With starry dreams in their eyes, tech startups from India?s leading technical and research institutes?Indian Institutes of Technology (IIT), Indian Institute of Science (IISc), among others?debut with the promise to make it big in the market place. From software for financial risk management to a fast wireless technology, which allows customers to hang their beautiful high-definition LCD/ plasma TVs on walls in their living rooms and forget about managing those ugly looking and messy video cables, or even an eco-friendly printer ink, the offerings by these startups are not just innovative, they cut across diverse industry segments. They are also ideal for what investors are always yearning for as the next ?big idea?.
Yet few years down the lane, these startups face the harsh market realities. Most of them are cash-starved and have to operate on a shoe-string budget. Survival is dependent on the loan given by the institutes as seed money or personal finances from friends and family. Astonishingly, a lot of the developed technology ends up inside another product which is then sold to the end-customer. The net result: the high commitment and energy levels attached to a venture in its initial stages gradually begins to fizzle out and founders start looking for exit options.
?When it comes to technology, we still have the mental block on accepting a domestic company delivering a quality product. While the same solution coming in from a large multinational with the same team has a value,? says Taron Mohan, an IIT Delhi-bred entrepreneur and founder of Phoneytunes.com.
What ails the tech entrepreneurship scenario in the country? Is the Indian environment too stifling for their existence, or is it the strong orientation towards theoretical research in Indian institutes that hampers innovation in a big way? Do tech startups lack that ?killer app? which makes their offerings non-viable in the market place? Isn?t the onus also on older and larger organisations to look upon tech startups as innovators and not as a means to achieve cost efficiencies by outsourcing their peripheral work?
?The first five to seven years are a learning experience for these startups. Hence, there is little visibility in the market place and most of these companies are in this phase. It is only after this that these companies start to get recognition. This phenomenon is not unique to India; most of the startups in the US and Europe undergo similar experience,? says IIT Madras professor, Ashok Jhunjhunwala.
In a nutshell, it is a catch 22 situation; startups do not get recognition and respect till their ideas/ventures prove to be a success?and it is difficult to introduce new business ideas and gain acceptance without a recognised name.
?Entrepreneurship is not ingrained in our ecosystem; it is often a fashion statement,? says Vijay Shekhar Sharma, founder of mobile value added services firm, One97 Communications. ?Majority of Indians are risk-averse and not inclined towards taking risks when it comes to their work life. Hence, they push their children towards secure jobs. This however does not mean that we lack in entrepreneurial skills. It?s just that we tend to look for safer options?tried and tested areas to operate in,? says Sharma, who struggled as a student/entrepreneur at Delhi College of Engineering (DCE).
?One could say that the ecosystem is less receptive to adoption of new technologies in India, which is a major hurdle for tech startups to emerge in India,? says Vishal Chandra, CEO of an IIT Delhi startup called VirtualWire Technologies. To understand the less than desired success of startups emerging from Indian technical and research institutes as compared to those from research institutes like Stanford or MIT, we need to understand the nature of the ecosystem in India and the impact of the lack of industry-academia collaboration here vis-a-vis that in the US.
Chandra says, ?Indian institutes have significantly less collaborative research going on with the industry and the environment is also inclined towards publishing research papers than that for filing patents. This results in stress on theoretical research and negligible development of actual working prototypes and technology. Startups emerging from such an environment become limited in their understandings of the issues being faced by customers at a practical level and what kind of technology solutions is needed by the industry.?
According to Chandra, students doing their PhDs in US universities work on practical problems a lot more which result in some of them actually dropping out from their PhDs once they get an innovative idea while working on a unique practical problem. A famous example is the Google founders dropping out from Stanford to setup Google. He adds: ?People to whom I have spoken tell me that when students join Stanford for PhD programmes, they are mostly trying to figure out just when is the right time to drop out and do their startup!?
At present, IIT Delhi?s incubator cell hosts eight student-academia startups. Barely five such startups have exited the campus. The scenario in IIT Bombay is marginally better. Under the institute?s Society for Innovation Entrepreneurship (SINE) programme, there are 14 startups residing in the campus and 10 companies are testing waters in the market place. Under the Society for Innovation and Development (SID) programme at IISc, Bangalore, five startups have entered the market place.
Beyond the IITs, IISc and IIMs, there are hardly any serious mentorship programmes for entrepreneurship in our colleges. A few that do offer are run by college teachers with little or no participation from the industry. Due to lack of proper mentorship, a number of startups fail to make a long-term impact due to clear goals and vision.
There is of course quite a difference in the magnitude of early stage funding available for startups in India versus those in the Silicon Valley in the USA. Indian startups, especially in product and IP development domain, not only have to innovate on technology but also on business models so as to make them more capital efficient. Startups in India can take advantage of the lower costs in India for developing technology and try to manage with lesser funds. But for selling technology and having access to markets globally needs the same kind of investment that startups in the Silicon Valley have.
Nevertheless, there has been an improvement over the last few years in the early stage funding available for startups, both with the emergence of angel investors and setting up of a few early stage VC firms, informs Jhunjhunwala. On its part, the government has lent a helping hand by introducing grant schemes under the aegis of the department of scientific and industrial research. As part of this, they give seed grants?in the range of Rs 5-7 lakh?to individuals and startups to develop prototypes of the product/technologies they have ideas about.
Initial funds in form of soft loans provided by the institutes are not adequate for developing and productising technologies and then taking it to the market. The problem with these funds are either it takes ages to come, or you have to shed a good portion of your company for getting the money and deal with the wimps of the investor(s), says Surojit Bose, director and co-founder of LeadInvent Technologies, a drug discovery firm from IIT Delhi.
?I would say that the adequate seed level funding made available to tech startups should be somewhere in the range of Rs 15-30 lakh. This should be coupled with a lot of mentoring and advice, as startups are a lot frugal in their initial phase,? insists Sidhartha Bhimania, CEO of EnNatura Tech Ventures, an IIT Delhi startup developing eco-friendly printer ink.
Going forward, several measures are suggested for creating a better ecosystem for the startups. To begin with, initial screening for the startups should be thorough, so that the student entrepreneurs taking a plunge actually undergo a self-diagnosis whether they have the right idea and the right value system in place. There is an equivocal demand to improve and increase the number of incubation centres for budding entrepreneurs. There has to be more industry involvement at this stage through mentorship programmes. More government umbrella grants focused on product/prototype development activities should be made available. On a more idealistic note, established businesses should share knowledge and expertise in setting up and running new ventures.
