Rising wave of Indian entrepreneurship

Author : Atim Kabra

Source : From LinkedIn Archives

Date first published : May 9th, 2015

There is a wave of entrepreneurship that has washed up on Indian shores if the significant increase in the number of proposals to fund early stage companies is any indication. And rightly so. Indian economy was hitherto dominated by traditional old economy industrialists who in collusion with rent seeking politicians and bureaucrats stifled competition and ensured that any challenge to their dominance was nipped in the bud. Access to gatekeepers (telecom licences is a prime example) and capital were necessary ingredients for success till now and both were to be obtained only at a high cost provided you had the necessary connections in the system to tap these ‘resources’. Internet has been a whiff of fresh air which has led to blossoming of a million entrepreneurs. The sector has been relatively free of the politician bureaucrat interference till now mainly because it was too new for them to understand and also maybe because they still do not know how to squeeze rent from this sector.

Ideas know no boundaries and Indian creativity has witnessed the best of the West and innovated around it to adapt to the unique characteristics which define the Indian market. This is all being powered by mainly foreign capital which has tasted success in the West and China and is keen on replicating the success in India. Enough smart investors have jumped into the field to power the angel and early stage investing space to provide the initial risk capital. It so happens that Indian software industry has provided the backbone for necessary coding and computing skills which has combined well with the entrepreneurial drive. This unique confluence of success factors has allowed the internet driven new economy to expand. I think it is just the beginning of a tsunami which has the potential to transform India in the urban centres. Like it or not but the ripple effects are already impacting traditional businesses. Folks are shopping online and mall business is suffering. Anecdotal evidence speaks of falling business volumes and drop in shop rentals across malls in Indian cities.

The pace of adoption of technology is shrinking. Recently I came across this data point in Forbes which measured the time taken by innovations to be adopted by 50% of the U.S. Population:

Car:85years Airplane :75 years telephone :69 years electricity: 53 years radio: 30 years PC: 27 years Internet: 18 years Cellphone: 10 years

Similar and maybe faster adoption trends will be visible across the world as the template for these changes are already available from the West to the Rest. Capital and Entrepreneurship does the rest and both have been in ample supply over the last two decades.

In the Indian context, I am extremely happy to see the emergence of serial entrepreneurs in the startup space. Just yesterday, Ajay introduced me to a deal and the guy wrote back giving instances of his earlier interactions with me in his previous ventures. This is a very welcome development. It signifies the increased risk taking abilities, it denotes a fast learning curve of experiences, it embodies the lure of taking charge of ones own destiny. This is not a one off phenomenon as I have already invested in one such serial entrepreneur and the ability to generate an exit there was in my opinion an outcome of his previous brush with near success and with greed and fear. Besides, Ajay himself is turning out to be an ideas man. At an early enough stage in his own venture, he has multiplied the investment value and elevated himself to be a champion of new ideas brewing in his mind factory. I really hope to enjoy this ride with him.

Lastly, three established players have closed large funds for Indian tech space and multiple new funds focussed on early stage investments are in the offing. Capital exists for good ideas and institutional risk taking heralds the arrival of sustainable risk taking ability.

For most of us dealing with old school entrepreneurs and in listed stocks, stories of accounting and sales shenanigans are not new. Just sit with a few new era guys and swap stories. It is clear that we will have to deal with disappointments born out of lack of adequate due diligence in investee companies much sooner than what we would have expected. When the ability to attract capital is incumbent on the sharp upward curve in sales and number of users of your product and services, it is inevitable that sharp practices that produce such growth curves get embedded in the system. As Prahalad mentioned today morning, this is an inevitable part of any bull market. Maxim of buyer beware is creeping in the new economy fast.