The question I am most frequently asked by students of business schools and engineering colleges who are aspiring to be entrepreneurs is – When is it the right time to become an entrepreneur? Should I do it straight after college or should I work for a few years first?
The truth is that there are success stories of all sorts. There are those who have done it after working for a few years as managers in companies – the Infosys founders are an example. Then there are people who have done it straight out of college – my good friend Kunwar Sachdev of SuKam invertors is one such. And there are those who have dropped out of college to become entrepreneurs – Bill Gates is the most famous name that comes to mind. There are people who do college and entrepreneurship side by side – Michael Dell’s story of how he founded and ran Dell from his college room is famous. Finally there are those who became entrepreneurs without even going to college or completing their school education – the best known story in India is of Dhirubhai Ambani.
There is no one right answer to these questions however you can always find an example to support whatever point of view you support.
The argument in favour of becoming an entrepreneur straight out of college is that once you are in a job and you get comfortable with the idea of a regular salary you will find it extremely difficult to quit do a start up. This is especially true if you are from a premier institute and earning a high salary in a well known company. It becomes worse if some years have elapsed since you finished college and you have now bought a car and a house and have EMI’s to service. And later on when you have got married and started a family it becomes nearly impossible to quit – you crave security.
The single largest reason why people give up on their entrepreneurial aspirations and continue is a job is delay in breaking out after college.
The argument in favour of working for some years in a job before becoming an entrepreneur is that you improve your reality check. It is well known that the Indian education system does not provide a great reality check to students. It takes several years of working after college for graduating students to figure out how the real world actually functions. You learn to work as a subordinate before you become a boss and that experience is important when your company scales up and you are managing a larger team. You acquire skills on the job that you would have otherwise not have. You meet customers, get an insight into their needs and an understanding the market. You get to know about business opportunities. You learn about processes and good practices that are useful years later. You build your network and credentials. In summary, working for a few years will increase your chances of success once you do become an entrepreneur. The flip side is that if you get into a good job and work there for a few years you may never actually quit to become an entrepreneur.
My view on this is that you should become an entrepreneur only when you are ready. I had worked for five years before I quit and became an entrepreneur. And in hindsight I would not do it any other way. I needed those five years to learn and mature and become a better people’s person. And you will know when you are ready. You inner voice will compel you to do it.
The other time to become an entrepreneur is when you have such a compelling idea that you are totally convinced that it is now or never. Bill Gates often cites this when he talks about his decision to quit college and found Microsoft. He could see the PC age coming and he just had to be a part of it but felt it would pass him by if he spent another three years in college. He just had to do it then.
Saturday, 22 May 2010
Sunday, 16 May 2010
Dont expect the government to fund start ups
Time and again I am asked questions by young people about why the government doesn’t do more to help start ups. Why, for instance, doesn’t the government fund start ups? This question is usually asked by people who have some sort of a sense of entitlement and they believe it is their right to get funding from the government for their enterprise.
This sort of attitude is a throw back to twenty or thirty years ago – to the days of nationalized banking.
There are enough private sources of risk capital available now for the government to not do this. Apart from Venture Capitalists, there is even an emerging category of Angel investors.
Admittedly early stage capital is still somewhat scarce but it is there if you knock enough doors.
The easiest thing to do is to ask the government for a dole or a subsidy. However actually extracting it from the government is usually a very bureaucratic and time consuming process. And taking money from the government does require skills that are not the same as those required to build world class products for customers.
If your start up really deserves funding chances are that you will get if faster from private sources than from government.
And if after trying from many places you fail to obtain funding then the market is giving you feedback – listen to it. Perhaps your project actually isn’t the sort that will get funding or you need to achieve some more milestones before you approach an investor.
Whatever it is the fact is that every start up will not receive VC funding. Less than one in a hundred business plans gets funded. It must also be remembered that most successful companies did not receive venture investment. So the belief that you cannot succeed without venture capital is somewhat misplaced.
The entrepreneurial eco system is Darwinian in nature – and that is the way it should be. Only the fittest will survive. Some start ups will die – sounds harsh but that is good for efficiency. The ones that do make the cut however will go on to become large valuable businesses.
The mindset of those who want government funding for startups hasn’t changed twenty years after economic liberalization -we want free markets when it benefits us and we want govt. intervention when we are at the receiving end of free markets.
There is no such thing as risk free entrepreneurship. It is a requirement of entrepreneurship to bootstrap, sacrifice, do more for less and struggle for financing. That experience creates a mindset of frugality and a laser sharp focus on only that which is essential. It is scarcity of capital and the accountability that a free market imposes that leads to capital efficiency.
The role of the government should be limited to creating the right environment for a healthy entrepreneurial eco system rather than taking direct financial risks in commercial enterprises. This would mean creating the right regulatory framework.
One useful rule for the government to follow is to let markets work when they are doing a good job and intervene only when markets fail.
There could be a case for the government to intervene where private venture capital or angel money does not reach rural areas, under developed regions of the country, the bottom of the pyramid or other sectors where there could be large social impact. However even these projects – to scale and impact the lives of a large number of people would necessarily have to be financially viable and generate a positive return on capital.
Therefore even where the government does intervene the filters of what projects should be backed and which should not, should be very discerning and the process well managed.
This sort of attitude is a throw back to twenty or thirty years ago – to the days of nationalized banking.
There are enough private sources of risk capital available now for the government to not do this. Apart from Venture Capitalists, there is even an emerging category of Angel investors.
Admittedly early stage capital is still somewhat scarce but it is there if you knock enough doors.
The easiest thing to do is to ask the government for a dole or a subsidy. However actually extracting it from the government is usually a very bureaucratic and time consuming process. And taking money from the government does require skills that are not the same as those required to build world class products for customers.
If your start up really deserves funding chances are that you will get if faster from private sources than from government.
And if after trying from many places you fail to obtain funding then the market is giving you feedback – listen to it. Perhaps your project actually isn’t the sort that will get funding or you need to achieve some more milestones before you approach an investor.
Whatever it is the fact is that every start up will not receive VC funding. Less than one in a hundred business plans gets funded. It must also be remembered that most successful companies did not receive venture investment. So the belief that you cannot succeed without venture capital is somewhat misplaced.
The entrepreneurial eco system is Darwinian in nature – and that is the way it should be. Only the fittest will survive. Some start ups will die – sounds harsh but that is good for efficiency. The ones that do make the cut however will go on to become large valuable businesses.
The mindset of those who want government funding for startups hasn’t changed twenty years after economic liberalization -we want free markets when it benefits us and we want govt. intervention when we are at the receiving end of free markets.
There is no such thing as risk free entrepreneurship. It is a requirement of entrepreneurship to bootstrap, sacrifice, do more for less and struggle for financing. That experience creates a mindset of frugality and a laser sharp focus on only that which is essential. It is scarcity of capital and the accountability that a free market imposes that leads to capital efficiency.
The role of the government should be limited to creating the right environment for a healthy entrepreneurial eco system rather than taking direct financial risks in commercial enterprises. This would mean creating the right regulatory framework.
One useful rule for the government to follow is to let markets work when they are doing a good job and intervene only when markets fail.
There could be a case for the government to intervene where private venture capital or angel money does not reach rural areas, under developed regions of the country, the bottom of the pyramid or other sectors where there could be large social impact. However even these projects – to scale and impact the lives of a large number of people would necessarily have to be financially viable and generate a positive return on capital.
Therefore even where the government does intervene the filters of what projects should be backed and which should not, should be very discerning and the process well managed.
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