How has the entrepreneurial ecosystem developed in India over the last five years or so? How would you compare it with those in more developed ecosystems?
We are talking about high-potential companies, a new group of professional entrepreneurs. We are working with young entrepreneurs and helping them at the academic level. The number of people coming up with business ideas is exponentially different from them who had started five years back. This has helped as we have a slightly better ecosystem now. But, compared to more developed countries, we face a number of challenges. I have been in India for 10 years. I have also worked in Silicon Valley, Moscow; I grew up in Hong Kong. When I compare these ecosystems with that in India, I find that there are many challenges here which have nothing to do with the business, but cost money. Corruption is a challenge. It becomes difficult for entrepreneurs to get permissions and licences. However, there are many upsides too. There’s an increasing amount of recognition in the domestic market. We lack healthcare, effective education for people, buildings, power, clean water. We have almost nothing, which is great news for entrepreneurs. Venture capitalists are already investing in healthcare, small scale hospitals, telediagnostics...
You are working with young people. Is it good to start at a young age? What are the advantages?
It is imperative for us to start introducing entrepreneurship skills at a young age. What is entrepreneurship? It’s being creative, having ideas, and practicing to figure out what is a good idea and what is a bad one (the fancy term is ‘opportunity evaluation’). There’s no place in the education system, in India, for young people to learn and practice these skills. Here, you can achieve success by passing a standard set of examination. We introduce the space to train aspiring entrepreneurs. Many among them are about to start their own companies and want to learn about an industry. Some join as e-leaders of entrepreneurship cells in educational institutions, which have partnership with National Entrepreneurship Network (NEN). If someone from NEN grows up to become a successful entrepreneur, we ask them to extend their support. We also have clubs to maintain network and learn about opportunities.
Do venture capitalists really look for young people?
I was a venture capitalist. I can tell you that raising venture capital is a definition of success. We, at NEN, are trying to educate entrepreneurs that there are many business models which are not fit for venture capitalists. Venture capitalists buy some part of a company. One day they sell that. They either sell the entire company (cash out), or go public and sell their shares in the market. People don’t realise that if they take venture capital, they are greedy to sell their company one day. Not every company can use enough money, not every company can be sold like that, but every entrepreneur wants to sell. Also, it requires very high returns in a short time on a large amount of money. Venture capitalists will try to mitigate risks. So, most of them look at seasoned people. There are exceptions, like Redbus. It doesn’t make sense for first-time entrepreneurs to start a business that requires so much money.
Tell us about angel investors...
Angel investors invest in a broader group of companies. Our major concerns is that in the next 2-3 years there might be lack of angel funding. Angel investors have a number of flexibilities in terms of investment. But, they should know about the business, and about the opportunities it has. There should be a good chemistry between the entrepreneur and the angel investor. Angel investors should act as mentors. Get them on your advisory board. Make them feel that they are a part of the team. Then the money will automatically come.
It is tough to get funds in the beginning. Can entrepreneurs go to banks? What are the other options?
Banks are not a great option. Banks lend on collateral. But, we are hoping to work with some banks to teach them how to lend to entrepreneurs. Now, many young entrepreneurs are using their own capital to get started, their families are giving them the money, or they find a good business model. For instance, Abhishek Humbad started NextGen, an energy and environment consulting company and made money out of the consulting business. He made good use of incubators and figured out a cash-flow business. Once they got the cash flow going, they could invest in more capital intensive businesses. They had been able to bootstrap very effectively. Entrepreneurs need to figure out a smart business model, do some bootstrapping and only after achieving some level, start looking at angels and venture capitalists.
Your advice to people leaving their jobs to start business...
First think why you want to start a business and you’ll understand which business to start. If you think that you work 90 hours a week, you have no personal life, so to control your schedule you will start a business, understand that you will need to trade a secure paycheck to take control over your life. Also, a business requires all of your time.
Quick Facts About Nen
- Provides critical support to start-ups and early-stage entrepreneurs through high-impact entrepreneurship education
- Gives fast-track access to incubation, funding mentors and experts
- Partners over 512 top-tier academic institutes in India to help them develop vibrant entrepreneurship ecosystems on campus
- Runs Entrepreneurship Week India, the country’s largest entrepreneurship awareness campaign
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