Unveiling StartUp India Campaign
Startup India – A clamor that is being heard across the world like never before. Everywhere you go today, you can’t miss hearing or reading about how India is the next big startup nation!
The Gods Have Spoken : How the country has come to a point where we are seeing so many creators in the country today.
The Indian middle class story saw a huge shift in early 1990 with the introduction of reforms and the increasing integration of Indian economy into the global market. The economic reforms coupled with globalization saw a huge mind shift among the Indian middle class.The rise of Indian IT Industry in the late 90s not only gave rise to an increase in average income levels in the country but also created a well-traveled global Indian. The increase in average income created a sense of financial security in the minds of Indians who could now think beyond basic needs of roti kapda and makan.
Today as the environment becomes more and more conducive to start your own venture, it is this breed of the new middle class Indian who is creating global companies out of India.
India, a country of 1.25 billion people, is home to the world’s second largest population. India’s population base is expected to serve as a huge asset for the country in the next few decades. India is poised to become the world’s youngest country by 2020, with an average age of 29 years, and account for around 28% of the world’s workforce. India’s demographics presents a huge opportunity for any business trying to create a dominant position in the global market. Any product developed for the Indian market becomes available to a huge amount of population that is earning and can afford to pay for the product or service.
Startups and entrepreneurs in India naturally see a huge home advantage in starting now.
There is an evident change in the professional and social preferences of the new Indian population.
Indian MindSet About Startups Sees A Change
While the silicon valley gave us new gods, the likes of Steve Jobs and Mark Zuckerbergs, who showed us how following your heart was the best thing that you can do to yourself, the new age middle class Indian, with an increased risk appetite is surely walking on that path !
The new age India today is ready to break away from the typical career paths, to take a chance, to follow their hearts and this is clearly evident from the hiring trends that we are currently seeing in the country. Traditional recruiters in India are said to be under pressure to up their game as more and more talent is tending towards working with growth companies.
A budding startup ecosystem, challenging assignments, huge fundings and an associated coolness quotient are attracting a lot of talent towards the Indian startup space.
The opportunity and challenges that startups and growth companies are providing today is really huge. The opportunity and challenges that startups and growth companies are providing today is really huge.
Rushil Goel from Boston Consulting to Ola Cabs, Peeyush Ranjan — from Google to Flipkart as senior vice president of engineering; Namita Gupta — from Facebook to Zomato as chief product officer; Niket Desai — from Motorola Mobility to Flipkart as chief of staff; and Gaurav Gupta — from ScaleArc to Snapdeal are some of the examples of this drift.
Indian Startups Get Bolder
Bold moves by startups have played a huge role in attracting more and more interest in the startup ecosystem in India.
One of the boldest thing that startups have done is to go behind some of the best talent in the world. If reports are to be believed, in the last six to 12 months, between 120 and 150 high-profile executives have returned to India from the Silicon Valley wooed by Indian startups for their Valley know how.
Among the Indian companies, Flipkart has been the most aggressive about hiring talent from the west. Some of the notable hires made by Flipkart in the last few months are – Punit Soni as Chief Product Officer, who was a senior product management executive for Google and Motorola, Peeyush Ranjan from Google as Senior Vice President and Head of Engineering, Amazon’s Dan Rawson as Head of Customer Logistics and Supply Chain Ecosystems, Google’s Ravi Byakod as Director of Engineering – Accounting and Anand Lakshminarayanan from Microsoft as Head of Product Management for Digital Goods and Services
The boldness is also evident in the college hiring trends of startups and e-commerce companies.
For hiring MBA graduates from India’s premium institutes, startups and the e-Commerce companies have raised their offers up to 120 percent in 2015 as compare to 2014. Snapdeal, Flipkart, Olacabs, Housing.com and Amazon remain the top recruiters in premium MBA colleges of India.
According to the Nasscom Report, while 82% startups are ready to pay more than the market median, about 83% startups are using stock options for long term incentives.
The Government Steps In
Announcement of the Start-Up India Initiative
Saturday, Aug. 15th 2015 at 10am
Red Fort, Netaji Subhash Marg, Chandini Chowk, New Delhi, India
Prime Minister Narendra Modi today announced a new campaign ‘Start-up India; Stand up India’ to promote bank financing for start-ups and offer incentives to boost entrepreneurship and job creation.
He also promised to do away with the current practice of interview-based selections for low-skilled government jobs.
The setting up of the SETU (Self-Employment and Talent Utilization) fund has been hugely welcomed by the startup community. Under this fund, the government will be launching an incubation center in order to create opportunities for self-employment and new jobs particularly in technology-driven areas. The center has allocated Rs 1000 crore for this purpose.
To boot entrepreneurship and to make it easy to start your business, Budget 2015 has pitched for the widespread usage of the recently launched e-biz portal. The portal integrates 14 regulatory permissions at one source. Widespread use of this portal is expected to help enable faster clearances for setting up businesses.
Several entrepreneurs in the MSME sector have often complained about lack of or difficulty in getting finances to run their business. Often, while applying for loans, these companies are asked for large collaterals by the banks, which made their business unsustainable.
The 2015 Budget addressed this problem by setting up of the Microfinance Unit Development Refinance (MUDRA) bank.
Atal Innovation Mission (AIM)
During the Budget 2015, Mr Arun Jaitley launched the Atal Innovation Fund (AIM).AIM will be an innovation promotion platform involving academics, entrepreneurs and researchers.
In a bid to allow greater access to new technology for their business, Finance Minister Arun Jaitley has slashed royalty tax paid by entrepreneurs from 25% to 10%.
The Modi government is creating an ecosystem for supporting young entrepreneurs through a formal network of incubators, accelerators and mentors that would help set up, grow and stabilize new businesses, with an emphasis on social enterprises and commercial adaptation of grass-root level innovations.
The network that would include institutions like the IIMs, IITs, Indian Institute of Science, research parks and industry bodies, is being steered by the Ministry of Skill Development and Entrepreneurship as a ‘high-impact scheme’ to spur job creation.
The new startup network would also bring on board existing entrepreneurship promotion initiatives such as the National Science & Technology Entrepreneurship Development Board (set up in 1982 under the Ministry of Science and Technology) and the National Institute for Entrepreneurship and Small Business Development under the aegis of the Ministry of Micro, Small & Medium Enterprises.
There are various government and semi-governmental funds, grants and other initiatives to help startups.
Smart Cities And Digital India Opportunity
The Smart Cities Initiative by the current Narendra Modi led government is expected to create a huge opportunity for companies to provide services. The plan which aims to create about 100 smart cities in India is expected to require services in waste management, clean energy, traffic management, internet availability, transport solutions, smart grids, education, e- governance, healthcare and sanitation and more. The smart cities initiative by the Modi government is attracting huge interest within and outside the country.
The Prime minister also recently launched the India Smart Cities Challenge which invites citizens to contribute to creating a vision for their city.
The Digital India Initiative by The Modi Government which includes plan to connect rural areas with high-speed internet networks is also expected to open up huge opportunities for SMEs in India.
Official launch of StartUp India, StandUp India campaign
Saturday, Jan. 16th, 9pm
Vigyan Bhawan, New Delhi, India
Analysis of the Action plan
Innovation is strongly co-related with the entrepreneurship that the Startup India programme is aiming to usher. Innovation, however, is often misrepresented as building upon pre-existent successful “prototypes”. E-commerce and payment wallets are a good example of this, as they were originally pioneered abroad and simply rebranded and launched in the domestic Indian market. While these are examples of structural innovations, they do not represent pioneering ideas by Indian entrepreneurs.
So what then does “Startup India” aim to achieve? The reproduction of prototypes and the creation of new, original paradigms each require a different set of policy efforts and actions. Intuitively, it seems that the intention of the programme is replication rather than creation, given the fact that the government is still acting along the lines of incentives – such as financing, new tax codes, tax holidays, etc.
This makes the Startup India project quite similar to any rozgar yojna (employment scheme) of the past, bound to fall short of desired results. Its actually more government and less governance, directly in contrast to Prime Minister Modi’s election campaign slogan of “minimum government, maximum governance”. With such policy action, the government also wrongly defines what constitutes a “start-up”, therefore exposing itself to chances of a regulatory mess and various litigations, particularly when tax inspectors begin the process of attesting start-up ventures. The definitional ambiguities of “start-ups” will soon be a cover for imaginative Indian businesses that have long exploited such systemic loopholes. This also leads to another critical question – who needs incentives? It may be more apt if the fate of businesses is left to market vagaries.
Creating successful entrepreneurial ecosystems requires a lot of work at the governmental and bureaucratic level. This is reflected in what Raghuram Rajan envisioned in his address to RBI staff: an agile, responsive and accountable governance machinery.
Lessons from the US and Europe
Looking through the process of how two successful entrepreneurial and innovative ecosystems emerged – one in the United States and the other in Europe – helps us understand what is required.
First and foremost, most successful innovative clusters around the world are the unintended consequence of actor behaviour, and only tangentially result from government interventions (if any). Second, the lead anchors in this process have always been universities or other technical entities, and an enterprise (or spin off enterprises). Both complement each other in successive years to innovate and create more successful spin-offs. Without either one of these two agents, it’s hard to find a successful innovation cluster anywhere in the world.
In the case of Silicon Valley, for instance, it was the foundation of Stanford University in 1891 and Lee de Forest’s founding of the Federal Telegraph Company in 1909 (the company which later invented the vacuum tube amplifier in Palo Alto) that triggered the birth of an innovation and ‘startup’ ecosystem. Both worked in tandem to lay strong foundations in electronics research, and what followed were newer entrepreneurs and startups in the area, beginning with Hewlett-Packard (1938). By 1950, the list included Lockheed (missile and space), Shockley Semiconductors, Ampex (video and audio recording equipment) and the Xerox Palo Alto Research Center in 1970.
Another successful example is the story of Eindhoven in the Netherlands, home to Philips. When Philips struggled in the early 1990s in the face of the onslaught of Korean electronics, the hi-tech electronic campus and universities in the Eindhoven region came to its rescue. They not only helped Philips diversify, but also led to other spin-offs coming up in the fields of semiconductors and hi-tech electronics (such as printing machinery and precision machinery). Today, the Eindhoven cluster is responsible for four patents per day – more than half (55%) of the total number of patents registered in the entire country. More recently, successive investments in R&D and infrastructure in the region have had positive results. Tilburg (approximately 35 km from Eindhoven), for example, became the obvious choice for the Tesla Motors assembly and production line in order to fulfill its European demand. Such examples can also be found in the Skäne region of Sweden and Dublin in the Republic of Ireland.
In India, on the contrary, it is disheartening to see that none of the IITs or NITs, most of which are located in small towns to fulfill Nehru’s socialist vision of institution-led regional development, replicated any near similar entrepreneurial ecosystem.
The examples of Silicon Valley and Eindhoven are reflective of how easy financing and a good business climate come after a strategic idea, and not the other way around. The Modi government is, therefore, looking at the process from the wrong end. Startups are not market place entities but a key constituent of an entrepreneurial ecosystem.
The only role the state has had in these successful clusters (or those elsewhere) was in becoming the “creative first user” for newly delivered technologies. It was the US Department of Defense and NASA in the early 1900s that first used semiconductors. These agencies play a similar role even today, such as in being the “creative first user” for experimental space launch vehicles created by Elon Musk’s Space X.
How “startup India” seeks to push cutting-edge R&D still needs to be spelt out by the government. For the sake of comparison, the 2011 share of GDP on R&D spending was a mere 0.82% for India, while for China it was at 1.79% and the US at 2.77%, according to the World Bank Data. The success of Bangalore, Hyderabad and Pune as IT, BPO and off-shore hubs is due to private ventures (Infosys, Patni, Wipro, TCS, etc.) founded in the early 1990s, as well as the availability of skilled engineering graduates. However, in all these places, the entrepreneurial or innovative ecosystem is far from perfect. The automation challenges from leaner organization elsewhere (mostly in Europe and the US) have now posed existential threats to Indian IT behemoths.
The moral of the story, then, is that policy thinking needs to be reflective and inclusive rather than simply being a spectacle for publicity. It needs more partners in design to avoid the blunders that will probably be the fate of Startup India, considering the lack of imaginative thinking in the Modi government.
Capacity building amounting to increasing sops and entitlements won’t yield the desired results. Latest data suggests a 32% increase in US-bound students between 2014 and 2015, 75% of whom are headed for graduate studies. Amongst these students, 81% are enrolled in STEM subjects (science, technology, engineering, and math). Since these are probably the best students in the class, it isn’t hard to figure that the probability of innovation travels with them.
The bottom line for what the government can do is this: It should invest in universities, incentivise higher education, embrace the role of a “creative first user” and incentivise innovation. These sustained measures, rather than sops unveiled at a high-profile event is what will catalyse entrepreneurship and innovation in India.