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New wave of entrepreneurs in India
Dr. Deepak B. Phatak
Monday, May 2, 2005
A lot has been written in the recent past on the success stories of Indian entrepreneurship, and rightly so, considering very encouraging trends seen all around. Being the harbinger of change, the charge is led by the IT sector startups. Having worked actively in this scenario, I am penning down my thoughts on the way forward.

To begin with, a little background is in order. Entrepreneurship is not new either to India or to Indians. It is just that the economic policies that we practiced for several decades after freedom did not encourage wealth generation through innovative development, specially, of new technologies.

Thus large number of entrepreneurs in India concentrated their energies essentially on trading—and they did use all kinds of innovative practices! Those afflicted with that creative bug continued to make attempts, often succeeding in technology innovation but not in the attendant wealth generation.

Many however, left the nation—and presto—several of them succeeded in both! After 1991, in what I call the re-born India, wealth generation is again increasingly being regarded as something to be proud of, and not to be ashamed of when it is done legally and ethically. A rapid situational transition is now permitting this second breed of people, the generation-next India to boldly, openly, and successfully embark on entrepreneurial careers with global ambitions.

Academic Institutions, specially the engineering and management Institutions can and should play a far greater role in the process of transforming R&D to product/ technology to a successful company. IIT Bombay, India has been a pioneer in Indian IT business incubation within academia, thanks to generous support from Kanwal Rekhi and Nandan Nilekini, and from many distinguished TiE charter members and VCs visiting, advising, and encouraging the young start-ups. We have now set up a Society for INnovation and Entrepreneurship (SINE) with a primary goal to allow the faculty, students and alumni of the Institute to convert research into products and into successful companies in all fields, not just in IT.

VC funding in India
There are two kinds of VC funds operating in the country. One comes largely from Public Sector heritage, the other being the private sector funds. In the early years, most public sector funds displayed a “sarkari” attitude, with many genuinely believing that that venture capital was some kind of a glorified loan. Over the years, they have learnt their lessons and have understood that venture is about taking risks.

The private sector funds, mostly with their U.S. pedigree, understand the risk element better, but almost always pay more attention to exit paths through second round funding.
The VC community has to acknowledge that first generation young Indian entrepreneurs normally have an extremely low appetite for risk and practically none for a failure with its associated social stigma.

This is changing but will take may be four to five years before entrepreneurs and the society at large can understand the entrepreneurial careers and change the behavioral pattern. Till such time, advice, mentoring, and anecdotal cases are required to be sweet-talked into the young heads with a much greater vigor than what is normally required for their Bay area counterparts.

But the ‘Dream Big’ phenomenon has started. This process is irreversible. The necessary reforms in fiscal policies and legal infrastructure are happening at a faster pace today than in the last decade, so one hopes that Law and Justice may not remain only distant cousins as some have felt in the past! Besides, Indians are fast learners and great adapters. With the shackles getting removed, this new wave of Indian entrepreneurs is poised to make great strides.

Dr Deepak B Phatak is Subrao Nilekani Chair Professor at Kanwal Rekhi School of Information Technology and Head of Shailesh J Mehta School of Management, IIT Bombay, India.
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