrepreneurial eco system has sprung up.


Venture capital is now available. Of course not everyone has the good fortune to get funding—but at least it is available for most good teams and good ideas. Two decades ago there was only one real VC firm in India—TDICI which went on to become ICICI Venture. It was very early days—we had never actually met anyone who had received venture capital (we just read the odd article about it in business magazines), we did not understand it and did not know how to go about getting it—and therefore never even considered it as a source of funding. We struggled for months to get an OD limit of Rs30,000 from Bank of India—and we got it mainly because the manager was a nice guy who felt sorry for us—by all banking norms we did not deserve it. Finally we raised VC 10 years after I had become an entrepreneur.


A very recent trend is the emergence of Indian investors into VC funds. Up until now VC firms would raise money overseas and invest in Indian companies. Now wealthy Indians are investing both as angels and also into VC funds. I expect this trend too to gather momentum in 2008.


As a consequence of all these changes a new class of entrepreneurs has emerged in India—well educated, first generation and with experience in the best in class companies. It is these entrepreneurs and the companies they build that will be one of the major engines of growth for the Indian economy in the decades to come.


Today, almost every business school in India has an entrepreneurship cell and actively promotes it as a viable career option for its students. Twenty years ago entrepreneurship was a fringe movement at business schools. It is now mainstream. However, even as more fresh business school graduates are likely to become entrepreneurs in 2008, it will be tough for most to get funding since investors value experience, domain expertise and a proven track record.


To them and to others who want to become entrepreneurs, I would like to say that today there are role models for young entrepreneurs to emulate and to get inspiration from—right here in India and not in Silicon Valley. When you are starting out you are hopeful about the future but you are also afraid of the uncertainties. And rest assured as an entrepreneur you will face adversity and your commitment will be tested.


We struggled for 13 years before we could call ourselves somewhat successful. At times like this it is good to talk to people who have been through the entrepreneurial journey a few years before you. This kind of emotional support can keep you going when times are tough—for the greatest success factor for most entrepreneurs is persistence, not brilliance. Keep at it long enough and sooner or later you will get lucky, is what I say.


2008 is just a beginning.

13 comments:

Anonymous said...

Entrepreneurship will certainly test your commitment and persistence you want to set up a corner shop, a factory floor or a digital economy startup. However it will also test the support from you family. I think that will almost always be a key ingredient apart form others. Families will have to get convinced and rally behind you for those struggling entrepreneurs with budding brilliance!

Apart from moneys the first among the challenges will be to get a core team in place. And it will not just be your friends who are willing to sweat it out for your idea for a stake in your company. The initial hires will also determine the trajectory of your 'company'. That gets us to the question of whether the current educational system equips the graduates think "beyond the obvious" and evaluate options of joining a startup as a career.

i am sure a lot of startups face challenges in hiring "line staff" not because they cannot offer great salaries but because the current "frenzy" of branding in recruitment circles is such high decibel that it is close to impossible for young entrepreneurs to hire any decent talent.

it might not be a bad idea to have a page for jobs@startups on leading portals, at tapered prices. just a thought, worth a muse i am sure

anujkanish said...

Thank you, Mr. Sanjeev Bikhchandani
for setting the great example for all the first generation entrepreneurs like us to follow.

Great thoughts. Only the global meltdown thing was a bit scary :)

Wish you a very happy new year 2008!

Anuj Kanish
www.tolmol.com

Harinath Pudipeddi said...

That was very thoughtful Sanjeev. Yes, as you mentioned there are various organizations who are promoting entrepreneurship. I just wanted to throw light on BarCamps which are fast becoming forums for like minded people which deserve a noble mentioning keeping the returns in mind. Likewise, we just concluded HeadStart (www.HeadStart.in) yesterday which focused on showcasing entrepreneurial spirit and also brought investors, academicians, entrepreneurs together.
Coming to the "slow down", yes, we need to be worried, but IMHO a person who believes in his/her ideology and passion need not bother about it. However, one needs to assess risks and ensure there is always a risk mitigation plan in place. When you write your business plan, always has answer to the other side of your proposal - this would be a lot of help.

Sudhanshu said...

I think every age of entrepreneurs have their own set of issues.

Starting up these days is about missing out on all those onsites. On those huge paychecks for which you don't have to do much in return. On forgetting of buying a house early. On missing the dream car you see your friends driving. And sometimes even about dropping plans of going to a business school.

Now it is about listening to all those entrepreneurs you knew so well who tried and failed, and to those who got burnt in the last crash. And yet about being optimistic every time you read a post like this.

It is about thinking of how you had managed to survive those ten years before you make it big, because right now, every six months seem so damn hard.

Rajiv said...

Its good to hear that its becoming a trend. As more and more big stories come out of India, like your's of course, it will become much more of a trend. We need a couple of more boom cycles. The other thing we need is acceptance of failure. Most of the first time entrepreneurs fail.

On the ground though, a struggling entrepreneur is still a pariah in many ways.

Priya Mudholkar said...

Thank you Mr. Bikhchandani. I know exactly what you mean. I work for a start up company called nautanki.tv. it is an online entertainment platform and one of its kind in asia. We for the longest time had to fight a lot of scepticism when we launched it a year back. Now ofcourse things have changed and the same people who thought that the company would go bust are taking notice. It was only our persistence that has kept us afloat all this while!

It was great reading your post. Do keep writing more of it so that young entrepreneurs or youngsters working for start ups get an idea of what to expect and how to work. Importantly, they will all get the courage to carry on :)

Priya Mudholkar.

Krishnaraj said...

Sadly, market bulls and investors see only half of the picture -- the monetary side.

While one feels great about the India Growth Story, there is a hidden tragedy -- a sort of India Death Story, unreported by the media. It is a story of social and environmental costs being quietly passed on by manufacturers, and frankly, society and environment are getting saturated.

An important social principle is violated by many manufacturing activities: While engaged in a profit-making activity, one must not leave a mess behind for the rest of society to clean up.

This principle can easily be understood as common decency. If I come to your house as a salesman in order to market something, I must clean up any mess that I make while selling my product.

But this principle is continually breached by manufacturers and marketers on a large scale in our country, and nobody even thinks of objecting!

Have you ever pondered how mineral water and soft-drink manufacturers who sell their product to you in a PET bottle take no further responsibility what happens to their non-biodegradable bottle? Most often, it ends up as litter in the environment, because the consumer simply does not know what to do with the bottle, other than tossing it away.
This is not how it should be. At the time of conceptualizing and designing the product, the manufacturer has the responsibility of thinking what will happen to the discarded packaging, or, in the case of non-consumables, to the product itself after its use. He must take the responsibility to create a safe avenue for its disposal or recycling.

This requires a mechanism to collect the empty container or used product. So he must set up that mechanism. For instance, the grocery shopkeeper may incentivate the consumer to return PET bopttles to him by initially charging a coupl;e of rupees as deposit for the bottle, which he returns when the consumer returns the bottle to him. These bottles can then be sent back to the company’s recycling facility. (This is how soft-drink bottles made of glass were returned to manufacturers until very recently, remember? We, the consumers, were OK with this system. So why the sudden urge to package everything in discardable materials?)

We should mobilize citizens to demand legislation that every manufacturer must repurchase/collect and recycle as many tonnes of raw material as he uses on a week-by-week basis. For example, if a mineral-water manufacturer uses ten tonnes of plastics per week to manufacture bottles, he MUST buy back ten tonnes of plastic scrap and safely recycle it.

Now think for a moment about used automobiles. Used cars and scooters in India are sold as second-hand vehicles, and then third-hand, fourth-hand. A second-hand vehicle may go from a metropolis to a small town or village. It keeps going further and further into the interiors as it ages, as its condition deteriorates and its market price dwindles. And then?

And then it is sometimes sold to a garage at a throwaway price, and this garage may salvage spare parts from it. ut what remains of this vehicle, including worn-out tyres, may lie around rusting and gathering dust for years and years on some deserted road. The tyres, when they are often burnt in winter for warmth, releasing black, acrid smoke and carcinogenic chemicals into the atmosphere.

Or it lies as a rusting eyesore in some building compound for many years as the last owner loses all motivation to either repair it or sell it.

Thus, every automobile manufacturer sells a product that turns into many hundred tonnes of junk — assorted metal, plastic, glass and rubber junk — after 6-8 years. They end up littering the beautiful countryside with this junk. Is this socially acceptable behaviour?

If one looks for solutions, they are not difficult to find. Legislation and regulations are the answer.

Automobile manufacturers must be required by law to buy back that many tonnes of metals, plastics, glass etc every week, and find ways to recycle them. The cost may be met by raising the market price of their product… but the responsibility to make the recycling activity happen MUST be fixed on the manufacturer of every product.

The same applies to tyres, batteries, plastic goods, newspapers, textiles, chemicals, auto-lubricant oils, etc. The list is long.

It is possible that this will make some manufacturing and marketing processes unviable. If so, this would mean that these economic activities were unviable in the first place, and were sustainable only by passing on hidden costs to the environment, to society and to consumers! Such activities must necessarily come to an end.

Many industrial activities are environmentally and socially subsidized to keep them economically profitable. Let us lobby governments to knock off that subsidy and see how many activities remain sustainable!

I propose peaceful demonstrations to compel industries to self-regulate, and legislators to pass laws:

Small groups of citizens shall collect the branded packaging material of various manufacturers from the environment, and delivering them in large bundles every week to their corporate offices. It belongs to them, right? So let them have it back!

A peaceful demonstration like this, sustained over some weeks, would make a powerful statement. I think this will make a powerful media impact as well… and thereby, an impact on the consciousness of people.

This would be the first step to making changes happen. Citizens, industry and government must first be made to acknowledge that there is a problem; then viable solutions will begin to emerge.

What say, fellow-citizens? I would appreciate your detailed responses to this idea.

Those who wish to join me in peaceful social action (as described) are urged to email me at friendlyghost.kk@gmail.com

Warmly,
Krish

http://friendlyghost.rediffiland.com
http://globalwarming.rediffiland.com

Kaustubh said...

I completely agree with Sanjeev. The trend is now changing. But there's still a long way to before we actually accept entrepreneurship as a 'way of life' here in India.

Few days back, at an alumni meet organized at my college, one of the professors informed me about the new entrepreneurship cell that has started by the college. However, it was bit unfortunate for me to hear that only those students, who could not secure a job in the campus went for the entrepreneurship cell. I believe, this is because of the lack of knowledge about entrepreneurship that our students have.

Sanjeev, typically entrepreneurs are considered as 'the genius ones' who got opportunities at the right time and they were at the right place to benefit from it. Very few people really talk about the failures they've encountered during the startup process.

I'd be happy if you could share your failures with us and the lessons you learned from them. I think it would benefit a good bunch of readers of this fantastic blog.

Looking forward to more posts! Keep up the good job!

Darcy said...

It is good to hear that families are supporting entrepreneurship. I am not sure why but I hear a lot that the more people entering entrepreneurship the more it would benefit the economy.

Can I invite you to the Young Entrepreneur Society from the www.YoungEntrepreneurSociety.com. A real helpful guide for entrepreneurs.

Manpreet Juneja said...

Very insightful post. No doubt, there are immense challenges faced by any start-up and persistence is the KEY here.

More than current education system, it's the success stories that are changing the mindset of the youth.

I have been meeting lot of young college graduates who are so eager to revive the 'Indian education system' and are ready to take risks and start their own ventures.

Talking is happening a lot more than before, however, the need of the hour is the "Catalysts" that can facilitate and encourage the implementation of the ideas.

Take an example of Social entrepreneurism - people who can't give up their secured jobs are being intuitive enough and forming groups and taking on smaller projects. Quite interestingly, they are also creating employment opportunities just like any other startup. However, they can't add much to the cash inflow for the economy because of the obvious reasons.

The idea [suggested by 'anonymous' above] of having a "jobs@startups" page at job portals is great!

This is a great blog Sanjeev, looking forward to more such posts.

Subho Ray said...

Here is a counter argument. Not to discourage anyone, but to make them aware of the rough road ahead.
A few of the reasons why entrepreneurship is not taking off in the internet and mobile space in India are:
1. Too many me too ideas
2. Very strong incumbents
3. Too many greedy entrepreneurs out there to make the fast buck and move on.
4. Too many VCs right, but some of them are investing in food chains and DVD rentals rather than technology space because of lack of so called good ideas in the tech space.
6. Shortage of qualified people. Whatever good talent is there, is being picked up by large Indian and MNC at well above realistic salaries because the going is good now for bigger players. Who wants to slog it out as an entrepreneur when you can live as well as an employee without the attendant hassles. Remember life is short working like is even shorter
8. Finally, show me a patient young person today... After all Sanjjev is where he is today after slogging his butt for 18 years... With his degrees he would have got better and better jobs in the last 18 years instead of struggling.
You need a serious leap of faith to become an entrepreneur and we do not have too many people around to do that.
Sorry to be a spoilsport
Cheers......

Sivasubramanian Muthusamy said...

Hello Sanjeev,

Naukri.com has come a long way and has branched off into equally lucrative areas of business. Whatever you have shared here and at the TiE meetings tend to inspire new entrepreneurs.

The mindset of the family is changing ( In India the entrepreneur's family is inseparable from his enterprise ) but not quite... It is not only non-business families that fail to encourage entrepreneurship, but even the traditional families, when it comes to a yonger member of the family seeking to take up an enterprise activity in a field of business unrelated to the family's traditional line of business.

It is changing, but need to change a lot more....

Harold Hill said...

Great article. Thanks for posting that. I want to become an entrepreneur and start off with buying a small business. I know it will be tough, but I'm sure it'll be very rewarding. I'm looking forward to it. I've been reading up on everything, but I haven't been able to find any potential businesses. Any suggestions where to go? Thanks.