National Startup Day Intent and Outcome

NANDINI VAIDYANATHAN shares her thoughts on the hits and misses of India’s startup story

The years between 2010 and 2015 were abuzz with the glamour and excitement of entrepreneurship. Home-grown Indian brands were aiming for the unicorn goal post and according to a Credit Suisse India Market Strategy Report, there were more than 100 unicorns in India, many of which had started operations after 2005. The report said that because of increased availability of capital, improved infrastructure and ease of doing business, many young startups had managed to scale successfully.

My biggest peeve with the entrepreneurship space has been that it is a lot of high-faulting talk and less of ground performance. It is not just the entrepreneurs but every single stakeholder of the system who has contributed to the hype

A startup is called a unicorn if it is privately held and has a valuation of over $ 1 billion. By this definition, it wasn’t necessary to be an IT or an ITES company to qualify as a unicorn. Along with the usual suspects, there were stars from manufacturing, healthcare, retail and pharmaceuticals. In 2015, in the IT space, there were 8 unicorns – Flipkart, Snapdeal, Ola, InMobi, Paytm, Quikr, Zomato and MuSigma and 5 out of this were Bangalore-born.

All of this made PM of India, Narendra Modi inaugurate the Startup India initiative on 16 January 2016 ‘to create a powerful and dynamic environment for startups that foster innovation by supporting them financially’.

In a matter of 5 years, under the Startup India programme, startups in the country increased from around 400 to 1.18 lakh. So in 2022, the PM officially declared 16th January as National Startup Day and the theme for this year is ‘Celebrating 8 years of Innovation’.

The official website of Startup India says, “Startup India initiative has played a pivotal role in shaping the startup ecosystem in India. Multiple initiatives like the Seed Fund Scheme, Fund of Funds Scheme, Credit Guarantee Scheme for Startups, MAARG mentorship platform, National Startup Awards, State Ranking Framework are some of the key pillars driving the spirit of entrepreneurship.”

So far, the Indian government has given 2,977 income tax exemptions and provided 3,658 startups with funds under the SIDBI Fund of Funds scheme, established in 2016 with a corpus of Rs.10,000 crore. The scheme also gives capital to Alternative Investment Funds (AIFs) registered with SEBI. These funds invest money in startups through equity and equity-linked instruments.

According to the official website, there are now 118950 startups, 894 mentors, 1054 incubators, 89 investors, and 202

Accelerators across the country. India is now the 3rd startup hub globally.

In absolute terms, these numbers look impressive but if you take into account the size of our population, it falls miserably short of expectation by any yardstick. The government’s intent to encourage youngsters to embrace entrepreneurship as opposed to seeking employment hasn’t translated into anything meaningful going by the number of incubators and accelerators. Whilst it lists 894 mentors, which in itself is a measly number, it doesn’t indicate the profile of these mentors. In my experience, in India, anybody who gives advice is called a mentor and mentors neither have entrepreneurial experience nor P&L experience in corporates. Again in my experience, startup entrepreneurs have wonderful ideas and do not need so much handholding in product development as much as they need in building the business around their ideas.

Also, under this program, there is no monitoring of the performance of the startups on a regular basis. Once they are registered and become a statistic, they fall off the radar. So some meaningful data in terms of how these startups are faring, and if they continue to be aligned in their performance to their business plans seems singularly missing.

My biggest peeve with the entrepreneurship space has been that it is a lot of high-faulting talk and less of ground performance. It is not just the entrepreneurs but every single stakeholder of the system who has contributed to the hype. Wake-up calls when a unicorn loses its valuation by 90 percent happens and for a moment everyone shakes his head but once the dirge call becomes weak, it is business as usual in this world – big numbers, big talk, big dreams, with no stellar report card to justify it.

To my mind, for the Startup India initiative to have a meaningful outcome, the following steps (not an exhaustive list by any means, but key ones) need to be taken by the government:

  1. Hand over the initiative to the private sector to manage it.
  2. Create a think tank on rotation basis that will infuse new ideas, monitor performance metrics and create global network of all the stakeholders in the system for the entrepreneurs to access and benefit from.
  3. Be ruthless in choosing startups that qualify for registration. Don’t just look at ideas, look at the reason why the founders have become entrepreneurs.
  4. Be equally ruthless in monitoring performance and eliminating the joy-riders.
  5. Make it mandatory that every business school and every engineering college should have an incubator.
  6. Let these schools be evaluated on the basis of the alumni graduating successfully from the incubator.
  7. Continuously offer courses to upskill the entrepreneurs through online programs, exchange fellowships, workshops and interactions.
  8. Let each state run its own program under the broad guidelines of the central one, but encourage cross-pollination among states.

We have a long way to go. I know it feels good when we take the first step and we are prone to gloating. But the initiative’s success also depends on whether its own performance report is aligned to its vision in practice. That is a reality check no one can ignore.

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