chasing the new wave

July 5, 2017

“Entrepreneurship has become mainstream,” Sachin Bansal, co-founder of Flipkart, told me. His was one of more than hundred interviews I had conducted as part of research for my book, Boom Country? The New Wave of Indian Enterprise. Sachin’s story of ambition was typical of many of the narratives I have heard from a generation of entrepreneurs who is determined to change India for the better through business.

The younger and more recent entrepreneurs I interviewed, including Bhavish Aggarwal, Vijay Shekhar Sharma, and Naveen Tewari, contrasted strongly with the older ones I met, such as Narayana Murthy, Ronnie Screwvala, Kiran Mazumdar-Shaw, or Uday Kotak. For those who started businesses in the 1980s and 90s, the road was longer and more difficult. While still not easy, India today is clearly a more conducive environment for startups. And these newer startups are more intensely determined to create great businesses on an international scale and improve the country by doing so.

Notwithstanding the ups and downs of funding sentiment, we are witnessing a seminal surge in entrepreneurship in India. This entrepreneurial insurgency has been enabled by four critical factors. Firstly, the opportunity for new business has been transformed by strong economic growth and by new technologies that offer novel ways of serving customer needs. Think ecommerce, but also solar power. Secondly, government policy has eased the challenges of doing business and opened new sectors to private enterprise. Thirdly, there is no longer a shortage of equity risk capital for startups with strong stories and compelling teams. Whether at seed, venture, or growth stage, India is fast developing an intensely active venture financing industry. Last year, $15bn of private equity financing was deployed in India, with the fastest growth in early-stage investing. Lastly, and probably most profoundly, there has been a cultural shift in the country, especially among the young, towards favoring entrepreneurship.

Entrepreneurship is now cool on campus and more acceptable to a wider family including spouses, parents, and prospective in-laws. Experience tells us that most new businesses will fail, but now the stigma of failure is less of a deterrent as increasingly those who try and fail as entrepreneurs are confident of getting back into the job market, and indeed can raise money a second time to try again. Repeatedly, my interviewees spoke of how education changed their thinking about business. In addition, these positive changes have been driven by an intense interaction with US business thinking which has catalyzed India’s traditional pro-business culture and spread the desire to start a business to wider social groups. Young people who in previous generations would have emigrated or sought a safe job with the Tatas or Citibank now choose to stay in India and create their own businesses.

This bodes well for growth and job creation as research increasingly makes clear that it is small and new companies that innovate and generate wealth and employment. As India becomes a globally competitive entrepreneurial ecosystem, new enterprises will help change the country for the better. I heard young entrepreneurs tell of their desire to revolutionize mobility, healthcare, retailing, and finance through new business models.

Take Milk Mantra as an example. Srikumar Misra returned to Odisha from working in Tetley in London to set up a company for selling fresh milk and dairy products. He now buys milk from 45,000 farmers who typically own just two cows, injecting new regular income into the villages he serves. He offers consumers assured fresh milk, paneer, and shakes with innovation in packaging and marketing. Then there is Ather Energy, a Bengaluru startup, that is about to launch an electric bike with performance comparable to petrol scooters. With finance initially from the Bansals of Flipkart, then Tiger Global, and now a partnership with Hero, the Ather S340 is due to be launched in 2018. Attero Recycling is another Indian startup which has developed a technology to mine the precious metals from old phones and computers at a cost not matched by international competitors.

These, and thousands like them, are the new wave of Indian enterprise. But there is, however, a very long way to go yet. As Vani Kola of Kalaari Capital put it to me, the Indian entrepreneurial ecosystem is at Mile 5 of a marathon. I identified a number of ways in which the environment for startups still needs to mature.

While improved policy and governance has enabled the recent upswing in entrepreneurship, the government needs to take further steps to ease business. Further deregulation, improved service standards in regulatory matters, and upgraded infrastructure are required. The education and skills agenda is pressing and incentives for leading universities to work with business critical. Startup Indiaand the R10,000 crore of additional funding for domestic funds are welcome initiatives. But more pressing are the basics of efficient and quick regulation, simple taxation, and reliable public services.

Second, the VC industry in India needs to develop further and faster. Funding today is easier in certain sectors, especially around digital businesses, while other promising businesses in important areas such as deep technology, manufacturing, or infrastructure find raising capital more challenging. India needs more diversity and specialization among investors. VCs need to build teams with the confidence and expertise to judge technology and operating risks, and with the experience to mentor, guide, and challenge inexperienced entrepreneurs.

Most importantly, India needs more entrepreneurs of difference, entrepreneurs who are seeking true innovation to remodel solutions to customer needs at home and internationally. We need entrepreneurs with different thinking about food supply, healthcare, energy, textiles, and branding, in addition to more digital crusaders and ecommerce players. And we need more entrepreneurs from outside the typical IIT, male, techie profile. We need more women and those from small towns and rural areas to take the entrepreneurial plunge.

The weakest business muscle in Indian business presently is innovation. Too many businesses are content with me-too or cost models. The most striking difference between the Indian entrepreneurial ecosystem and comparable hotspots in the US, UK, or Israel is the paucity of links in India between new business, investors, and the science base. Ather Energy spun out of IIT Madras and Carbon Clean Solutions from IIT Kharagpur, but they were the exceptions not the rule.

I sit on the board of Vyome Biosciences which is developing new dermatological drugs. India is a fantastic place to do the development work cost effectively, given the talent available, but the basic scientific insight driving the business is coming from the founder based in Harvard Medical School, rather than AIIMS. Increasingly, that must change, with more academics commercializing their work in India and more VCs seeking innovation to back in India’s research base.

I placed a question mark in my book’s title because India has had a repeated tendency to under-deliver against its enormous potential. Too often before, we have seen growth slow as external shocks and tentative reforms undermine phases of greater confidence. This time I believe things are different. The Government is addressing structural economic issues and reducing the friction holding back business. Investors are willing to deploy unprecedented amounts of risk capital at every stage of a company’s development. And there are now thousands of entrepreneurs, young and mid-career, determined to make money out of doing something different.

The growing momentum of new enterprise looks set to convert India into a true boom country.

*Boom Country? The New Wave of Indian Enterprise.