India
is finally getting its act together to create an ecosystem for start up firms
to bloom and prosper. Growth drivers for start up firms may be classified into
three categories: legal, economic and financial. Legal drivers of growth
include government measures and reforms in order to demarcate a crystal clear
policy to define start up firms. Economic drivers include measures by
educational institutions to foster the right environment to integrate research
and development initiatives with business plans and managerial know how. In
other words these drivers call for the integration of scientific know how with
managerial know how. Financial drivers for growth of start up firms include
access to capital in different forms.
As
India gets crazy over the “Start Up
India Stand Up India” campaign, the faculty team at Ishan Institute of
Management & Technology, the first graduate business school in Greater
Noida, Delhi NCR perform an intellectual surgery to comprehend the anatomy of
an ecosystem that is required for start up firms in India.
First
the government led by the PM Shri Narendra Modi, has played a master stroke by
defining a start up in no uncertain terms. This will enable bankers,
institutional investors, private equity funds and angel investors to identify
potential start up projects that are lucrative targets for credit. In fact the
best and the most important step under the new start up policy is that it
offers an easy exit option to entrepreneurs. Access to life jackets can be
great motivation to budding entrepreneurs to dive into risky waters.
Economic
drivers that may be recommended for the start up movement to gather steam shall
include the twinning of scientific and technological research with business
research through collaboration between researchers, students and academicians
of business and tech schools. This shall enable transfer of technology and
synergies from backend integration of business processes with scientific know
how. In short it will close the gap between invention and innovation. It is
authentic truth that Indian techies in software, information technology and other
avenues of engineering are great with technical know-how but to extract
business mileage from their scientific research they need the business
know-how. Techies make for great product development talent and managers with
expertise in business development bring a strong revenue realization
proposition to the table. A cross-over of the two is a winning combination.
Thirdly
financial drivers for start up business in India call for access to capital at
different stages and of corresponding types. Seed capital is a challenge that
most entrepreneurs identify with. Yet, another and perhaps a bigger challenge
is to provide start up firms the capital that is required to be deposited as
security or collateral for access to bank credit for seed capital. This is
known in business school parlance as mezzanine assistance or risk capital.
Bankers can ponder over suitable financial products to offer risk capital for
start up firms. Angel investors and venture capitalists have a bog role to play
as start up firms expand and vouch for scalability. Over the years, start up
firms that struck the bull’s eye, have focused on scalability. Red Bus,
Flipkart, Snapdeal and many other companies are great evidences in support of
this argument. Scalability and expansion call for sound financial support. Corporate philanthropy initiatives by
captains of blue chip companies in the form of investments can be great not
only in terms of financial support but also in terms of the experience that
they shall bring to board meetings and thus institutionalizing corporate
governance in start up firms from the early days.
As
academicians of a business school, we offer our tokens of appreciation for the
government to institutionalize start up firms in India and humbly suggest the
close working of the ministries of human resource development, MSME and
finance.
