Startup India: Long Way From Silicon Valley Level Disruptions, But Its A Giant Step In The Right Direction

Author: Dr. Vijay Chauthaiwale. He tweets @vijai63.

Recently concluded start-up event in New Delhi was one of the most energetic events I have ever seen. A lot of enthusiasm, positive energy, commitment to the social cause and at the same time great pragmatism. Each one has his/her own story. Very inspiring. Innovation is the heart of any start up. This can be of the following type:

First, it can be as small as typical Indian “Jugaad”, which employs localised technology, resources and talent to bring out local, customised solutions. It works perfectly well in that set of conditions but it’s not scalable most of the time.

Second is the incremental innovation by which any limitation(s) of existing technology or product is overcome.

Third and equally important is the disruptive innovation which basically changes the status quo of the business or people’s choices drastically. It is technologically intensive and requires sustained support of capital. Additionally, academic excellence where world class brains come together and interact plays a very important role. Collaboration and inter-disciplinary interaction can best happen in such ecosystem.

Of course irrespective of the level of innovation, behind any such idea lies bright young brains, enormous passion and conviction, ability to withstand and overcome setbacks and failures.

While India has no dearth of bright, young brains, barring few notable academic institutes, mentorship by educational institutes is  not available. In addition, access to capital is not very easy, mainly because of the complicated regulatory framework and bureaucratic hurdles.

It’s not that the government never tried to encourage innovation. Biotechnology Industry Research Assistance Council (BIRAC), an initiative of Dept of Biotechnology, for example, has funded many biotech start-ups right from initial stage to advanced stages of field trials and prototype development and has many success stories under its sleeve.

However, the broader ecosystem of  VC funding is still not adequately developed in India. The classic case is of the Noida-based biotech start-up “Curadev”. Two guys, Arjun and Manish after spending a decade in biotech service industry decided to start their own drug discovery company, a “high risk-high reward” venture. They poured initial capital by selling their houses and moving to rented apartments. Fortunately, Curadev was a front runner in identifying a novel anti-cancer therapy. Several MNC Pharma giants approached them saying that if they have additional data, they were willing to sign a deal. To generate this new data, Curadev had just six months (to remain ahead in the race) and the funding requirement of additional five Crores. They knocked every possible door but couldn’t succeed. But so convinced about their research, they somehow arranged money from unofficial sources at exorbitant interest rates that we cannot even imagine. Thanks to their passion and conviction, MNC giant Roche signed off licensing deal with Curadev and paid upfront 35 million USD. A sweet success, except the fact that as soon as they receive the sum, they had to pay 30% capital gain tax.

We need to understand PM Modi’s start-up initiative on this background. And that makes his Action Plan quite revolutionary. No doubt, he was quick to realise the potential of start-ups. Gujarat is the hub of MSME industries. Additionally, being  quite well versed with the Internet and social media, he knew that all the Apples and Facebooks of today were  start-ups not very long ago.

As a gradual unfolding of his vision on start ups and innovation, he announced the theme of “Startup India, Standup India” during his Independence Day speech last year. Subsequently,  NASSCOM and Centre for Innovation Incubation and Entrepreneurship (CIIE, IIM, Ahmedabad) in collaboration with TiE, Silicon Valley organised a start-up conclave in Silicon Valley during PM Modi’s visit in September.

It was also decided to take 40 odd start ups to the Silicon Valley for the conclave. The objectives were two-fold. First, to introduce Indian start-ups to the capital of disruptive innovation, Silicon Valley and two, make Indian innovators aware of innovation ecosystem there. These 40 plus start-ups were carefully chosen so that in addition to information technology, sectors like  biotech, clean energy were also represented. Also, most of these selected start ups had some social relevance.

The response was overwhelming. To the surprise of organisers, more than 350 entrepreneurs, venture capitalists and innovators from Silicon Valley joined that event, concluding session of which was addressed by PM Modi.

In spite of such a great success of this conclave, there was some scepticism. Many people in the silicon valley, who matters in start-up ecosystem used to ask same questions. “What after the event? Will government convert all these talks into an action plan? Will the ground realities change?

While everyone expected positive movement in this direction, no one thought that the government, under the leadership of Shri Modiji, would take entire start-up initiative to this level. Thanks  to everyone’s efforts, it has arguably exceeded even Silicon Valley’s expectations. I could see the excitement on the faces of US delegation of TiE once the action plan was announced. And they were not an exception. There is something for everyone who is even dreaming of having his own small start-up, at the remotest part of the country or Working in Whitefield Bangalore and IIT Madras.

The best aspect of this action plan is its comprehensive nature. It was possible due to “bottom up” approach of the government by which it understood the gaps and bottlenecks in the current system and then came out with the solutions.

In a simplistic world view, any typical announcement of this nature would have been confined to some financial package. Modification of some existing scheme with a pudding of few tax breaks. But this action plan walks much beyond that. Of course, access to capital is the prime requirement for any start up. Launching of ‘Fund of Funds’ with a corpus of ₹10,000 Cr, complimented by tax breaks is a right move in that direction. But simplifying the rules of registration and compliance, govt assistance and speedy processing of Intellectual Property protection, etc will help the start-ups in a long way.

Most important aspect of this action plan is that government is making a serious effort to develop a self-sustainable ecosystem of start-ups where government’s role will be minimal. A case of IIT Madras Technology Park was presented in the event. With this plan, it will not remain an isolated example. It envisages setting up seven more such parks in India’s premier institutes. On the top of it, sector specific incubators, 500 Tinkering labs (under Atal Innovation Mission),  5 new bio-clusters and 50 new bio-incubators (to boost biotech sector) will develop a thriving ecosystem over a period of time.

In short, it’s one of the most comprehensive initiatives and therefore, it is a game changer indeed. It is an ideal test case of “Minimum government, Maximum governance”. Of course, it’s just a beginning and India has a long way to go to compete with Silicon Valley or Singapore. To the pointed question of Shri Jayant Sinha, most of the successful start ups ( like Flipkart) have shown their reluctance to list their companies in India, though they are keen to do the same if the conditions are conducive. But certainly, it’s a giant step forward in the right direction that will certainly stimulate young and bright brains to venture big risks, without which, big rewards are next to impossible.