With 5.7 per cent of the world’s Unicorn companies, India has become the third largest ecosystem in the world for start-ups. Over the last decade, first generation entrepreneurs and new age start-ups have emerged as the new engine of growth for the economy and in many cases also accelerated the transformation and disruption in the traditional legacy business models. The non-legacy businesses which are agile by design, now also have better access to risk capital and technology to tap into India’s large customer base, thereby unlocking value and generating employment from hitherto non-existent business opportunities. The mindset that fostered innovation and entrepreneurship in the Silicon Valley in the 70s and 80s is now accelerating in India as well, with support coming in from all quarters. However, we need to cement these early successes, and provide supporting frameworks, equiping early stage start-ups with the knowledge and experience to face business headwinds.
Stage 1 -Funding:
While there has been a marked increase in the number of private equity and venture capital players showing an uptick in their interest levels to loosen their purse strings in the Indian start-up ecosystem; it is interesting to note that most of these investments have been beyond the seed and angel rounds in businesses which have proven their mettle. In this context, I believe what is most important is the ability to create an ecosystem of “angel” investors with reasonable risk appetite; across the length and breadth of the country. Interestingly today, 25 years since the globalization of our economy, Indian ecosystem today has thousands of “professionals” who have the required financial cushion and proven track record in varied lines of businesses. These professionals can greatly contribute in ensuring ideas that can propel Indian economy does not go un-invested!
Stage 2 - Incubation
Early stage companies are looking to start off on the right foot; an incubator’s active involvement in facilitating linkages Rana Kapoor, MD and CEO, YES BANK congenial for the survival and growth of these enterprises becomes indispensible given the novelty of the venture. Towards the same, it is furthermore crucial to extend a gamut of services to entrepreneurs, ranging from sectoral mentorship programs, interactive forums for tech, marketing and finance advancements, to access technology, infrastructure and clients. In this context, it is important that incubators are not reduced to just being “term-sheet” shops and that there is unfrettered focus on providing necessary resources for start-ups to acquire customers and focus on implementing defined strategies.
Stage 3 - Vesting
Successful vesting should not only be judged by the quantum of exit return provided to the entrepreneur, but also by the suitability of the acquirer to grow the incumbent business to the next stage of growth. There is a need to design effective platforms with VCs and PE firms to unwind unsustainable business or investment, ensuring an easy exit.
Stage 4 - Expansion
Over my 3.5 decade career as a banker and professional entrepreneur, I have realized that a vote of confidence in your company’s future can go a long way in determining how the company fares in the future. The reason is simple – thinking long-term gives you the motivation to ‘go all out’. Weighing out options and parameters typical to growth are reliable indicators that your start-up is ‘ready’, however these yardsticks can only complement the risk-taking appetite of a successful entrepreneur. Finding a sustainable business model for your product or service is the first leg of the entrepreneurial journey. Once the business takes root, it becomes imperative to gain ground via expansion. Towards the same, establishing effective platforms for addressing challenges and concerns faced by entrepreneurs is paramount to scaling business and exploring growth opportunities.
(This article was first published in the January issue of Entrepreneur Magazine. To subscribe, click here)