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HT Power Jobs: Jumping into the unknown

Despite the presence of sunrise sector, entrepreneurship still hasn't come of age in India, writes Rupashree Singh.

india Updated: Apr 11, 2006 16:21 IST

Nitin Vyakaranam's Hyderabad-based start-up, Spirit Networks, designs and develops broadband routers for home and corporate customers His team of five techies and three management gurus, takes care of business imperatives, while the manufacturing is outsourced to a third party vendor in South Korea.

The model was put in place with a seed capital of Rs three lakhs, a bulk of which goes into travel and developing prototypes. So these days, Spirit is actively scouting for $500,000 from benevolent venture capitalists, but the task is proving to be an uphill one, as any entrepreneur in India worth his salt would know.

"We have been operating for almost eight months. All my co-workers are taking home equity. We have successfully developed our first prototype and got a client too, but to expand, we would need more dough," reveals this 28-years old entrepreneur about his first brush with business adversity.

His problem is not unique. Neeta Jain's Aarkay Graphics started as a DTP outfit some years ago but has now moved on to the production of rolls and gum sheets. Founded on a shoestring budget of Rs 47000, the company registered a turnover of Rs 22 lakhs last year, but to expand any further, she also needs capital. Despite her deteriorating eyesight, Jain and her team of six employees are hopeful that given some luck and an angel investor, they would be able to scale up their dreamboat.

Vyakaranam and Jain come from varied backgrounds but they share one feature in common --- both are first-generation entrepreneurs, which happens to be the rarest of the rare breed in India.

Experts contend that we may be the most enterprising race on this planet, but when it comes to playing safe, no one can beat us at this game, which is why despite being a billion-plus nation, we are unable to generate enough employers to employ others Do a round of any IIT or IIM and you'd be surprised to find that even the brightest of the breed have such a low appetite for risk.

However the malaise appears to have a global spread. For proof, there's the Global Entrepreneurship Monitor Report, which reveals that out of the 20 per cent youth who have the potential to evolve as entrepreneurs, only five per cent actually do so. And, in India the statistic is still lower.

"Merely one per cent takes the plunge, despite the fact that we are a young nation with 69 per cent of our population below the age of 35. This implies that we will need to create at least 10 million new jobs over the next five years in order to keep the new tide gainfully employed. If that's not possible, the only viable alternative is to create new start-ups," observes Lakshmi V Venkatesan, Founding Trustee and Executive VP, Bharatiya Yuva Shakti Trust (BYST), an organisation dedicated to helping out youth like Vyakaranam and Jain.

There are unfortunately very few institutes like BYST that train youth for this job. IIM-Calcutta has been teaching entrepreneurship for the past 25 years and although over 20-25 per cent of their students opt for the programme, they too take the plunge only after five to six years of being in service, by which time, it is already too late for some of them.

Admits Prof Anjan Raichaudhuri, Head, Entrepreneurship Cell, IIM-C, "Seven to 10 years is the average for a student to launch his venture, after gaining some industry insight."

The statistic is no better for the Indian School of Business (ISB), Hyderabad, which offers a mandatory course in entrepreneurship. On an average, only 10 out of a class of 350 major in the stream. It is anyone's guess, how many of these are eventually able to survive the rough and tumble of the real business world.

One institute that does appear to have a marginally better record on this score is the Pune-based Entrepreneurship Development Institute of India.

The institute's Director, Dr Dinesh Awasthi claims, "Our success rate is nearly 71 per cent. Out of the six batches of Postgraduate Diplomas in Business Entrepreneurship and Management (total 311 students) that we have rolled out in all these years, 49 are already in business, 123 have joined their family businesses and 47 are in the process of setting-up their independent establishments."

Throwing a spanner in the works however is the rigid bureaucracy and inflexible laws, which do not make entrepreneurship a paying pursuit in India.

"So although there are a growing number of sunrise industries that offer plenty of untapped opportunities for the inexperienced entrepreneur, especially in knowledge-centric, innovation-based segments, the incentives just don't outweigh the risk," laments Mayank Gupta, Secretary, Entrepreneurship and Consulting Club, IIM Indore.

According to Gupta, one reason for the lack of an entrepreneurial spirit in our youth is the presence of the big sharks. "We have ample technical talent available at low costs. But the market is dominated by big players, who gobble up all the smaller fish in the pond. These young entrepreneurs just don't command the operational efficiency, scale or financial muscle to compete with them."

"Had this not been the case, it would be so much easier for a bunch of bright kids to put their heads together and develop innovative gaming packages for clients like Nokia," he maintains.

According to Dr V Chandrasekar, Executive Director, ISB-WCED, other under-explored, high-potential sectors, which thrive on intellect are Biotechnology and Food Sciences.

"The government's keenness to engage our youth in this field is evident from the number of schemes launched to promotes these sector," corroborates Dr Awasthi. So it's a little sad if the youth is still not interested.

Most experts agree that sustaining a business in India is no joke. "Contrary to expectations, people with an average education are still better at risk taking than graduates from leading engineering and management schools," says Venkatesan. Any surprise then that 94 per cent of all businesses developed since independence still have a turnover of less than Rs 10 million, according to a BYST report.

What it takes to survive in today's tough business climate, according to these experts is a clear vision, a marketable idea, sound strategy, and an implementable action plan and good access to credit.

There are very few like Vyakaranam, who have the courage to admit, "Spirit is the third start-up I created. If this fails too, I will have a better chance of succeeding the next time round, because, in the business world, there's always a next time…."