Business Today

The risk revolution

A new generation of entrepreneurs is at work across India, but several parts of the ecosystem need to be put in place to ensure their success.

Rahul Sachitanandand Anusha Subramanian | Print Edition: December 27, 2009

On a cool evening in late November, some 70 entrepreneurs from across sectors such as information technology, real estate, hospitality and clean tech met for dinner at Bangalore's Leela Palace to discuss the latest developments in their companies. The meeting, part of the Entrepreneurs Organisation — once called Young Entrepreneurs Organisation — represents a new and fast-growing interest in giving up risk-free jobs, biting the bullet of uncertainty and going solo.

From a time when Indians preferred to stick to steady pay and focus on building a three-decade career in one company, executives today are crowding startup events, chasing investors and splurging their savings, and, well, starting up. Across industries such as IT, mobile phones, hospitality and now education and clean tech, entrepreneurs are breaking loose from the confines of a 9-to-5 job to set up their businesses.

"There has been a night-and-day change over the past decade," says Laura Perkin, Executive Director of National Entrepreneurship Network (NEN). She says that since its inception seven years ago, NEN, which provides start-up support to colleges and entrepreneurs, now has over 70,000 students covered and works with 470 educational institutes nationwide. Elsewhere,, a not-for-profit startup initiative focussed on the products segment, has seen attendance grow from 200 wide-eyed entrepreneurs and a couple of investors, to over 600 people and 15 to 20 investors in its latest round held in Pune.

 "We began with interest basically in IT and mobile value-added segments, but this has since grown into newer segments such as auto and clean tech," says Ravi Shankar, co-founder of Earlier this year, a summit organised by The Indus Entrepreneurs, better known as TiE, attracted over 1,700 people and many mentoring sessions were sold out well in advance and had to be repeated.

Things haven't been so rosy for long. The first Indian entrepreneurs were traders who relied on family money and networks to run their businesses. Prior to liberalisation, this meant focussing on a closed—and slowgrowing— economy, with a strong dose of restraints in the form of licences and permits, restrictions on import of machinery and limitations on foreign exchange. It wasn't until the economy was liberalised in 1991 that most of these controls were lifted and entrepreneurship could be given serious thought.

Even then the going was tough. "When I started my first company (ITandT) back in 1990, no one was willing to lend me money and a business was about factories," says serial entrepreneur and angel investor K. Ganesh. Others agree with this dismal view. "When I started my company IIS Infotech in 1989, it took me a year to get the licences, and there was a 160 per cent import duty on software," says Saurabh Srivastava, currently Chairman of US software major CA (formerly Computer Associates, Inc) and co-founder of the Indian Angel Network. "Socially, it was not an acceptable thing to do—to become an entrepreneur. Overall, it was a very difficult task. All this has changed in the last decade."

It all started in the late nineties, when everything with a dotcom suffix became hip, and growth-hungry venture capitalists (VCs) rushed to back anything in this segment. According to some executives, there were as many as 50-60 VCs looking to fund dotcom businesses during the 1999-2000 period. Just as quickly as the bubble bloated, it exploded, leaving many investors gasping for breath. Early VCs in this market such as Ant Factory and EVentures went belly-up and others such as WestBridge Capital (now Sequoia Capital India) and ChrysCapital morphed into later-stage and private equity type of investors.

Despite this blip, entrepreneurship was certainly here to stay. According to data from the Ministry of Corporate Affairs, from 1980 to 1991, the average number of companies formed each year was 14,379 and from 1992-2006 it was 33,385. Emboldened by pioneers such as Shiv Nadar of HCL and the seven founders of Infosys led by N.R. Narayana Murthy, many more wannabe entrepreneurs took the plunge, first in IT and then in other sunrise sectors like organised retailing and financial services.

While a glut of funding for a specific sector— the Internet—may have catalysed entrepreneurship in the early part of this decade, it was equally the explosive decline that saw VCs run for cover. This led to a shortage of capital, and the wannabes returning to the comfort of a regular job as battle-scarred investors were in no hurry to back a business plan. But as the Indian economy climbed onto a higher growth curve, even as returns began to dry up in mature markets, global investors started entering, and reentering, India in droves.

The returning investors were smarter this time around, demanding more detailed business plans, keeping a closer track of how companies were spending their money, and also more persistent on the returns front. Emerging segments such as mobile value-added services, and knowledge-intensive back office work increasingly got investor attention. Several greenhorn as well as seasoned corporate honchos saw opportunities to start up.

Auto industry veteran and former Maruti Suzuki MD Jagdish Khattar started a chain of third-party, multi-brand auto service centres called Carnation after quitting his job with the Japanese carmaker. He recently tied up Rs 170 crore in funding from Punjab National Bank and plans to expand his network from 12 centres to 30 by the end of the year. At the other end of the spectrum, Hari Prakash Shanbog, quit a cushy job with Wipro and teamed up with his friend Vidhyadhara S. Talaya to set up Ipomo, which provides learning solutions on mobile devices.

Simultaneously, the focus of entrepreneurs has shifted from providing services and products to Western countries to developing solutions for emerging markets. "India and the developing economy as a whole have unique problems and opportunities," says T.G. "Tiger" Ramesh, founder of Vignani Solutions, a provider of LED lighting equipment. "While some of this enthusiasm has been dampened by the current slowdown—and its after-effects—some experts say that this may actually be a blessing in disguise. Companies with a strong business plan and some funding will attract talent at lower costs. And a meltdown in real estate means rentals and leases are cheaper.

While entrepreneurship has been kindled and nurtured in places such as Silicon Valley and Boston in the US due to a mature ecosystem of academic institutes, entrepreneurship cells, investors and risk-friendly entrepreneurs, observers believe India is some way away from emulating this model. "The Silicon Valley model happened over 40 years and even the focus of this hub has changed, with no actual semiconductor fabs in the region any longer," says Ganesh, who has founded TutorVista, a virtual tutoring service. He instead says that in India, the focus needs to be on providing more early-stage (seed and angel funding) to nurture entrepreneurship in the country.

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