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Entrepreneurship in India

Posted on Tuesday, Feb 3rd 2009

I spoke with a number of people this week, and one comment that came up several times, is that the entrepreneurial ecosystem in India is not coming together as well as it needs to.

Indian readers: Why do you think this is the case? What are you experiencing?

Addendum:

Based on your responses below, I have started several different initiatives:

The Entrepreneur Journeys book series, to give you real world role models and access to Silicon Valley entrepreneurs, their tribal wisdom, strategies, etc.

The series includes Bootstrapping: Weapon Of Mass Reconstruction, which addresses the dysfunctions of seed investing and how to get your business off the ground without external financing.

The EJ Methodology is heavily rooted in using bootstrapping to get an idea validated, and raising money only after it has moved from being an idea to a business. I also regularly teach entrepreneurs to bootstrap their ventures at my weekly online strategy roundtables.

It is my observation that not bootstrapping and not validating their ideas with customers before going out to raise financing is one of the most common causes of the Infant Entrepreneur Mortality (IEM) disease.

And finally, you *must* validate your ideas before spending any energy on building products. Please use the Clarify Your Story appendix of Positioning, How to Test, Validate, and Bring Your Idea To Market, to do so. This due diligence is essential.

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http://www.pluggd.in/funding/technology-funding-in-india-sloka-ceo-sujai-karampuri-3772/

This interview pretty much nails the problems plaguing entrepreneurial ecosystem in India – huge disconnect between VC and entrepreneurs.

Mav Friday, February 20, 2009 at 5:55 AM PT

There are several questions that preoccupy the minds of entrepreneurs, academicians, industry bodies and other stakeholders. Some of which are
What are the procedural hindrances that burden new businesses?
Do the present franchise policies protect the franchisees?
Are the present policies promoting/ encouraging entrepreneurs?
What are the elements in the present budget that are promoting entrepreneurship/ discouraging entrepreneurship?
What are the labour laws that are discouraging entrepreneurs?
For failed ventures, are the regulatory labour laws more of a burden to the entrepreneur? Do these laws discourage entrepreneurs to start new businesses?
What are the schemes that the government offers to new businesses? Are entrepreneurs able to access any schemes that the government offers for new businesses?

There is an international conference in the month of June 2009 which aims to discuss questions that effects the ecosystem which encourages or discourages entrepreneurship in India. The conference website is http://www.isb.edu/wced/isb-randconference.

Kavita

Kavita Monani Monday, February 23, 2009 at 4:01 AM PT

Wel, there are a bunch of good hearted souls that are doing thier part in build the so called “eco sysem”

http://www.youtube.com/watch?v=vMaTaC3xV14

Cheers

Jebroni Wednesday, February 25, 2009 at 3:45 PM PT

Ok. Wow. So?

We are very good at analysis. This is what we have been doing, people. We can come up with top 10 reasons why entrepreneurship is difficult in our country.

Question is what am I doing about it? At least, what solutions I have here to offer. Think. Act. Anybody can talk.

Indian Wednesday, March 18, 2009 at 12:30 AM PT

Yes, don’t talk, attend a roundtable with a real business idea, and try to make it happen.

Sramana Mitra Wednesday, March 18, 2009 at 11:00 AM PT

I agree with Dipankar’s point of view here. I think a lot of us who are looking at entrepreneurship are excited because of the “hot” and “sexy” deals that we have heard about. But as it was pointed out in Sramana’s another post these “home run” deals like e-bay, google etc are only top 15-20% of the total pie.

I think India is a country of entrepreneurs, I mean we see them all over, the local paanwalah to our “mom & pop- grocery stores” all are very encouraging tales of entrepreneurship. Though some of us have referred to the typical middle class up-bringing that we have received. “Sweat” “Study” and “Find a good job”. However with changing times the sense of security that our parents got by securing a job (probably that term also needs to change) is gone! Those of us who want to work for the big MNC and believe that our jobs are secured are kidding themselves!!!

Coming back to the topic of entrepreneurship, I am a green horn in this field having been out there for last 18 months, I can share from my own experience that an early stage entrepreneur whether or not from a business family (big or small) background essentially is looking for few things:

1. Proof of concept — I need to know that what I thought as the big idea or customer need is what really exists in the minds of the customers and they are willing to pay for it. I mean the joy of receiving your first cheque from the customer is much more than your first salary!!

2. Guidance— here I would equate with most of our experience during teenage to adulthood…we are full of energy and enthusiasm to take the whole world head on..but what we are also looking for is some words of wisdom which don’t discourage us but educate us about the risks involved and how possibly we can tide over them.

3. enough to keep afloat – myself..family & my dream — this is the real test and have personally been impacted by that. Since I have a family to support (wife & kid) the sacrifices that one expects from them to make for your dream can become “the” nemesis of your relationship and I have seen few other entrepreneurs struggling with this aspect. We know that all these are important to us but it’s the families patience and faith which probably runs out earlier than the entrepreneur’s own and then he/she is left with a choice between the two some choose the dream and some the family.

Now coming to the point of why aren’t we bootstrapping the venture rather than seeking the high cost VC funds, its again partly similar to why the poor farmer in rural India goes to the money lender!

I love my dream but in the initial time that I have been struggling with it I haven’t been able to find the right support/platform and initial business success. I believe VC can bring in the necessary contacts to help me quickly ramp-up my business and also provide with necessary guidance that I have been looking for. Going the debt route with banks though less costly does not come with this added benefit of “guidance”

Our venture is being incubated by an angel investor and at this stage with us looking for first round of funding and hence a bit on incubation. I guess as entrepreneur incubation is more like early stage funding any way, as you do loose a significant portion of the equity to this model with further dilution opportunities with more funding coming in.

Why we still play the game? Well, its not only about the money after all its about having been there and done that.

And I don’t fully agree with the other point being made here about “failed” entrepreneurs not being welcomed in corporate india, if you have learnt your lessons then you are!!!

Amol Pawar Wednesday, April 8, 2009 at 4:13 AM PT

1. The best entrepreneur talent is often seen in the marginal zone – practical upstarts, who have very little to lose and everything to gain.
2. Typically, most of these people have migrated from or have been displaced from their ‘comfort zones’ (home towns, communities, traditional trade etc.) and have started out practically as new identities / faces in their new worlds.
3. Perhaps, it is this very background that provides them the luxury to aim high, freedom to stumble and fall and the poise (or nonchalance) to get up, pick the scattered pieces and start all over again !
4. Tough they seldom have the advantages of education, skill training, access to capital, infrastructure, mentoring, leadership etc., they are able to sublimate because they have no other choice
5. On the other side are the security seeking middle-class (often well educated but ill-trained in life-skills), with starkly different back-grounds and culture, who perhaps fail to become truly entrepreneurial precisely on account of their more advantageous background : Education, comfort in the routine, aversion for risk, fear of failing, distaste for hard-ship, pride, sensitivity and above all, inability to let go of their ‘security blanket’
6. Thus we have a peculiar situation where some with more natural entrepreneurial talents suffer from limited back-up and resources, whereas others, who have more social advantages and support systems actually lack what is takes to be a true entrepreneur.

Sriram Friday, June 19, 2009 at 1:48 AM PT

The biggest reason I feel is fear or lack of courage to take the first step. People look short term! Ours is a ‘poor dad’ (read as Poor Dad from Rich Dad Poor Dad) community – where parents teach kids – study hard, go to college, and then work hard.

I strongly believe their is anything like entrepreneurial talent, if anything is there than it can be entrepreneurial aptitude which builds because of your environment. Lately things have changed and worked out well.

For the just-graduated students it can be summed as “What if my proposed venture fails, I will not even have a job!”.

(Views are personal and seem attacking! But trust me I am a student entrepreneur and should be seen as self-introspection)

Gaurav Parashar Friday, June 19, 2009 at 10:35 AM PT

Lots of good points. But, I think a comparison with silicon valley is unfair. That is the filtered lot of best of the world. Do you think people in Kansas city or Spokane or Stockton are any more entrepreneurial than those in Napur, Coimbatore and Candigarh? Definitely not.

Based on my experiences living in US and India, I think Indians are far more entrpreneurial by nature, and an Indian in US is far more likely to start his own venture than an American in US. When you notice the entrepreneurship centers of the US – Silicon Valley or NYC, it is no coincidence that they are among the most open, diverse & international among US regions. If only Californian borns were starting business in Silicon Valley, there would be no silicon valley.

What we need is such open cities where people from various regions in India and expats from rest of the world can feel confident and collaborate. Bangalore and Bombay are only cosmopolitan centers we have, but they still suffer from a lot of chauvinism (think of anti-Tamil riots in Bangalore and anti-Bihair riots in Bombay).

Then comes social security. Indians have to rely on their families for social security and that puts unusual burden on the working members. Instead, the burden & risk of supporting old and young should be pooled and spread across the society.

I think if we just have an open & risk spreading society, India has the rest of the stuff to lead the way in Entrepreneurship. This is a nation of entrepreneurs who traded with far away lands, and made homes in unknown regions. And this generation of us doesn’t lack the penchant to dream.

Balaji Viswanathan Wednesday, August 5, 2009 at 6:11 PM PT

Sramana,

India is still finding it’s feet, currently looking at only low-hanging fruits.
Entrepreneurship, as an attitude is not imbibed in us and will take time.

As there is no Social Net to fall back upon, when one fails, People do fear to start on their own.

Even who start on their own are the one’s, who maintain good relation with Clients, Snatch Projects and then start.

Might be we’re still concerned about Roj Roj ki Bhook-Pyaas.

As it gets satiated, Men/Women will start realizing there is more than a Campus Placement to be attained.
Then, possibly, we can see…….. what you keep insisting should happen.

I, for one, planned to do on my own, but retiring Dad, Sister’s Education and Marriage, Peer Pressure to some amount were all urgent needs.
So, dreams have had to wait. 🙂

One more point.
There is so much difference between Average B.S graduate in US and an Average BE Graduate in India.

Engineering Education in India emphasizes Skills and lesser on Application .
I presume, outside, People try to apply knowledge into real-world.

20 year old comes up with Googol, Facebook, unlike the Projects we do here.

Mallik Thursday, August 6, 2009 at 5:50 AM PT

Firstly, India needs ”Good Leaders” to drive the Carnival of Entrepreneurship.

Education system should focus on practical application of skills since school and isolate the concept of gettinng a salaried job.

Also, Indian community needs to encourage entrepreneurship practices.

Revolution is within us. Yes! in everyone of us.

” Entrepreneurs make things happen!!”

Sagar Pednekar Thursday, September 3, 2009 at 9:22 PM PT

Eureka! The International Business Plan Competition, E-Cell IIT Bombay

The Entrepreneurship Cell of IIT-Bombay is organizing EUREKA! The Largest International Business Plan Competition in Asia.

Prizes worth USD 50,000 are to be won with finalists getting a chance to pitch in front of Indian Angel Network.

Teams will get a chance to represent India at the Intel-UC Berkeley Innovation Challenge.

Its simple to participate, just log on to http://www.eureka.ecell.in

ravi1803 Monday, October 5, 2009 at 5:28 AM PT

Who says Indian doesn’t have entrepreneurship, India is big bazzar, biggest in world. Go to any street in India and it is full of peoples, someone is selling something and others are buying it. I think people on this board are confusing entrepreneurship with starting only a software company, it could be service or product. No one is thinking out of this box, shows typical herd mentality. I have not seen any comments about starting manufacturing firm, producing something new like system for factory automation.

I think this herd menatlity and the Indian goverment is a biggest problem .

Sanjay Wednesday, October 7, 2009 at 9:34 PM PT

India Entrepreneurship Ecosystem is coming of age but at a slower pace than expected. The VCs, Angel Investors are interested in funding :
1. Replica Model : Something that has been replicated elsewhere,being replicated to fit in the indian context.Some proven business model like a Matrimonial Portal, Real Estate Portal, trust me there are 100s that come every year, claim to be slightly different in their business model,but lot of them lose steam.

2. Funding the Brands: IITs and IIMs are brandnames, but there are a lot of entrepreneurs who are Non IIT and Non IIMs, from smaller lesser known institutes have better ideas, but lose out on seed funds because they are not from the Premier Institutes. Instilling faith in that case is a very difficult activity.

3. Instant Returns: I have met VCs who think investing money is like playing a card game in casino. They want instant gains and phenomenal dividends.Many of the investors do not have a proper exit plan in place.

4.E Cells of various colleges cater to a very small audience, Mostly from their own institutes and thus narrows the spectrum of entrepreneurs.

I started 3 years back. At that moment , i had modest technical knowledge, some savings but no knowledge of entrepreneurship. The only thing I knew was I wanted to do this since a long long time. I never thought of any other thing as a long term plan. the only plan in the end was to startup.

So one day i did, started freelancing, then outsourcing, and in the span of 2 years built a network, learn the processes of running a company, managing people, finances, building products, because thats what we do, where we need to do the innovations etc. I had plans of putting up a product, but lost a lot money in the recession as 2 of my major customers shut down. That didnt stop me, and we continued, and we are not back to good healthy state. We never sought VC, Angel Money because our previous interactions with them made us feel that we would end up having Reporting Managers in our own company in the name of mentors. Bootstrapping is what we did. Although I agree the downside is we are not able to execute our ideas on time, but we are quite happy that we are self funded and bootstrapped, although we dont own blackberries.

Saurabh Wednesday, December 30, 2009 at 10:51 PM PT

This is the spirit of a true entrepreneur, Saurabh. Keep it up!

Sramana Mitra Thursday, December 31, 2009 at 12:57 PM PT

I was in India for the month of Dec2009. It’s for a business trip. We trained a group of young worker there . We gave them jobs. There will be more job allocate to India next year. What I observed, it’s cheap labor in India. My company want me to go again this year 2010. I smell oportunity in Pune,India. If anyone want to star up small business or have any ideas for new business please let me know. We could make money together. My personal email jongtran@hotmail.com Feel free to contact me I have some capital and i’m open for any new ideas. Best! JET

JET Saturday, January 9, 2010 at 10:02 PM PT

Why aren’t there more entrepreneurs in India?

This question has a negative AND a positive answer:

1) postive: there are plenty. Go to Gujarat, Maharashtra, Tamil Nadu, Punjab, millions of small businesses thrive

2) Negative:

– The country is not startup friendly. Try opening a new bank account: I have a working current account with a bank for 4 years. I wanted to start a new one under a different company name, but th ebank wants all my paperwork all over again. I have lived across 6 major cities in india, and my passport, driving license, service tax number etc are all spread all over. despite having a 4 year relationship with my bank, why would they want all the paperwork ALL OVER AGAIN beats me. Its a pain. i shudder at the thought of starting a new company. heavy bureaucracy.

– the cost of rent vs recovery: the average rent in mumbai is higher than perhaps the average rent in New York city. but the average good fetches less price than new york. its always a challenge to put together enough money for rent. we are shooting ourselves on the foot with where the property prices are going. my friend rented a property to build a small audio studio. leave alone the exorbitant rent, his lease expired after two years and the land lord refuses to renew it, unless there is a preposterous increase in the rent. this guy cant afford it, with the extremely low margins. one feels one is working for the land owner. it reminds me of feudal india, where the zamindar owns the land and the poor hapless farmer tills and toils on it all his life to eke out two meals a day for his family.

– competition driving margins out of the business: if india’s advantage is the huuuuuuuge population, it is also a disadvantage. there are so many players out there that they are willing to drive the margins out of the window. i know a friend’s advertising agency lost a large MNC client because someone was askimg them for under rs 200,000 per month retainer fee. (now if you consider teh cost of rent, the high taxation in india, the cost of air-conditioning, office expenses, salaries etc, can you really manage a half decent profit after rs 200,000 per month?).

– not many willing to fund: there arent too many people willing to fund a startup. of course you will give stories of those who are successful. but for every success story there are perhaps a 1000 which couldnt make it. remember how many people live here in this country?

– feudal culture and old hackneyed thoughts: lets face it. we are a feudal nation. there is no government policy to help the small entrepreneur thrive. unless you have a big name backing you no one is going to take your phone calls either. most of the the business is owned and run by the rich and the powerful., they keep starting new businesses. they drive the property market. they drive the eco system.

– low and un professional quality of tech help: i have had bad experiences here. i had a fantastic tech idea (an online thing) which I ddnt have the money to startup. So i partnered with a techie who promised to code it in return of equity. two years have passed and he hasnt delivered. now he wants equity PLUS money, he claims things have changed. If he had been clear on the money part, then I would not have offered him equity AND I probably would have looked at a proper company. I am stuck. now he wants to hijack my idea. i am scared of sharing any more ideas with anyone. there are millions of techies but all unprofessional, greedy and not with a pioneering spirit.

more soon

saumya Wednesday, February 3, 2010 at 12:49 AM PT

My view about entrepreneurship is rather discouraging I would say. I am a biotech based entrepreneur . I have hardly found anybody encouraging by way angel investments / seed capital etc. Bootstrapping is the only way or the forced way of making it to the entrepreneurial way.
the one diff ,I found b/w the entrepreneur and the entereprenurial manager (CEO) is , if an entreopreneur fails, he looses everything including his undergarment, whereas for a CEO, if he fails and has to be removed , then he will have to be compensated with the hefty package in order to make a smooth exit.
its a strange thing but a fact!!!

raghu Monday, April 12, 2010 at 6:11 AM PT

[…] Power of Ideas, and this post has been itself written as a comment to Sramana Mitra’s very popular post on the same topic.) Entrepreneurship, India, […]

Lack of Entrepreneurship in India — Whats wrong? Sunday, May 30, 2010 at 12:42 PM PT

completely agree your thoughts……..This mid-layer is the one that has produced deeply knowledgeable systems architects, product managers, program managers, etc. in the Valley…………

biotech training Saturday, September 18, 2010 at 12:08 AM PT

I think the only reason of entrepreneurship struggling to take out its neck is that majority of VC community think IT is the only domain of entrepreneurship where their is scope of high IP creation.

Whereas innovation exists in marketing ,,,, too.

Vikas Shah Friday, October 1, 2010 at 4:37 AM PT

It is hip to work for Infy or Wipro. But it is not hip to struggle, sell, work day and night for your own.

Ada1985 Sunday, May 8, 2011 at 8:37 PM PT

I have been wondering about this problem for quite some-time before i dropped out and began working on my start-up. My specific question was " Why don't we have any global audience serving Website/ product from India? When India has so many talented IT guys and Internet is supposed to have removed/lowered barriers. On internet the audience hardly care where the web-site company is located! (Remember the infamous Dilbert strip " On internet nobody knows you are a dog").

I have a few hypothesis for this apparent anomaly.
1. Lack of Courage/Imagination to do anything truly original?
I think this is probably the main reason. We simply did not try? Compare the start-ups featured in TechCrunch (Mostly Silicon Valley) with those on yourstory.in. Most of the start ups are copy cat of successful silicon valley companies. While most of the TC featured start-ups have some new idea!

2. Lack of Global Vision/ Exposure.
Most of the start-up ideas are too localized in thinking to be suitable for the global audience. Maybe this is because we are too preoccupied with India to get exposed to the outside world.

3. Bad Design, Poor Marketing/Communication.
In a nation of engineers we have undervalue the importance of Arts and the human factor in the design of website/application. It is difficult to find great web designers, artists locally & costs a boatload of money to get it done internationally. Moreover the founders do not appreciate the importance of great UI/UX to invest in it. It is no wonder most of the Indian websites have such shoddy look and feel.

4. No Risk Capital at Seed Stage!
Even to build a decent prototype it takes some money ( you cannot have all the talent in-house specifically design) buy servers/certificates. There are hundreds of entrepreneurial events, camps and competitions but it is all a farce. You waste a lot of time going through the various elimination rounds and at the end of it you get some bull-shit advice but no funding.

Then there are a whole host of other reasons which others have in most cases correctly pointed out in the comments to this post. We can point another 2 dozens reasons why we do not have great web start-ups in India.

But as entrepreneurs, we are supposed to solve the problem rather than merely generating 4 dozen cribs about a thing. Therefore i think the next logical thing would to try to do something about it. Sarvana's 1M/1M initiative is a good try but i feel it would be better if it could also find small seed fund for the ideas or it would become yet another gyan giving venture.

People! Have any ideas on improving the situation?

Amu Friday, November 18, 2011 at 7:37 PM PT

Sramana – great discussion happening here !

Why Startups need to boot-strap – I agree with Kumar. There's no choice.

There are also no heroes. Sangeeth is absolutely right. Day zero is still bigger than seed funding. The mainstream media doesn't make the entrepreneur a hero. This plays into the psyche of the individual and creates a 'get rich fast else die' thinking.

It's not always about money – sometimes a startup needs guidance. Most people will say the same thing over and over again with no clear path of how to reach there. Startups aren't a bunch of idiots – they spend their nights and days thinking about all the wrongs that can happen. Providing a flash light isn't enough – pointing and actually walking does make a difference.

Maybe opening the doors to the Angel's boardroom could be valuable.

Sameer Agarwal Sunday, March 18, 2012 at 11:45 PM PT

Hi Sramana,

Interesting posts and comments!

I still believe that it is a "MINDSET" which makes all the difference. To be or not to be an entrepreneur is solely dependent on the "Mindset" of an individual, which results in subsequent actions or in-actions, in his life. This, of course, is to the best of my belief.

In our part of the world, people take up business (mostly as a trader) when he fails to get a job. People hailing from business families are brought up in an environment where they tend to be conscious about finances, investing and the things alike. To be educated financially is of prime importance, develops at a very young age and to become an entrepreneur or trader in life, only comes as an aftermath.

This is absolutely my personal opinion. In this light do I see your "incubation program", which is unique in many a ways. I may be wrong, but this is what I realized in my 44 years.

Best wishes!

hellosomen Wednesday, March 28, 2012 at 12:50 AM PT

Can someone guide me on what are the steps (legal) that one needs to do while starting a buisness,Say an IT/KPO/BPO industry. I would like to know details on how to get a company register and other formalities that needs to be done as per the Govt India rules and regulations.

Allen Thomas Monday, April 16, 2012 at 3:00 AM PT

There's a great quote that Thomas Edison once said, and I reckon it fits perfectly with the struggles of entrepreneurs, "I have not failed. I've just found 10000 ways that won't work"

Alex Wednesday, May 9, 2012 at 3:54 AM PT