Why private companies could be the answer to Indian entrepreneurship

One small step by entrepreneurs could be a giant leap for the economy. It may not take us economic nirvana, but it could just be the encouraging push that we need.

Srividya Iyer September 10, 2012 11:46:14 IST
Why private companies could be the answer to Indian entrepreneurship

One small step by entrepreneurs could be a giant leap for the economy. It may not take us economic nirvana, but it could just be the encouraging push that we need.

Firstpost earlier argued how Indian entrepreneurship has a long way to go before it could start comparing itself with Silicon Valley. Well, the first step towards correction is identifying the loopholes.

Recently, a committee consisting of veteran venture capitalists and angel investors proposed a government-backed VC fund of $1 billion as a fillip to entrepreneurship and recommended Creation of innovation labs in PPP mode with the government providing infrastructure and the private sector bringing in management and operational support and also to increase the number of incubators in the country.

Why private companies could be the answer to Indian entrepreneurship

The onus to support and bolster the fledgling start-up ecosystem to a large extent rests on these incubators. Agencies

To provide context, incubators usually operate in three capacities.

One, where they are attached to an academic institution, the most common kind in India, supporting and mentoring enterprising students and their promising projects ( SINE at IIT Bombay) . Another is infrastructural, where startups share a common space from where they operate, like the oft-quoted garage ( Jaaga in Bangalore) . And, the third role is that of an accelerator-which provides structured mentoring for a stipulated period of time in return for equity in the company( IAN, Morpheus).

The onus to support and bolster the fledgling start-up ecosystem to a large extent rests on these incubators and accelerators. Along with creating an innovation-friendly environment, they also need to make sure that bright entrepreneurs get the right kind of mentorship and support for growth.

While there are challenges that Indian incubators face, the new crop of business accelerators are trying to solve these problems.

The solution starts with defining the functions and limitations of our institutions. "We should start with differentiating between incubator and accelerators. Incubators in the classical sense are meant to be more patient in supporting startups. Accelerators are a little more impatient and believe in providing a hands-on approach for fledgling companies," said Ravi Kiran, co-founder of Venturenursery, an angel-backed accelerator.

While the popular academic incubators in India try to operate within their means, start-up accelerators including Morpheus, Indian Angel Network Incubator, The Indus Entrepreneur India( TiE) function antithetically as compared to the incubators.

They are run by entrepreneurs, they have a stake in the companies and make them commercially viable. They help the entrepreneurs make the right connections and give them a global exposure.

"One of the most important things is that mentors must be full-time people and their success must be tied with the success of the companies they mentor. For me, running this incubator is like running a startup. We need more entrepreneurs running incubators, who want to give it back to the system. Incubation may mean to provide protective shelter but we need to do the exact opposite of that. They need to be left out to fight and survive ," said Sameer Guglani, who runs Chandigarh-based start-up accelerator Morpheus.

Since most of these networks are run by entrepreneurs themselves, the experience and the mistakes make for valuable learning. But even they struggle to fight the stigma against failure which shrinks the risk appetite. "This is unfortunate, given the talent base that exists. Educational institutions like IITs are trying, but the propensity to take risks isn't there. So people do innovate, against all odds, of their own will, with little or no support. It is not valued," said Murrali Rangarajan, founder of Business Accelerator, a Silicon-Valley based accelerator.

Vivek Ravishankar, founder of InterviewStreet, a startup which runs coding tests to recruit developers is the first Indian business to be a part of Paul Graham's accelerator, Y Combinator. An NIT Trichy student, who was once a part of Morpheus, feels that ideas take precedence over people unlike the Valley. "One of the major challenges amongst incubators/accelerators here is the lack of global exposure for startups," he wrote, in an email response to Firstpost.com

Presently, incubators across the country operate in isolation and there is no uniform or inclusive growth. "There is a need to set up incubators within vocational institutes and clusters of innovation centers should be formed," said Suryanarayanan.

The private sector also needs to participate in this process actively. Jayant Sinha, MD and Partner, Omdiyar Network, in a note titled 'Sparking Innovation in India' stated that while the government can assist these incubators with tax incentives and policy easing, "for innovation to flourish in our country, we need them to be run by the private sector". If leading corporate houses set up venture funds to support early-stage companies in their sector, it will increase the avenues of resources available and also boost product innovation in different sectors. In our earlier piece we had noted that the lack of a mature mergers and acquisitions sector could be a key challenge for startups, private companies fostering innovation in their sectors, could very well be the answer.

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