To many, the economic outlook may seem gloomy but start-ups are thriving, backed by good ideas and growing support for new enterprise.
At 14, Irfan Alam was managing a stock portfolio worth Rs 40 lakh for his father’s friends. By the time he was 17, the boy from Bihar was itching to start his own business. The idea came to him during a rickshaw ride home from college in Begusarai.
“I was hot and thirsty but there wasn’t a drink to be found. Then it struck me that the rickshaw-puller could easily become a mobile vendor stocking things like mineral water and juice,” says Irfan. He fine-tuned his business plan at IIMAhmedabad. The enterprise, Samman, was born in 2007, transforming the humble rickshaw into a marketing engine. Alam’s customized rickshaws not only offered smoother rides; they became vehicles for outdoor advertising. The rickshaw-pullers, who were given uniforms, identity cards and vehicles for free, could earn extra by selling everything from newspapers to mobile-recharge coupons. The start-up now boasts a fleet of 2,500 across Bihar, UP and Jharkhand.
It has also pedalled its way into an ongoing national competition to identify India’s hottest start-up. Run by the National Entrepreneurship Network (NEN) and the Tata group, the contest has shortlisted 30 Indian enterprises, including Samman — from the nearly 600 entries. The five winners will be announced at the end of February. For NEN, a not-for-profit initiative that nurtures budding entrepreneurs, the contest is part of the broader role it wants to play in building an entrepreneurial ecosystem in India.
There is a reason for this. In riskaverse India, where job security is prized, the entrepreneurial spirit has been restricted to a few communities. But that may be changing. The NEN contest shows how: 65% of the nominated entries are first-time entrepreneurs; 76% belong to families sans a business background. Four of the 30 finalists belong to tier-2 cities such as Patna, Kota, Belgaum and Patiala.
But Bangalore still emerges as the country’s start-up capital. Here, many feed their start-up dreams even as they work in the swanky local offices of global companies. These entrepreneurs are like Siva Prasad Cotipalli. He quit a plum marketing job with Oracle to found a start-up. “Instead of wondering how my business would fare, my mother worried about whether I would ever get married,” says Cotipalli, whose company, Dhanax, started as a two-man, internet-based microlending outfit. But the downturn and subsequent layoffs by big companies have improved his prospects in the marriage market. “Quite a few of my entrepreneur friends have found matches recently so I, too, have hope,” he jokes.
Not only are would-be in-laws softening towards grooms who don’t have Infosys or IBM on their business card, Siva says the downturn has many benefits for new ventures. “Though some start-ups will find it difficult to find funding, there are other advantages such as the availability of good talent at good rates and reduced rental costs.” At Dhanax, several of the newest employees have joined straight from college.
Another sign of the growing cachet enjoyed by entrepreneurship is to be found on IIT and IIM campuses. “Internships with start-ups were always an option for students at IIT-Bombay but this year, they are part of the placement process,” says Ankit Agarwal, MD of IITB's entrepreneurship cell. As many as 20 start-ups have taken part in the placement process, which is still in progress. “The pay isn’t as good as the McKinseys but students realize that the experience will prove very useful if they want to strike out on their own later,” he says.
IIT-Bombay is also hosting Eureka!,India’s biggest business plan competition, which gives the winner a chance to pitch his idea to venture capitalists. These are the people who generally bankroll newish firms.
Mohanjit Jolly is a venture capitalist who moved from Silicon Valley to Bangalore in search of that needle-in-thehaystack idea that the trade calls the “home run”, i.e. a company that is “game changing”. He is still looking. “The brilliance and passion are here. What is needed is an ecosystem like Silicon Valley, which has a combination of investors, academia and support-businesses. That didn’t happen in the Valley overnight and it won’t happen here in a hurry.” But the journey has begun, says Jolly, executive director of Draper Fisher Jurvetson.
Might it hit a roadblock because of the global downturn? Venture capitalist firms clocked a little more than 125 deals worth $740 million during 2008, down 15.53% compared to 2007, according to data from Venture Intelligence, a firm that tracks such activity. “The number of deals will surely go down but those who are truly driven will get the backing they need,” says Jolly, adding that he has seen more business plans in the last three to four months than he did in early 2008.
His advice to start-ups: Think big. “For most, Rs 20 crore is a meaningful trajectory but why not aim for a Rs 300-crore business over the next three to five years?”
It’s the success stories that will make Indians dream big. “We need more heroes — the guys who have shown that it is achievable,” says Rajesh Srivathsa, managing partner of Ojas Ventures, which invests in early-stage tech start-ups.
Start-ups also require angel investment, a rare resource in the Indian market. Deal sizes at this stage are usually in the Rs 20-30 lakh range. “In Silicon Valley, angels take on the role of identifying and funding new start-ups. India needs more of them,” says Sridhar Mitta of The Indus Entrepreneurs (TiE), a global network that fosters entrepreneurship.
Lack of funds, however, didn’t deter Hiten Turakhia and his three friends from founding Librarywala.com, India’s first completely online book library, which also figures in the Tata-NEN shortlist of hottest start-ups. The self-funded enterprise, launched in Mumbai, started off slowly; today it has more than 5,000 members. “We have already expanded to Bangalore and Pune and are looking at other cities,” says Turakhia, who is managing director of the venture.
From a booming domestic market to a growing entrepreneur ecosystem, Indian start-ups have plenty going for them. Now, all they need is a business culture that views failure as a badge of honour.
Unconference in the corridor
Welcome to the weird world of un-conferences, a trend that originated in Silicon Valley but is becoming increasingly popular with Indian entrepreneurs. Inexpensive, and usually informal, these gatherings bring the entire start-up
ecosystem together. So, a venture capitalist can meet and evaluate the guy behind the start-up while the entrepreneur can get a reality check on his business plan. It's also an ideal platform for first-time entrepreneurs to share experiences and mistakes.
At traditional conferences, the most productive moments often occur in the corridor between meetings; at un-conferences, it's all corridor. In India, it all started with BarCamp (nothing to do with alcohol, everything to with the sharing of ideas) three years ago and has now mushroomed into a host of networking events such as Mobile Mondays (MoMo) and Open Coffee Clubs (OCCs). Organised on the web and on the fly, they have become good places to foster a start-up culture across the country.
Entrepreneurs have also found more serious forums such as Proto.in and Headstart, which act as a bridge between VCs and start-ups and showcase innovative products and services.
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