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38% of India’s Unicorns Are Not “Indian”

India currently has 90 unicorns – startup companies that are valued at over $1b – and will likely soon have 100 unicorns, becoming the third such country after the USA and China. Since January 2016 when the “Startup India” program was launched, the startup ecosystem of India including infrastructure for startups, be it incubators, mentorship, funding, corporate initiatives, media coverage, or even patent filing, has improved substantially making life easier for entrepreneurs. 

However, it is still not as smooth a ride for the Indian start-ups as it is for startups in the advanced economies of say, the USA, Singapore, and China. Our “ease of doing business” is yet to be on par with the developed world, especially given the high taxation, onerous compliance requirements, inadequate and cumbersome legal protection of IP, as well as time-consuming and expensive processes to access capital and secure exits. It isn’t a surprise therefore that many companies are shifting their primary legal location to foreign jurisdictions like the USA, and Singapore. 

How do the numbers stand?

As per a study by Venture Intelligence, of the presently known 90 “Indian” unicorns), 56 are based in India, 25 in the USA, 8 in Singapore, and 1 in the Netherlands spanning sectors from e-Commerce to fintech to gaming and more. In other words,  38% of “Indian” unicorns are not quite Indian as they are domiciled outside of India. Moreover, these 34 unicorns have raised approximately $30B ie, this large money could have been but hasn’t been invested into an India domiciled entity. 

Sector Wise break-up of the Unicorns 

Source: Venture Intelligence

Chart: Sector-wise domicile of unicorns as on 31st March 2022.

The reasons for incorporating in the USA are different from incorporating in say,  Singapore. SaaS founders find it easier to reach out to the large market for SaaS “Software as a Service” based offerings in the USA by incorporating there. Companies incorporated in Singapore for high “ease of doing business”, low taxation, quality infrastructure, and quality of life while remaining close to India.  

Out of 12 Indian unicorns in the SaaS category, all except Zoho and Darwinbox are based in the USA. SaaS offerings are expected to be a $1 trillion opportunity and India will lose wealth creation, tax revenues, listing, and related income, by not having these companies domiciled in India. 

Of the three unicorns in a frontier technology area like Artificial Intelligence, namely – Glance, Fractal, and Mindtickle, one is registered in Singapore while the other two are in the USA. Of the 3 unicorns in Gaming, Mobile Premier League and  Dream 11 are based in Singapore and New Jersey respectively while Games 24×7 is registered in India. 

Flipkart, India’s greatest startup success story and the poster boy for Indian e-commerce, which was acquired by Walmart at a valuation of over $20B, was domiciled in Singapore.  That set the trend of e-commerce companies having their HQs in the island country. There are many Singapore shell companies set up by VC funds to become holding companies for Indian subsidiaries. Singapore is today the hottest destination for the registration of Indian e-commerce players.

Even more worrying than this trend of registering the parent company outside India is the migration of startup founders to UAE and Singapore.  Lower taxes, easier access to capital, government support, simple compliance, and better quality of life while being just a short flight away from India make the UAE and Singapore rather attractive to founders. 

Whichever country our startups chose to register or our founders chose to migrate to, the ultimate loser is India with intellectual property ownership and funds being vested in non-Indian jurisdictions. 

Stay in India Mission

In order to retain the economic value added by the start-up ecosystem, it is important that India urgently puts in place policies that ensure that founders and startups ‘Stay-in-India”.  This will require the coming together of various ministries, particularly DPIIT/Min of Commerce, Ministry of Finance, Ministry of Electronics and Information Technology, and regulators like the Reserve Bank of India and Securities and Exchange Board of India to address the Stay-in-India Checklist. 

Stay-in-India is an evolving checklist of issues that need to be solved to contain the exodus of startups from India. These issues fall under four categories: a) Ease of doing business and making it easy to raise funds; b) harmonization of coding of digital economy c) Reducing overall tax anomalies and d) Increased DTA and foreign markets access. 

The issues are comprehensively listed in the Stay-in-India checklist. 

As an example, let’s consider the anomalies in the taxation of dividends. Dividend received from overseas subsidiaries, that has been already taxed, is taxed once again in India as income in the hands of the company. Also, while the rate of tax on such dividends for certain companies is 15% (as against 30%), the same exemption is not provided to limited-liability partnerships and individuals. It amounts to double taxation of income and discourages a model where overseas subsidiaries of Indian startups can pay dividends at lower tax rates to Indian shareholders. Removal of this dividend tax will directly encourage start-ups to remain domiciled in India and receive dividend income from subsidiaries abroad. 

Similarly, there are regulatory frictions e.g. TDS on the sale of software products which reduces the working capital in hands of Software product companies, or the need for filling the Softex form (which was relevant in the early days of IT services exports), and which is now redundant as GSTN Invoices already have the required and sufficient data. All that is required is for different departments of the Govt and regulators to connect digitally and share information. The unfavourable tax regime for IPR protection, such as subjection to minimum alternate tax, IPRs being subject to income tax, and not capital gains even when they are held for more than a year is another big irritant. Technology-heavy startups, therefore, tend to relocate to jurisdictions like Singapore and the USA that have a smoother and lower-cost approach. Founders relocating to overseas jurisdictions are typically seen around the time of M&A. One of the reasons relates to taxation: typically, a portion of the financial proceeds arising from an M&A transaction is held in escrow and released to the founders after some time and/or completion of certain contractual obligations. The escrow payments are treated as income by the Indian tax authorities rather than capital gains as other jurisdictions do – this needs resolution.

India is emerging as a global startup hub, with the support of the Govt, with our startups attracting capital and talent while being at the forefront of innovation, jobs, wealth, and intellectual property creation. Brand India is enhanced globally by the success of Indian startups.  With more support from the Government by way of removal of regulatory friction and by providing incentives – fiscal and regulatory –  the ecosystem required to create, enable and grow Indian startups will dramatically accelerate. 

The Ease of Doing Business must be tackled in mission mode with the Stay-in-India Mission (SIIM) being an integral part of India is to secure its rightful place around the global innovation table. 

The blog post is co-authored by our volunteers Sanjay Anandram and Amit Agrahari. You can reach out to Amit at [email protected]

Disclaimer: The article depends upon various pubic data sources apart from credible data sources that are relevant at the current date and time. Readers may like to read this accordingly. 

Data Sources Courtesy: 1. Venture Intelligence. 2. Invest India

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A New Tryst with Destiny

On Aug 15th 1947 at the dawn of India’s political Independence, Jawaharlal Nehru delivered his “Tryst with Destiny” midnight speech. In 1991, India gained economic freedom from a clutch of socialist era shackles. In 2017, it is time for India to redeem its “pledge in full measure” towards freedom of the individual and enterprise to achieve its destiny.

Today, as India completes its 70th year, we need to, as is customary, take stock. India is a $2.2trillion consumption-led economy today, growing at about 6.5 percent, with a 250m in the middle-class out of 1.3billion, and at an average of 29years old, the youngest population in the world among major economies. Life expectancy is at about 68 years while literacy is at 79%.  About 31% of India resides in urban areas. India’s forex reserves were at $386billion in June 2017 up from $5.83billion (~3.5months of imports) in 1991. We now have about 799 Universities and 50,994 colleges with about 34million students in higher education.

While very impressive strides have been made in many areas, it is important that we keep in mind the fact that 15% of the world lives in India and over 68%  ie about 700million of our people live on less than US$2 a day. Over 17 million people are born (equivalent to the population of The Netherlands), an estimated 40million are unemployed, 47million youth drop out of school by 10th standard, healthcare related expenses push over 60million people into poverty each year,  500,000 students graduate each year from various colleges and over 12 million join the workforce each year. The investment required to educate, feed, train, and employ these large numbers into gainful jobs is in the lakhs of crores. Where will this money come from if not from economic activity and from creation of millions of jobs?  Where will the water and sanitation, education, travel, housing, electricity, entertainment, banking and financial services that need to be provided to these huge numbers come from?

For far too long, we have been plagued by poverty – of ideas, of ideology and of course economically. Misplaced socialistic policies in the early years of India ensured that poverty was distributed while cronyism ensured that a few made unconscionable amounts of money and enjoyed the trappings of power.

Jobs and solutions are created by entrepreneurs and those who are entrepreneurial in their thinking. Governments are facilitators and regulators to make sure that everyone’s playing fairly and by the rules. Wealth is then created by entrepreneurial actions. Only when wealth is created, can there be investments in creating the support infrastructure and services necessary for India to seriously consider redeeming its pledge in its tryst with destiny.  And a crucial pre-requisite for this is the need for an entrepreneurial mindset among different stakeholders. A mindset that challenges status-quo, propels growth, engenders innovative problem solving, embraces ideas, technology and models, and delivers benefits to people.

Fortunately, India has no shortage of entrepreneurs, of all kinds! There are born entrepreneurs, some become entrepreneurs and others have entrepreneurial thinking thrust on them thanks to circumstances! In 2017, as the landmark $2.5b Softbank-Flipkart deal shows, Indian entrepreneurs have come of age.  The Indian startup entrepreneur is educated, aware, unafraid, confident, assertive and, are unabashedly Indian.  Today, the Indian startup ecosystem is the 3rd largest in the world with over 26,000 startups and with over $90billion in value being created. 

This century will be driven by knowledge based capital with software as engine. India is recognised, regarded and respected for its software prowess built on the success of Indian IT services which deliver over $170billion in revenue and employ over 4million people today. Indian talent runs software giants like Google and Microsoft and powers thousands around the world from Silicon Valley to Singapore, Boston to Bangalore. India’s ability to leverage this talent, create and deploy knowledge based capital will be key.  New technologies, models,  affordability, policies are all helping India rapidly emerge as a key player in the 21st century knowledge economy.

Regulators and governments are waking up to the transformative power of innovation via startups. Policies are being re-worked, technology platforms are being deployed and programmes being launched to encourage innovation and entrepreneurship.  Digital India, Startup India, India Stack and other programmes are being co-opted to drive financial inclusion, education, healthcare, and governance.  Startup hubs, incubators and accelerators, entrepreneurship groups, are sprouting across cities and towns in India. Costs of doing business, ease of doing business have to come down dramatically and there’re initiatives underway to make those happen.

In 1929 in Lahore, a call for “Purna Swaraj” a declaration of India’s Independence was given and Gandhiji hoisted the Indian flag.  No one knew how or when this would happen but it was an audacious goal, a call to action that drove the people to achieve their goal in 18 years.  Is it possible, similarly, for us today to set a goal that will galvanise us to action to achieve what seems audacious? Is it possible for startups to enable India to leapfrog and transform itself? Could we have a 10year goal calling for 100,000 startups, benefitting 10million people, impacting 40million people, uplifting 30million MSMEs, creating $500billion in value? Is it possible for us to imagine that each of us, in our lifetimes, creates – either directly or indirectly – a 100 jobs? Can these 100,000 startups – with educated, experienced, entrepreneurial and energetic founders– each  take up this challenge? Ten million jobs can be created by this group, indirectly benefiting 40 million?

If it is possible, it is do-able!

The Brihadaranyaka Upanishada has this to say:

“You are what your deep, driving desire is. As your desire, so is your will. As your will is, so is your deed. As your deed is, so is your destiny.”

Do we desire this strongly enough?

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The Kaysh-less Economy

the-kaysh-less-economy

The November 8th announcement of demonetization of Rs 500 and Rs 1000 notes by Prime Minister Modi caught everyone by surprise. That was the intent. It is, however, widely expected that bank accounts, plastic cards and digital money usage will increase dramatically in the next 12 months. In other words, India will be pushed towards a cashless economy. The purpose of this piece however isn’t about the probability of a cashless economy happening; It is about the definite opportunity presented by the Indian kaysh-less economy. That is, the economy resulting from the removal of hair from people’s heads. India has been going kaysh-less for millennia. It is our kaysh that adorns the heads of Western celebrities like Lady Gaga, Beyonce, Naomi Campbell and any “Hollywood who’s been a mile of a first class weave” according to Mother Jones. It is Indian kaysh – renowned for its length, quality and strength – that is most prized in the making of wigs, weaves and hair extensions (“dry hair”) used by women in the West.

Annually, India exports about 1,300 tons of hair- 80 per cent of the world’s supply – contributing to about US$400 million in revenues and employing thousands in the collecting, cleaning and sorting activities. Our temples sell the best quality hair – 20-30 per cent of all hair is harvested in temples – while barber shops and women’s combs and garbage bins generate the rest. Temple towns like Tirupati in Andhra and Palani in Tamil Nadu are on the world map for their hair exports. In 2013, Tirupati alone generated Rs 200cr from e-auctioning of 106 tons of hair; 25,000 heads are shaved daily in Tirupati where over 600 hairdressers are employed including 50 female barbers. Rural women who get their heads tonsured have prized natural long hair because it is uncontaminated by shampooing and styling chemicals. The significantly less lucrative shorter men’s hair on the other hand is mostly for industrial use eg stuffing clothes, fertilizers and for extracting L-cysteine, an amino acid. It is worth noting that this acid is used in pizza dough and bakery products so spare a thought the next time you bite into pizza and actually find hair in it.

Indian hair is closest to Caucasian hair and is the most heavily priced thanks to it being “remy” ie single cut and orientation of the cuticle. The remy hair from India goes largely to the US and Europe while the non-remy hair goes to China.

The Indian kaysh-less economy can be a global multi-billion dollar market opportunity; Interestingly, Africa alone offers a US$6billion opportunity that Indian companies can target. If only we considered it as such and, instead of just being a supplier of the primary commodity, got into the higher value-added products of branded dry hair. Instead, even in kaysh, like most things that originate in India, someone else is actually harvesting the serious cash! China, on the other hand, generates $2billion from its supplying dry hair products by partly using Indian non-remy kaysh!

India’s domestic kaysh-less economy – as a leading supplier of the best quality human hair – can provide a very lucrative cash generating opportunity for Indian beauty and wellness companies.

With 1.25billion people, India’s original kaysh-less economy isn’t an hairy-fairy business; It is hair today and definitely not gone tomorrow. The country needs a Big Hairy Audacious Goal. All we have to do is say, “hair! Hair!” to that. Will we?

 

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#StartupIndia Little Action Plan

There was palpable excitement all around on June 16th as the much awaited Startup India policy was to be unveiled. Scores of intrepid, passionate, dedicated, knowledgeable volunteers from multiple groups had worked tirelessly for very many months advocating the need for the administration to recognise startups as legitimate 21st century vehicles for creating jobs and wealth in society. For this to happen, multiple sessions were held to educate, illustrate and showcase what startups had done for other economies and are beginning to do in India.


One of the great accomplishments has been to get the word “startup” accepted within the administration. Acknowledging that an educated highly talented set of individuals could come together to start an entity based on innovation and driven by technology and intellectual property was a major achievement. Because till then, the visual metaphor was of a safari suited micro and small business owner – much maligned in various soaps and movies – obsequiously dealing with multiple government agencies and not averse to bending the law and greasing the machinery!

It is said that the beginning of wisdom starts with definitions. Section A of the Action Plan details the definition of a startup which is quite acceptable. However, what is important is to see how language gets transferred into official government notifications and the law.

However, for a startup to get government tax benefits it has to receive a certification from an Inter-Ministerial Board that will be set up for such purposes! When such a Board will be set up, the composition of the Board, the frequency of their meetings, the discretion powers vested with this Board are all yet to be made known. Why not have An online self-certification mechanism for this with severe penalties for those misusing or misrepresenting their case?

A mobile app will be made available from April 1st of this year for the purposes of registering, filing, tracking, applying for schemes, by startups. Interestingly, though the hope is that it will be within a day, the Action Plan document doesn’t specify how long it will take for a startup company to be registered! And what the pre-requisites are eg does the Inter-Ministerial Board or the DIPP or any other approved 3rd party have to certify the startup?

Self-certification of compliance, via the mobile app, with 9 Labour and 3 Environment laws is a welcome move with a 3 year moratorium on labour inspection. But why not include simple self-certification compliance for all other laws too, eg secretarial and governance matters? And why not for say, 5 years? Especially when the definition of a startup talks of an entity that is less than 5years old?

The Action Plan aims to allow a startup to wind-down its operations in 90days after it appoints a liquidator/insolvency professional and pays off all creditors and sells the assets. This is a very welcome move as anyone who has attempted to shut a company down in India can attest that it is an almost impossible task. The Insolvency and Bankruptcy Bill 2015 (IBB) that’s pending in Parliament will detail the provisions of the fast-track and voluntary closure of a business. Till the IBB is passed and the details known, celebrations will have to wait. The PM even exhorted the audience to use social media to rally support for IBB!

Since April 2015, central and state governments and PSUs have to mandatorily procure 20% from micro, small and medium enterprises (MSMEs). This has been extended now to include startups. But only startups only in the manufacturing sector are eligible! Why not all startups? And in place of “prior experience/criterion” startups have to demonstrate “requisite capability to execute the project as per the requirements”. Whatever that means! With fears of the CAG audit, one can see how this will be implemented in practice.

Startups don’t have to pay Income Tax for 3 years. Well, am not sure if there are any startups that generate taxable income in the first 3years! Why not make startups exempt from all taxes for 5 years?

There is an exemption for investors with capital gains to invest in the government “Fund of Funds” and for investments in manufacturing MSMEs. This is just an extension of an existing provision. But is this exemption applicable to entrepreneurs (not just investors) who say, sell their house and invest in a startup? If not, why not?

Angel investors cannot claim the FMV certification exemption that now, thanks to this policy, includes incubators in addition to venture capital funds.

A clear liberal stock option policy, taxation policy, onerous compliance requirements for startups raising capital – either domestic or overseas – are other areas that will have to wait another day or the budget.

A Rs 10,000crore Fund of Funds, setting up a Rs 500cr annual venture debt scheme, encouraging the setting up of research parks, incubators and a country wide programme to spread the awareness of startups in schools and colleges showcase what the government does best, namely creating large national schemes with a grandiose hopeful vision. Clarity on how these will be implemented and more importantly managed and monitored and what kind of outcomes are planned will however have to await another day!

This Startup Action Policy flatters only to deceive. The reluctance of the state to disengage from the culture of command and control shines through. India jumped 12 places to 130 from 142 in the Ease of Doing Business Index 2015 thanks in large part to the improved power situation and not due to any radical change in procedures and laws!

The good news is that entrepreneurs are unstoppable and have, in spite of the best efforts of India’s crushing bureaucracy, demonstrated their abilities and established India as a global startup hotspot. The steps outlined in the Action Plan will only nudge them along faster. And that can’t be bad. India remains the country with enormous potential!

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of iSPIRT.)

This article was first published on YourStory

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The best way to predict the future is to invent it!

India is interestingly poised today. About half of India’s 1.25billion people are under the age of 25 and by 2020, India will be the world’s youngest country with an average age of 29. According to the World Bank, India’s will overtake China to become the world’s fastest growing big economy by 2017-18. The scale of opportunity – and of course the challenge – in India is unprecedented. Millions of jobs have to be created in the coming years. Wealth has to be created. At an increasing pace and in   an ever changing world.

It is clear to all, including the government, that technology will play an ever more important role in the future. The inevitability of that fact is slowly but surely seeping into the consciousness of all decision makers at all levels. That technology needs to be embraced and leveraged in improving the lives of Indians.

New technologies and platforms are rapidly emerging – e.g., IoT, Mobile/Smart phones, Cloud, Aadhar, Payments – that can and will have profound impact on how we as a country think about the next 5-10years. Our future.

It is clear that continuing to do what we’ve done since 1947 isn’t going to get us far into the future.

“The best way to predict the future is to invent it” and “Change is the only constant” are two popular adages usually bandied about in seminars, corporate-speak, by VC s and successful entrepreneurs! What’s left unsaid are – how do I invent the future? How do I deal with change? And from there on to, what are the possible futures? What are the possible changes? What’s causing them? How will different industries like Financial Services, Retail, Healthcare be likely impacted?

These are the tough questions. Successful entrepreneurs, investors, corporations, academics and governments spend – or, need to spend – a lot of time thinking about such issues.

What are new ways of framing the potential and overcoming these challenges? What is unique about India and what solutions and resources can be shared from around the world? How can India utilize the enormous, young and entrepreneurial energy to craft scalable solutions to impact lives? What are the emerging global megatrends that can be harnessed that will enable India to leapfrog decades of inefficiency and empower people?

We have done this before: From mainframe computing to client-server. From land line to mobile. From paper based to digital identity.

Can we do this again across multiple areas? What will it take?

Answers will be found through debate and discussion by various stakeholders invested in the India of a new India– government, thought leaders, practitioners, entrepreneurs, executives among others. A forum for learning, discussing, debating, sharing of ideas of a future impacted by technology would be very impactful. To catalyse conversations, connections and collaborations that would help provide the answers to the questions.

A journey of a million miles begins with a single step. It is time for that 1st meaningful step to be taken!

LeapFrogTIE LEAPFROG. AUGUST 21ST 2015. ITC GARDENIA BANGALORE. http://www.tieleapfrog.in/

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The Real Reforms: Is Anyone Listening?

The papers are breathlessly reporting the arrival of   “reforms 2.0” while the stock markets are doing what they always do – reacting to rumour,  hyperbole,  fears, uncertainties and doubts. But reforms 2.0 won’t impact the lives of citizens and won’t create jobs, that most crucial of determinants of the economic well- being of a people.

“I’m moving my company to Singapore”, said the CEO of an innovative startup. The company had developed sophisticated imaging and vision products using proprietary technology that would be of great benefit to the defence forces. The company was based in Bangalore where the design and development got done, components were sourced from overseas, manufacturing and assembly got done partly in India and partly overseas. The final product was Indian and competed more than favourably against competition from Israel and some other countries. However, given procurement policies, products from foreign companies were cheaper, received payments far more smoothly whereas the Indian company had to pay duties and taxes on imports (set-offs for these duties too forever to materialize) and had to constantly follow up for several months to get their bills cleared. Of course, that this company didn’t employ “consultants” who could help smoothen the process didn’t help matters. Hence the move to Singapore where the product would get built and shipped to India as a foreign product against a LC (letter of credit) issued by the purchasing entity in India!

Another entrepreneur, similar tale. Upon following up for months to get his payment, he was advised to divide his invoice into two parts in future: one for which payment would be made in US Dollars since it was imported and another for the Indian components of the final product. The US Dollar invoice would get paid via a LC while the Rupee invoice would get paid in due course. The only problem – the US Dollar invoice was only 30% of the overall price! Of course, this entrepreneur too wasn’t willing to inflate invoices and continued to suffer.

In another case, upon filing for the registration of his new company with the Registrar of Companies (RoC), the entrepreneur was informed, after a few weeks of course, that the registration request had been rejected as the name he had selected had “venture fund” in it and therefore required to be approved by the concerned department in Delhi. Not wanting to get into that black hole, the entrepreneur decided to re-file with just “fund” in the company’s name. After some more weeks, another rejection letter ensued. Upon again following up with the RoC, he was told that “fund” didn’t quite explain what the company did! Exasperated and harried as almost 7 weeks had elapsed, he asked the RoC for his suggestion. Finally, after almost 9 weeks, he got the “fund advisors” approved as the suffix.  Another entrepreneur’s application got rejected  since in the opinion of the RoC, the selected name sounded made up! The entrepreneur had to take a dictionary to the RoC to show them the name actually meant something in the English language!

These are but four examples of the kinds of absolutely irrational, meaningless, unfriendly, opaque bureaucratic policies that plague our system. Is it any wonder then that mind numbing corruption takes hold?

There are all kinds of approvals and permits and registrations required to set up a business. The Political and Economic Risk Consultancy based in Hong Kong in a January 2012 report said India’s bureaucracy is the worst in Asia – no surprise to anyone! According to a November 1st 2011  Wall Street Journal article, “India ranks among the world’s worst countries at encouraging entrepreneurs. For ease of starting a business, India is 166th out of 183 countries, just ahead of Angola, according to World Bank figures released recently. Only one country, Timor-Leste, is worse at enforcing contracts.” According to the World Bank “Doing Business” publications,  India ranks an abysmal 132 out of 183 countries in “ease of doing business’ and where, among other notable dismal indicators,  it takes, on average 7 years to close a business and  1,420 days to enforce a contract and where the cost of starting a business is 46.8% of per capita income!

Given this pathetic state of affairs, one can only stand up and salute the intrepid Indian entrepreneur who perseveres with fortitude in spite of the best efforts of bureaucracy, corrupt officials and maddening policies.  India’s small firms add about 3.3 million jobs each year but with over 15million people entering the job market each year, entrepreneurs can and should be playing a critical role in India’s economy.

The two fundamental and critical reforms namely, (a) administrative,  to dramatically simplify, empower and make transparent rules of engagement and (b) legal, to enforce the sanctity of contracts and the rule of  law in a speedy impartial manner are still pending in spite of the recommendations of umpteen committees over past decades. Real reforms in these two areas alone will unleash the energies of entrepreneurs and take India on a different trajectory. Is anyone listening?

Reblogged from YourStory.com

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Lets Not Lose the Reason and Season for Products

One of the long running debates in the Indian technology entrepreneurial world is whether India will ever engender global product companies or will it be destined to be a purveyor of services and a consumer of products and solutions that are imagined, created and marketed by others. As in most things, and especially true for India, there has to be a reason and there has to be a season for anything to occur. So what has occurred? What’s the reason? What’s the season?

What has occurred and is occurring with increasing velocity is:

  • Services companies are passé.  Almost all companies being created today are products or solutions (ie services around a core product offering)
  • These companies are largely to be found in the telecom/mobile domains utilising SaaS/cloud based delivery. This isn’t surprising since telecom/mobile are global scale, scope and market opportunities in India; SaaS/Cloud based companies can inexpensively cater to the world leveraging expensive and complex infrastructure built by others.
  • Talent from global tech companies or even from overseas is coming together to capitalise on these opportunities.

While these are heartening developments, what is more interesting is the opportunity ahead-  across each and every sector of the economy.

What’s the reason though for all this?

Increasing competition, awareness, technology adoption, and the like are beginning to convince more and more companies, across the board, of the importance of investing in technology to drive efficiency, productivity, quality and indeed competitiveness. Technology for all practical purposes today is all software: from vehicles to logistics to hotel, bus and airline reservations to rocket launches to banking to fraud detection to communication to education to anything-else-you-can-imagine! India is beginning to realise that it can be a market on a global scale for solutions as each of these sector s is plagued by colossal global sized problems.

Why is the season right?

Without the right season, no fruit would ever ripen. The season, in this case, is the environment:  enormous numbers of youngsters – aspirational, aware, impatient, confident, unafraid, educated, driven, the growing presence of avenues for these youngsters and their supporters, backers, service providers – investors, mentors, partners of all kinds– to experiment.

The collision of the reason with the season is accelerating this process at an increasing pace.

But before we all start hyperventilating, it is useful to remember that India, despite being the world’s largest producer of milk and in spite of being a milk surplus country, isn’t known around the world for its milk products! There’s a lesson in there somewhere right?  And as a country, we’re known to grab defeat from the jaws of victory with unfailing regularity and precision.  Some important points to keep in mind:

  • Most of the young product companies, especially those that have the connections, are either considering or already have set themselves up as overseas entities. Why? To escape from the mind-numbing red-tape, to enjoy operating freedom, for reasons of branding, protection of intellectual property, to get the benefit of taxation, investments and exits.  Is this desirable? If not, shouldn’t there be policy mechanisms to ensure that the reasons for seeking overseas domicile are minimised? When all countries are laying out red-carpets for companies to come to their shores, why are we intent on driving away those we have?
  • Local branding and awareness generation: Are there sufficient role models for Indian customers? Is it a matter of pride for the country if a world class “Made in India” product is used? What can and should be done to make this happen? Examples from what Taiwan and Korea did are relevant here. Remember, branding isn’t advertising. It is the delivery of a promise, consistently.
  • Industries that are global scale in India eg  defence or where India offers unique challenges eg retail and distribution? Co-option of stakeholders to build world class solutions in these areas is a possibility.
  • India, one would imagine, is ripe territory for the creation of unique voice based products and solutions, given the illiteracy, proliferation of languages and accents. Yet there’re no solutions here. Education – quality video over low bandwidth lines – can be a gamechanger. What about offering cloud based mobile apps for managing businesses for the large number of SMBs?

There are obviously opportunities and possibilities. But without the coming together of like-minded people driven by the desire to effect change across industry clusters via policy, awareness generation, branding, crafting solutions to solve Indian problems, the season to ripen fruits will pass.

This is a season where the coming together of young people, using technology, knowledge, research, engagement, drive and passion, are driving large changes in the way democracy and politics are practised for the better in the Indian nation. Surely, building a product nation is far simpler? Are we all up to it?

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Just Imagine

Today is India’s 66th Independence Day and the environment around, seems, to be generally shorn of excitement, energy and optimism. However, as is customary on such occasions, a call to the people – all of us – is, well, called for: to galvanise us all to action, to put our shoulders to the wheel of policy making that will make economic activity explode.  Such calls for action and indeed, the action, itself require us all to imagine an India that is radically different from the one that we see and experience each day around us.

Nandan Nilekani wrote “Imagining India” in 2008 and one of the things he imagined has since been actualised in the form of the Aadhar / UID project that provides an Identity card and number to every resident of India. Over 600million people would be recipients of this card by next year, 2014. In and as of itself, this would have been a gargantuan exercise, amongst the very largest in the world. But that by itself wouldn’t be as interesting as what the prevalence of the Aadhar infrastructure can enable.  Identity is a fundamental pre-requisite for any kind of financial transaction and the Aadhar project enables that.  “Know your customer” ( KYC) norms can now be easily done for all kinds of activities eg. From opening a bank account to applying for a gas connection to a phone to availing a loan to purchasing insurance. Hundreds of millions of people who operated in the informal or extra-legal financial services market will now come under the more benign, formal, organised and recognised regime.

Much earlier in the 1980s, Sam Pitroda imagined an India transformed with the creation and establishment of a nationwide telecom infrastructure.  Today, we all are witness to the remarkable benefits that this imagination has brought about. Over 900 million phone subscribers in just over two decades.

Even earlier, in the 1960s Dr Verghese Kurien imagined a young country that would be self-sufficient in milk. Operation Flood made India, formerly a milk deficient country, the world’s largest producer of milk accounting for over 17% of global output with an entire infrastructure, from rural to urban, tradition and technology to markets and branding.

Each of the above examples showcases the huge long term national benefits of creating big platforms – Unique Identity, Telecom, Milk Production and Distribution – through the sheer power of imagination, entrepreneurial energy, policy making, political will and savvy marketing. Platforms are soft and hard infrastructure – policy, rules of engagement and collaboration, co-opting of existing stakeholders, creation and harnessing of technology, innovative processes and business models. Such platforms while usually created and established by the government to serve public good, interest and national security, it is the subsequent entry of private entrepreneurs that enables the proliferation and development of additional technologies and services. For example, the mother of all platforms today, the internet, had its origins in the US Department of Defence Advanced Project Network.

So as we enter our 67th year as a nation, what is it that we can imagine? Indeed, what should we imagine? Very briefly,

i)               Education: In the age of MOOCs and Wikis, why cannot India have a national programme for education using and deploying the latest technologies? Video based learning, local languages with local examples, with the best teachers, with online testing? This will require the creation of a massive technology backbone, co-opting of existing institutions, training, establishment of processes and rules, financial incentives, payment and collection mechanisms for the entry and exit of private entities.

ii)              Healthcare is another area that requires enormous intervention along the lines being discussed. Telemedicine, remote diagnostics, new innovative low cost devices for self testing and medication, education and awareness, mobile clinics, logistics for moving patients and equipment, innovative payment systems, policy, regulation and oversight are areas that have to come together.

iii)            A marketplace for logistics providers – air, land and sea – across the value chain, integrated with warehouses, C&F agents, insurance providers, payments and settlements, processes for transparent pricing. Can be very useful for agriculture and industry.

There obviously are many more possibilities (viz. defence and space) and initiatives that can be imagined that will help all of us Indians and India. Can we set the ball rolling and start the process of engagement with various stakeholders – government, industry bodies, entrepreneurs and others – to help create platforms that can create a new India? Can we create and curate ideas for platforms that have the immense potential to fundamentally transform India.  Just Imagine.

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Stop Imitating! Finding India’s True Self

A man with a severe tooth ache goes to the dentist, who upon examining the tooth, assures the man that the problem wasn’t anything serious and that a simple procedure performed under a local anesthesia would help repair the damage. Upon hearing this, the man gets very upset and  tells the dentist, “What? Local anesthesia? You think I cannot afford a foreign one?! I demand an  imported one!”

I heard this tale first some decades ago and it served to highlight, in a tongue in cheek manner, the Indian’s obsession with all things foreign while also showcasing the lack of awareness of what a local anesthesia was.

This obsession with the imported and  the foreign should have lessened, one would have imagined, after over 20 years of economic liberalization. Yet, Chidanand Rajghattta writing about Ang Lee winning the Best Director Oscar for “Life of Pi” in the Times of India – Feb 16th 2013 – had this to say “It was a big moment for Lee, but a bigger moment for his Indian fans when he ended his acceptance speech with a “Namaste”” Really? Indians felt pride, according to the writer because Ang Lee said “Namaste”?!

There’s a big lesson for Indian entrepreneurs. A lesson involving self-esteem, capability, the confidence and courage of one’s own convictions.  An entrepreneur cannot solve problems by just seeking inspiration, affirmation and trivial acknowledgement from elsewhere without the passionate driving  self-belief, a deep understanding of the problems to be solved and a gathering of insight.  Therefore, blindly copying models from elsewhere, by only reading about startups and startup ecosystems  in  advanced economies and  thereafter slavishly attempting to adopt those offerings and even behavior  without adding any real original material of one’s own is a recipe for tragic disaster. Imitation is the best form of flattery, and indeed homage, to the original; the imitator is, at best, tolerated but never respected for there’s no original contribution on offer that’s worth recognizing, just a momentary quick-fix solution. Many companies and entrepreneurs – even countries (think Taiwan and China) – start off imitating but then, the successful ones, move rapidly to invest in creating the infrastructure to develop the insights and then execute relentlessly to offer unique solutions to their problems.

Shekhar Gupta, Editor in Chief at The Indian Express, talking to Steven Spielberg is quoted thus “Walking down Champs-Elysees, I was very happy to see a hoarding for an Indian film which described the director as India’s Tarantino”.  So, what about an American director being described as America’s Anurag Kashyap? When will that happen? Should that happen and is that a desirable goal? What will it take to make that happen? So, rather than have debates and discussions around these questions, we bask in the pitiable glory of being second hand?

Shekhar Gupta goes on to say, “I would like to express a wish to you. …… So why don’t you come to India and do an epic on anybody—Buddha, Ashoka, Chandragupta, Akbar, Gandhi, Nehru—we have many themes and stories for you. But it needs a Spielberg to come and do justice to it.”

And how does Spielberg respond?  “I think it needs an Indian director to tell those stories and maybe I could help in the background” How big a tragedy is it when we are so eager to outsource the telling of our own stories and history? What does it say about us? What does it reveal about our lack of self-belief, the infrastructure, the competence, the capacity?

Since we learn and react only to what outsiders have to say, perhaps the following will be instructive.

Eric Schmidt, Executive Chairman of Google, on a recent visit to India said “The most striking Indian internet ……….. will come from Indians solving local problems. We know that India’s internet infrastructure allows Indian engineers to solve the problems of small businesses in other countries. If India plays its cards right, we’ll soon see Indian engineers and Indian small businesses tackling Indian problems first, then exporting the solutions that work best.” For India to play its cards right, it must first recognize that it has the cards and can learn to play its own game!

Drew Olanoff writing in Techcrunch on recent visit had this to say “If a country like India can stop worrying about being like Silicon Valley and find its true self, there could be a new RedBus every other week. It’s moonshot thinking, of course, but that’s what it takes”.

Finding its true self  – that’s a challenge for Indian entrepreneurs and for those involved in the growth of the Indian entrepreneurial ecosystem. Shall we all rise to the occasion now that there’s endorsement from outside?

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India’s Need For Entrepreneurs and the MindSet

In 1991, the second Independence of India took place – there was an opening up of the economy that led, in its own tortuous Indian way, to the opening up of the minds of a section of the population. The educated middle class that had till then either left the country for greener pastures or taken up jobs in the government or with the few MNCs operating then started looking around at opportunities that were being created in India. Entrepreneurship still seemed like something only two sections of society ventured into – those with family wealth or traditional business backgrounds or those without any other option namely, the roadside food shop, the barber and the small store owner. Very few consciously chose entrepreneurship as an option. Then, towards the end of that decade, a remarkable thing began to happen. Young educated middle class Indians suddenly started taking an interest in India: a host of environmental factors played a catalytic role in this phenomenon: the rise of Indian entrepreneurship in the US, the emergence of 1st generation educated middle class Indian entrepreneurs, the creation of aspirations in a increasingly mobile workforce and the media, increased availability of capital and the like. India started getting noticed in the West and India’s arrival on the global stage started getting reported in breathless hyperbole. However, all this euphoric talk about India’s growth and success hid the fact that crony socialism had quietly given way to crony capitalism which was as insidious. Governance and policy making took not just the last rows in the stadium that was cheering “India’s arrival” but were not even in the stadium! The penny naturally dropped on the India story.

Today, we’re confronted by the stark realities of India that the breathless comparisons with China and other countries had somehow managed to paper over. The hubris is slowly and painfully giving away to the realization that the parties celebrating India as a super power had begun too soon. And that there was, quite simply, an enormous amount of work to be done.

In 2012, as India enters its 66th year, our first prime minister’s rousing speech “Tryst with Destiny” is yet again worth reading. Are we anywhere close to redeeming the pledge made, has the new star of hope provided succour and whether hope still springs in the hearts and minds of all of us? While very impressive strides have been made in many areas, especially given the desperate condition at the start of our country’s birth, it is important that we keep in mind the fact that 15% of the world lives in India and over 68%  ie about 700million of our people live on less than US$2 a day. Over 17 million people are born (equivalent to the population of The Netherlands), an estimated 40million are unemployed, over 500,000 students graduate each year from various colleges and over  12 million join the workforce each year . The investment required to educate, train, and deploy these large numbers into gainful jobs is in the tens of thousands of crores. And remember, these millions of jobs have to be yet created! Now imagine the public healthcare, water and sanitation, education, travel, housing, electricity, entertainment, banking and financial services that need to be provided to these huge numbers assuming there’re jobs that lead to incomes being generated leading to consumption and investment. Imagine a scenario where tens of millions of young energetic citizens become disillusioned job seekers – the social upheaval possibilities are terribly explosive even to contemplate, particularly in our country.

For far too long, we have been plagued by poverty – of ideas, of ideology and of course economically. Misplaced socialistic policies in the early years of India ensured that poverty was distributed while cronyism ensured that a few made unconscionable amounts of money and enjoyed the trappings of power.

Jobs are created by entrepreneurs. Governments are facilitators and regulators to make sure that everyone’s playing fairly and by the rules that have been created to facilitate the creation of jobs. Wealth is then created by entrepreneurial actions. Only when wealth is created, can there be investments in creating the support infrastructure and services necessary for India to seriously consider redeeming its pledge. And a crucial pre-requisite for this is the need for an entrepreneurial mindset.

Change in every society, in every age, in every sphere of human endeavor has come about because some people, a minority, decided to put their entrepreneurial mindsets to work. And they were able to put their entrepreneurial mindsets to work because they were incredibly passionate about what they believed in. This minority is the entrepreneurial community. And while the term “entrepreneur” is generally used in the context of business and startups, it is important to realize that the entrepreneurial mindset has been, is and will be on display all around us.

Anyone with an entrepreneurial mindset dreams big, is interested in solving problems, seizes opportunities, is unafraid to experiment with new ways of doing things in order to achieve the dream, demonstrates leadership in creating new resources while marshalling existing resources, energizes people to work collectively to executing the dream, is conscious of the need to be fair, is respectful of the laws of the land, realizes the need to act with speed, engages and responds to feedback with a recalibrated approach, is unapologetic about effecting positive change by challenging a prevailing status quo and works incredibly hard. Possibilities of effecting change and making a difference to oneself and to others as against complaining about constraints (“I have no resources, I don’t know too many people, don’t have the knowledge or experience”) is what distinguishes those with the entrepreneurial mindset from the others. They spend positive energy in figuring out ways to create, seek and aggregate resources (team members, finances, networks) to make the possibilities come true. They are not afraid of failure but instead as Vinod Khosla says, “My willingness to fail gives me the ability to succeed”. In other words, keep shooting multiple arrows at the target.

What is it that drove Andrew Wiles for 30 long frustrating and difficult years to solve Fermat’s Last Theorem – ever since he first came face to face with it at the age of 10 – that had confounded mathematicians for over 350 years? What is it that makes a Reinhold Messner, the greatest mountaineer of all time, climb mountains on every continent, losing several of his fingers and toes and putting himself through extreme life threatening hardships such as climbing Mount Everest without oxygen? Surely, it wasn’t the money! What is it that made a significantly deaf, unschooled child grow up to become Thomas Edison, one of the most prolific inventors of all time with over a 1000 patents? Well before IPL, the stuffy establishment of cricket was changed forever in 1978 when Kerry Packer an Australian media baron challenged status quo by signing up 51 of the world’s top cricketers and introduced limited overs cricket under flood lights, with fielding restrictions, with coloured clothing, cheer leaders and the like. How come no one else thought of this before Packer? Would there have been a Nano if not for a Ratan Tata daring to think of a $2000 car for the middle class Indian?

The mightiest empire the world has ever known was shaken to its very foundations by the incredible demonstration of the entrepreneurial mindset by Mahatma Gandhi. For example, he had this to say about Swaraj “we must have a proper picture of what we want before we can have something approaching it”. Landing in India in 1915 as a 46 year old without any real understanding of India and without any mass following, but shaped by his South African experiences on the need for social justice, driven only by a set of passionate beliefs about the need for freedom for India, developed his concept of Satyagraha and energised people through his own unique blend of non-violent politics, lifestyle and use of symbols like the Dandi March.

We all have heard of Amul. It is India’s largest branded impact making organization Amul today impacts over 3 million milk producers and generates over $2 billion in revenues. It is world’s largest vegetarian cheese brand, India’s largest food brand and the largest pouched milk brand. It would be hard to imagine that an Amul could have been created without the entrepreneurial mindset and leadership of Dr Verghese Kurien, who led Amul as it innovated across the value chain. Amul incidentally was founded in 1946 before India’s independence!

From the few less than obvious examples cited above, it is clear that the manifestations of an entrepreneurial mindset are visible across very many areas of human endeavor.  As we contemplate an India that can  redeem its tryst with destiny, where jobs create economic security for hundreds of millions, we absolutely cannot ignore the seemingly intractable problems that confront us all as citizens. I have long believed that change in India will gain irreversible momentum when the generation born after 1991 enters the work-force. This is the generation that is confident, knowledgeable, technology savvy, is aware, well traveled and is impatient. Fortunately, India is the home to the largest number of such people anywhere in the world.

Resolving these problems requires the energizing of the entrepreneurial mindset that’s latent in each of us. Each of us can make a difference if only we dare to think differently. Changes in the way things are done in government, in politics, in society, in business, in education, healthcare are all eminently possible through entrepreneurial thinking with job creation and facilitation as the important outcome.

Here, therefore, is a question for us to ponder over:

Is it possible for us to imagine that each of us, in our lifetimes, creates – either directly or indirectly – a 100 jobs? Are there not 100,000 people – educated, experienced, entrepreneurial and energetic – who can each take up this challenge? Ten million jobs can be created by this group, indirectly benefiting 50 million.

If it is possible, it is do-able!

The Brihadaranyaka Upanishada has this to say:

“You are what your deep, driving desire is. As your desire, so is your will. As your will is, so is your deed. As your deed is, so is your destiny.”