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September - 2011 - issue > In My Opinion
How can India boost an Entrepreneurial Ecosystem
Kris Gopalakrishnan
Thursday, September 1, 2011
Setting up your own venture is always a difficult task. It requires many sacrifices, a strong commitment, perseverance, and determination. It is by no means, an easy task to choose between the security of a nine to five job and the uncertainty of a new venture - that may or may not succeed. Entrepreneurs are a rare breed, and their courage must be lauded; for with every venture that succeeds, there are many that die a silent death.

Daunting as it may seem though, entrepreneurship is essential for any economy. Small ventures and entrepreneurs play a significant role in bringing to the market new ideas, services and offerings, that many large organizations are either unwilling or feel too risky to pursue. In addition to this, there is of course the significant role that entrepreneurs and their ventures play in job creation, and in a developing economy like India, this becomes even more pertinent, as it generates employment at various levels.

It is therefore not only advisable, but necessary for entrepreneurship to be nurtured and promoted in the Indian economy.

While there are the obvious social deterrents to entrepreneurship – family, critics and skeptics; once a person decides to pursue his or her dreams to be an entrepreneur there are a number of other challenges that arise.

The entrepreneurship ecosystem in India at the moment has much to ask for.

* The creation of an education system that encourages students to increase their appetite for risk, supports them to think out of the box and pursue their own aspirations. Institutions like the IIMs, through deferred placements; Indian School of Business, through specific courses focused on entrepreneurship, and a few other higher education institutions promote entrepreneurship, but these are a few students from a pool of millions that should be encouraged.

Education curriculum in India needs to be revamped, for students in schools and colleges, to be encouraged to develop skills and exposure to the spirit of entrepreneurship in various forms right from the start. Most recently, the development of TiE Buddies, an eight month program on entrepreneurship development for school students by The Indus Entrepreneurs- Hyderabad along with ISB, is a prime example of programs that can be developed.

*There needs to be an ecosystem of mentors, and programs that nurture entrepreneurship. The Indus Entrepreneurs have done a commendable job in mobilizing people from cross sections of the entrepreneurial world, to connect and share their learnings and experiences. Programs such as the Centre for Innovation, Incubation and Entrepreneurship from IIM A are also playing a significant role.

However, there are many small entrepreneurs who are left out of the fold – either because they are not aware of such programs, or because they are very small, or they are present in tier 2 & 3 cities (which are incidentally becoming the hot beds for entrepreneurship).

*There is a lack of true seed capital, as Venture Capital firms in India are mostly inclined towards late stage investments. According to Venture Intelligence, as on June 2011, Venture capital invests in startups with high growth potential, was an average investment of $5 million. Private equity players focus on late-state, high-growth companies and the average deal size ranges between $25 million and $100 million.

Smaller ventures that need funding are often overlooked, especially when these move away from cities. This is where microfinance institutions have an increasingly large role to play.

* On the regulatory front, while it is encouraging to see that the regulatory environment in India has improved, with reforms easing business entry. Entrepreneurs in India can now complete many formalities online – registering their business, paying fees and taxes and more.

However, there are still many areas that need improvement, many processes are hindered with laborious and time consuming processes, ambiguous laws, slow dispute resolution and more. There is still need to smoothen and ease processes.

*Finally, women entrepreneurs also need to be encouraged. While they form 50 percent of the worldwide population, they often comprise less than 30 percent of workforce in some economies. More often than not, women entrepreneurs face more challenges than men when they look at starting businesses. This is because either they lack the collateral to apply for loans, get discouraged by numerous processes, or face discrimination.

To encourage women entrepreneurs, we need to find ways for them to secure finance, ease processes and create specific programs and schemes to help them develop awareness.

The author is Co-Chairman of the Board, Infosys

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