Nurturing Innovative Entrepreneurship

Recently, I was watching a fascinating talk on TED (www.ted.com) about a Somali who recounted his experiences while living in Somalia’s capital, Mogadishu. Somalia, a famine and war-torn country, has been devastated with unemployment and an alarming rate of terrorism. Specifically, the talk was centered around the link between unemployment and terrorism.

But what was hidden behind the speaker’s talk was that, in spite of living in such dire circumstances, there were a select few individuals who, despite being unemployed but full of youthful energy, channeled their energy towards innovation. They looked around and did not like what they saw; but as is always the case, “challenges bring about opportunities”. These select few decided to enter headstrong into entrepreneurship, realizing that their city was in dire need for such simple things that we, as Indians, take for granted: things such as scarves, bicycles, pencils, and even such trivial things as flowers.

And that, in its very essence, is the power of entrepreneurship. Entrepreneurship is what creates jobs; it is what satisfies demands and creates the magical equation of supply = demand; and not only fills voids in societies, but it changes the entire life course of the individual embarking upon the risk-taking path. Instead of being mired by unemployment or by taking up an unsatisfactory job, the entrepreneur boldly takes the risk of meeting a need his society needs. There is a demand that is yet to be met; he is there to provide the supply.

Fortunately, India is a country with a relatively low rate of unemployment. Unlike countries like Somalia with staggering rates of unemployment, youth can find work in India. What is lacking, however, is a cultural system that actively promotes entrepreneurship at the most basic levels. If there is one thing that describes an entrepreneur aptly, it is that the entrepreneur is an outlier – that is, he does not fit into the “norm” of the society. Outliers, unfortunately, are frowned upon in India. A basic example would be a computer programming teenager whiz who spends all his free time programming. In the West, the teenager who spends all his time programming would surely be frowned upon but still accepted (for the most part), and the teenager would most likely end up having a brilliant future. He might eventually take that skill set and apply it towards creating something that has never been created before – the true tenet of an entrepreneur. The entrepreneur might not even finish college (Steve Jobs, Bill Gates, Mark Zuckerberg, etc.) However, India creates a difficult environment for that situation to materialize. The teenager would be assigned poor grades and the cultural system makes it difficult for the individual to become an entrepreneur of the highest level.

India is almost synonymous with IT and provides much of the IT outsourcing that the world needs. A country that is bound to be the most populous country in the world within 25 years, India undoubtedly has some of the brightest tech minds in the world. But when it comes to true outliers who go above and beyond and are able to create something truly revolutionary – think Google, Apple, Twitter, Microsoft or Facebook – none of these tech companies have come from India. A country filled with so much technology potential, one must wonder how not even a single brilliant entrepreneur was able to produce a world renowned technology company?

And the same applies to virtually every sector of the economy. Many individuals start businesses in India- therefore, there certainly is no lack of entrepreneurs. In fact, starting a company in itself is not a very difficult process. What is lacking, therefore, is innovative entrepreneurship. Let’s take an example.

Suppose a 15-year-old is obsessed with flying kites and spends his entire day flying kites, sometimes even skipping class to fly kites. Can you imagine the sorts of problems he would face through societal pressures? But he has a passion: he loves kites and he knows exactly what makes one kite better than the next; he knows how to handcraft the best kites; he knows how and where to sell kites and where to obtain all the materials to create kites. In other words, he knows everything about kites. Hence, he wants to become an entrepreneur, spread his knowledge, and make some money. What’s the next step?

Well, in the West, the undeniable next step would be for him to set up a website and begin marketing and selling kites through this website. He would enroll himself in a marketing class, figure out how to get the word out (in fact, companies that sell kites would approach him and offer him all sorts of opportunities to keep himself financially stable while providing him an environment to nurture and master his craft further). He might even do poorly in school, but due to his obsession with kites (and the fact that he’s making money) his parents might not mind it. He gets better and better at his craft, and eventually, he sets up his own business and revolutionizes the way kites are made, sold, purchased and flown. That, in its very essence, is the definition of an entrepreneur.

Here in India, it’s a different story. Sure, he likes to fly kites, but everybody around him is telling him to focus on his grades. He struggles to keep his grades under control while spending all his free time with kites; but with little support, he is unsure on what to do as his next step. He decides to set up a website to share his thoughts with the online community but since he knows nothing about marketing, all he can think of is setting up an online blog. He doesn’t know who to go to, how to promote his ideas, and what his next step should be. He enters college and slowly but surely, his kite flying obsession turns into a side hobby. Years later, he will fondly tell his friends how he was the master of kites when he was 15 years old.

Innovative entrepreneurship is what is lacking in India. If India promoted the right type of environment where, instead of competing against each other, entrepreneurs could boldly innovate on a global level, true entrepreneurship would arise, where the passion to create something great can be materialized through one’s environment. In other words, the environment cultivates entrepreneurship instead of inhibiting it.

Another pitfall for entrepreneurship in India that must be mentioned has to do with venture capitalists. Venture capitalists in India are very much like the companies that they fund: since most companies in India end up replicating things that already exist (but perhaps at a discounted price or catered towards the domestic market), venture capitalists in India in turn are more willing to fund these same companies rather than truly innovative companies. If the idea has not been tried, tested and proven, an entrepreneur is less likely to get funding in India versus the West. Venture capitalists have a different approach in India. Valuation places a higher focus on cost/revenues and encourages funding of ideas that already exist in the West. In other words, truly innovative ideas on a global scale are less likely to get funding.

Despite all this, there is a silver lining to this column: we know the problems that are preventing youngsters from becoming the next Bill Gates or Steve Jobs. NRI’s in the West are already spearheading cutting-edge companies that are competing on a global scale; why should there be any reason for Indians, born and raised in India, not to do the same?

So the next time you come across a particularly shy 13-year-old who appears to be just a little different than his peers, who is perhaps overly obsessed with a certain hobby, who might even make you slightly uncomfortable, you might want to think twice before dismissing him as a lost cause.

You could very well be looking at India’s first, iconic, global entrepreneur in the making.

Raghu Kumar

Raghu Kumar

Raghu loves trading, algorithms, and figuring out ways to beat the market. He enjoys workouts, naps, food, listening to Carnatic music, teaching his dogs (pug named Zenzi and Shih Tzu named Cactus) cool tricks, and spending time with family and friends.A list of his authored articles on NDTV Profit can be found at http://profit.ndtv.com/topic/rksv

  • hemen parekh

    A Ticking Time-Bomb ?

    Consider the following :

    * India’s population is 1220 million

    * Annual net increase is 15 + million

    * 285 million are in the age group of 15-29

    * When GDP was growing at 8 %, we added 5 million jobs / year

    * Now that GDP is down to 4.9 % , we are adding 1 million jobs / year

    * Jobs in India can grow at 15 million / year if GDP grows at 12 % / year !

    * 41 million unemployed are registered with 900+ Employment Exchanges

    * Employment Exchanges find jobs for a mere 3 lakh / year !

    * Annually , 14 million ( 15 – 1 ) get added to the ranks of jobless !

    * It takes Rs 1 million by way of Capital Investment , to create ONE job

    * National economies around the world are slowing down or shrinking

    * Unemployment among youth has become universal problem

    * All around the World , governments are cutting back on Welfare expenses

    * Root cause of ALL protests / riots / demos everywhere , is JOBLESSNESS

    * Don’t be fooled by experts who describe India’s Youth as Demographic
    Dividend !

    * Despite being a ” Low Cost Economy ” ( meaning wages / salaries at 10%
    of those in developed countries ) , jobs are NOT flowing to India . Why ?
    Our youth lack the necessary ” Skills ” – making them unemployable

    * UPA-2 Government is trying to fool us by saying NSDC ( National Skills
    Development Corporation ) will train 500 million youth in next 5 years !

    * On the other hand , there is NO incentive to Private Sector Industries , to
    come forward to invest in training these 500 million – something that
    would require an investment of Rs 250 Million Million

    * Private Sector has , required Money / Expertise / Organizational setup
    to impart such training

    * But that money is in the form of BLACK MONEY !

    * So , what is the ANSWER ?

    * Introduce a AMNESTY SCHEME , under which no questions will be asked
    as to the source of funds ( ie Black Money ) , if these are invested by
    the Private Sector in training of India’s Youth , in prescribed Skills

    * Private Sector should be allowed to charge a reasonable fee from each
    trainee , 50 % of which should be subsidized by State Governments

    * Income earned ( from Fees ) shall be tax-free for 10 years

    If UPA -2 gets wiped out in 2014 , it won’t be because of corruption !
    It will be because of JOBLESSNESS amongst the FIRST-TIME voters !

    And , if NDA comes to power but fails to defuse the ticking TIME BOMB of
    UNEMPLOYMENT , it will meet with the same fate in 2019 !

    Are our NETAS willing to think ” Out of Box ” ?

    It is still not too late !

    * hemen parekh ( 09 Feb 2014 / Mumbai )