Entrepreneurship is the basic engine of growth in any economy. And when an economy is growing the way India's is, it throws up many opportunities. Did we take full advantage of the opportunities thrown open in the last decade? Perhaps not.
We had many new and exciting businesses come up during the last decade. Consolidation and meteoric growth of IT and BPO services was the hallmark of this decade. There are stellar stories—all start-ups that flourished in this decade— like the low-cost carrier Deccan Aviation (which, however, couldn't survive in its original avatar), Airtel, Biocon, Naukri, Indiabulls and Suzlon.
Add to that many examples of social entrepreneurship. For instance, microfinance institutions to bank the unbanked, and connecting artisans to the urban world through enterprises such as Fab India. Or taking alternative energy to places where there is no electricity... the list is long. But, is it long enough?
Year 2000 saw a deluge of venture capital into India. About $2 billion was raised and $1 billiion or so invested in IT services and young companies. Most of the money was wasted as the premise of India being the next Internet frontier—after the Silicon Valley—was unsound. After the dotcom bubble burst in the US, most of the uninvested capital either vanished or moved up the value chain into mature companies.
The year 2004 was when the uptick in the economy began. Money returned cautiously for growth capital and public markets. Many of the earlier companies with a good business model and great execution teams flourished, while thousands of companies (funded earlier) languished. All this raises crucial questions. Do we have a vibrant entrepreneurial ecosystem to replicate the success of innovative companies, not a few but many, as in the US or even in China? The answers to these questions are not convincing. Take a sample.
Q: Is it easy to start and stop a business?
A: Doesn't work here.
Q: What about availability of capital & debt?
A: Very poor.
Q: Is the market ready for early adoption of innovation?
A: Active angel investing and mentoring are keys to the success of the market here. To top it all, we need an education system that prepares entrepreneurs for challenges, not merely one that creates smart employees.
If these issues are not fixed, we'll not be able to create truly innovative enterprises. We'll have great services companies, offshoring, adoption of external business models to the Indian market. But none like a Google, or a Cisco, or a Nokia.
But things have changed. Many incubators have come into being. Entrepreneurship courses are the flavour of the season. While funds are being made available, progress is slow and steady.
For innovation to flourish, many attempts must be made, not by large companies, but by young talent. And, young talent, as we all know, needs nurturing, and a pat on the back when its experiments fail so that it carries on with an unflagging spirit. In essence, we need to create a platform for success. The fact that so many Indians did pioneering work in Silicon Valley suggests that given the right environment, we can be better than the best.
— The writer is a Partner at Seedfund