In everyone there is an entrepreneur, but few move on to realization. Most children with normal cognitive capabilities demonstrate creative potentials at an early stage. The inquisitiveness to seek out-of-the-box solutions comes naturally to the young. As they age, they become increasingly conscious of the need to conform more and question less. They go through a structured educational process that trains them to obey the norms and become cogs in the wheel. A miniscule among the masses preserve and grow the inquisitiveness, imagination and critical thinking. They think beyond borders and tend to ask, “Why not” more often than “Why”. They create value for others by developing and delivering products and services not just to meet the current needs. They conjure up what people may need tomorrow and create viable operating models to produce, deliver and monetize solutions. We call them disruptors, innovators and entrepreneurs. Some of them go on to make history.
A look at the success stories of the past two decades highlight the phenomenal growth and popularity of a bunch of digital startups created out of nothing but the imagination, gut feeling and pioneering spirit of young minds who opted to think differently. Google was launched in 1998 by Larry Page and Sergey Brin, two students at Stanford University in California, who developed a search algorithm to help internet surfers to manoeuvre the web for specific content. Microsoft, the legendary software behemoth, was founded earlier in 1975 by Harvard College dropout, Bill Gates and his childhood friend Paul Allen. The Amazon we know today began in a garage with Jeff Bezos and his friends launching an internet site to sell books online across the US. Similar is the story of Facebook, the social networking service launched in 2003 by Mark Zuckerberg with his college roommate Eduardo Saverin and rechristened as Facebook a year later. The list is endless and spans a wide range of services and extends to many geographies.
What is common is that they were mostly created by intuitive and enterprising students or university dropouts on shoestring budgets with hardly any infrastructure support to start with. The story of entrepreneurship is one of pursuit of passion with single-minded focus, unmindful of risks and the uncertainty of funding.
The same is true of the success stories of Indian startups. We seldom think of the initial struggles and the immense hard work borne out of self-belief of the founders, most of them first-generation entrepreneurs from families with little, if any, business background. Most of them have leveraged emerging digital technologies to develop and deploy innovative products and services. The dawn of internet and the development of mobile telephony are truly defining moments in human development and economic progress.
The perception of India has undergone a sea change from being the land of snake charmers and street-corner jugglers to be the home of healthy unicorns grazing on lush-green patches. In finance, a unicorn is a privately held startup company with a current valuation of US$1 billion or more. As of 2019, India is home to over a dozen unicorns globally recognized and respected. Valuation-wise, Paytm (US$ 18B), Ola Cabs (US$6.B), Byju’s (US$ 5.4B), OYO Hotels and Homes (US$ 5B) and Swiggy (US$ 3.3 B) are the top five Indian unicorns who have succeeded in attracting top notch global investors to fund their investments.
A look at the profile of the entrepreneurs who made possible the impressive parade of Indian unicorns would reinforce the maxim,” If you have the will, you will have your way”. Let us look at just three of the success stories with fairy tale appeal.
Paytm founder, Vijay Shekhar Sharma was a bright student from a middle class family in Aligarh, UP who bought second-hand technology magazines to keep abreast of emerging trends. He failed to crack the entrance exam for IITs mainly due to his lack of proficiency in English language. He ventured into startup while a student of BTech in a Delhi-based Engineering College; he faced rejections and frustrations from investors but pursued his dream to set up a digital business to drive mobile-based transactions. The rest is history. Paytm has successfully leveraged Government’s thrust on Unified Payment Interface (UPI) transactions in the retail economy to become one of the most acclaimed unicorns in the country. A host of players like Phone Pe have entered the field riding on the digitization wave. As of December 2019, the aggregate UPI transaction value has exceeded Rs. 1 Trillion.
Ritesh Agarwal, founded OYO Rooms in 2013 when he was not yet of 20 years. When he came to New Delhi from native Orissa, he had only a nebulous idea of his future business domain. The difficulty he experienced in locating short-term stay options in the city helped crystallize his business idea. He dropped out of studies to pursue full-time his dream of providing budget stay opportunities for thousands of travellers like him. His incessant passion and global ambitions helped him to grow OYO Rooms into a success story in a short span of less than 5 years. Today he is a legend and role model for aspiring entrepreneurs and a much sought-after speaker at global fora on startup and entrepreneurship. OYO has forayed beyond the borders of India and is having a successful Chinese boom.
Byju Raveendran hails from Kannur district of Kerala. He studied in the local Malayalam medium school where his parents were teachers. His talent and passion in teaching aspirants to crack CAT and other entrance tests pivoted him to become a sought-after coach for a range of competitive examinations. In no time, 'Byju's classes' became so popular that his classrooms grew from a single room, to a hall, an auditorium and even a stadium on occasions! He launched the BYJU's Learning App for school students in 2015. Today with universal acclaim and an array of venture capitalists investing in his business, his venture has become one of the premier EdTech companies in India. Apart from expanding pan India the venture is planning to widen its overseas footprints emphatically on the back of strong global investor interest.
Three truly inspiring stories of young entrepreneurs who succeeded almost entirely on their own in an environment that offered hardly any support should inspire aspiring entrepreneurs overwhelmingly.
India's startup sector has long been reeling under a three-pronged challenge - high cost of credit, lack of funding options and regulatory bottlenecks. The facilitation and support by Governmental schemes and officials for Indian business in general have been legendarily lukewarm. In spite of policy pronouncements, the action on the ground leaves much to be desired. A symptomatic example of bureaucratic short-sightedness is the raging controversy over ‘angel tax’ involving the valuation of the angel funding and tax incidence on the amount over and above the ‘fair value’. Investors pay a premium for the idea and the business potential at the initial funding stage. Tax officials seem to question the valuation of the intellectual property and the perceived potential for growth. Several startups say that they find it difficult to justify the higher valuation to tax officials. It has taken months of uncertainty and dampening interest of the global venture capitalists for the bureaucracy to wake up. While presenting the 2019-20 budget proposals to the Parliament, the Finance Minister has announced that startups and their investors who provide requisite documents will not be subject to detailed angel tax assessment. Still the devil does lie in the details.
True, over the past few years, a number of steps have been taken by the Government of India to enhance ease of business and to support startup ventures. The initiative under Startup India program in forging Partnerships with countries who have developed successful startup ecosystems like Israel, Sweden, ASEAN etc. is a step in the right direction. The main activities in these partnerships include promoting visits, internships and skill upgrade programs. A healthy competition among states to take up entrepreneur- friendly policies and the introduction of annual ranking of startup States are good step to encourage competency-driven outcome.
But the incrementalism in policies are proving to be too tardy in kickstarting the much-needed entrepreneurial revolution. ‘Startup India’ has to move from slogan to passion for all stakeholders. If India is to create jobs massively and lift most of the population to more decent levels of affordability, startups have a key role to play.
Globally, startups have become the key strategic levers of development. According to the Global Startup Ecosystem Ranking (GSER) Survey, 2019 the global startup economy is worth nearly $3 trillion. That’s larger than the GDP of India, the United Kingdom, France, or Brazil. The top five ecosystems for startups globally are Silicon Valley, New York City, London, Beijing, and Boston. India’s rank in 2019 survey is 17, a significant improvement over the previous year. Within India Bengaluru, New Delhi and Mumbai are the top cities for startups.
A vibrant and resilient startup ecosystem is a prerequisite for nurturing and maturing of first-time entrepreneurs. A startup ecosystem means the overarching environment formed by people at large, startups in their various stages, the industry, academics, professionals, Government Agencies and funding/financial organizations interacting as a system to create and scale new startup companies. It encompasses the support infrastructures such as incubators, accelerators, co-working spaces, research labs as well as legal, corporate and financial service providers.
The global benchmark of the best-in-class startup ecosystem is Silicon Valley. It is home to some of the most successful technology companies in the world. If the entrepreneurs of Silicon Valley, a region in the southern part of the San Francisco Bay Area in the United States were to constitute a sovereign economy, that would be the tenth largest in the world.
What is the secret of the success of Silicon Valley’s as the premier startup hub on earth? At the core of Silicon Valley is the Stanford University. Many of the global leaders in Technology business graduated from or dropped out of Stanford’s academic programs. The close interface and pollination of ideas between the students, faculty, research labs and the businesses in the close vicinity of the University create the unmatched dynamism of the entrepreneurial ecosystem of Silicon Valley.
Countries as diverse as the United Kingdom, Israel and Chile have endeavored to replicate the success of the Valley. But till this date Silicon Valley’s aura has not been recreated elsewhere. If India’s startup ambitions have to scale global standards, we need to learn from Silicon Valley and improvise to our environs too.
As a project of national importance in mission mode, we need to develop at least two of the matured Indian Institutes of Technologies (IITs), from among the original five, on the model of Silicon Valley by integrating enterprise zones and research laboratories in the extended campus. Top industries should be invited to set up shop. An operating model of close industry-research-academia synergy should be fostered, led by the best minds in business. The concept needs to be developed in PPP mode. Devoid of bureaucratic interference and with full functional autonomy, this experiment can trigger the speedy evolution of a world class startup ecosystem in the country. Involving the alumni of these IITs to fund the initiative would increase financial viability and also sustain their emotional connect.
We need to think big, forge more global collaborations and cut down red tape mercilessly. Startup India initiative should go up a few notches in national priority to transform the entire value chain from ideation, funding, mentoring, infrastructure, skill development, hiring support and go-to-market strategies to the global best-in-class levels.