Bangalore/New Delhi: If The Social Network is to be believed, Mark Zuckerberg created Facebook because his girlfriend dumped him. Student entrepreneurs in India will tell you that, in reality, they go through the equivalent of one such heartbreak a day, all to do with growing their business and turning it profitable. Not everyone survives the heartbreaks: most student start-ups don’t last beyond a few years, and some fade away in months.
At least some of this may be because of the quality of the ideas, says Pritam Singh, professor of organizational behaviour at the Management Development Institute (MDI), Gurgaon. “Historically, innovation, which is at the heart of entrepreneurship, has been done in India at best at the incremental level and not the quantum level,” he says. “Innovation goes hand in hand with self actualization, a characteristic more pronounced in the American DNA. Therefore, one sees more innovation coming out of the US and even China than India or Japan.”
But there are also some prosaic reasons behind the failure of student start-ups. Failure has as much to do with issues such as resolve, discipline, and self confidence as it has to with the team’s qualifications, ideation, even funding (the last issue was dealt with extensively in the previous part of this series, on 22 April).
Also See | Survival Figures (PDF)
Some start-ups fail because they go after undeveloped markets.
Others do because of lack of good governance.
Still others fail because of a falling out among founders or a fight for control between the founders and the investors.
And there are those that collapse because the founders do not get any support from their families.
The problems are often exacerbated by the structural issues start-ups face in the Indian educational framework. “What is missing in engineering schools is the complimentary process (of business viewpoint). If I don’t have access to technology, they don’t have access to business. So we are trying to partner with such schools,” says Krishna Tanuku, executive director at Wadhwani centre for entrepreneurship at the Indian School of Business (ISB), Hyderabad. ISB, he adds, is trying to create an ecosystem where knowledge and people from multiple fields—arts and sciences, policy, finance, law, technology and business, come together.
Also Read | The previous stories in the series
At Stanford University, fabled for its start-ups, and at other US universities, the cross pollination between disciplines helps foster and nurture start-ups. “In India, traditionally, institutions specialize in technology or management. We are all stand-alone institutions. The US model works for student entrepreneurs because they reach out often to other disciplines and their courses are interdepartmental in nature,” says K. Kumar chairperson of NS Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management, Bangalore (IIM-B).
Student start-ups in US universities also benefit from the involvement of faculty. Many don’t just mentor them, but also invest in the start-ups. Some instructors even take a sabbatical to join the start-up as it scales up. The deferral system at most universities in the US makes it possible for students to take time off whereas this isn’t encouraged in India and students may have to do so at the risk of dropping out entirely from the course. Mohanjit Jolly, managing director of Draper Fisher Jurvetson, also recalls 10-15% of his MBA batch at the Anderson School, University of California, Los Angeles, opting out of placements not because they had a concrete plan, but simply because they wanted to explore the start-up life.
With the rare exception (such as Infosys), most companies started in the 1980s and even early part of the 1990s were promoted by family business houses. Professionals worked for such companies or houses; they rarely started companies of their own. And MBA curricula focused on systems and processes, not entrepreneurship.
Today, most respectable engineering and business schools offer courses in entrepreneurship and entrepreneurial activity has picked up on most campuses. The Foundation for Innovation and Technology Transfer (FITT), founded at the Indian Institute of Technology, Delhi (IIT-D) in 1992 to act as an incubation, technology, consulting and training centre of IIT-D, serves as one such example. According to Anil Wali, managing director of FITT, in the first five years of the foundation’s existence, it hardly incubated one or two companies. The action for FITT that seeks to give a “facilitative environment for tech start-ups” really began in 2005; since then it has incubated 32 firms.
Sameer Guglani, co-founder at the Morpheus, a firm that provides funding and mentoring assistance to early stage start-ups, says his estimate is that the top 20 engineering colleges in India have, in the past two years, seen 200 student start-ups of which about 20% continue to survive after the students graduate. The next 80 engineering colleges would have done much less, about 320, of which 10% survive, he adds.
In the early days of a start-up, students are consumed with creating the product and testing its viability. Much of this can be done in incubators of the sort some colleges in India have. It is only when the so-called proof of concept is established (or the start-up has established beyond reasonable doubt that its idea can be commercialized successfully) that start-ups feel the need for money. This is also usually the time when they feel they should move out of the incubator. And this period, called “death valley by venture capital firms, is when most student start-ups come up short”.
Companies such as Morpheus come to the rescue here. Interested student start-ups go through a selection process and shortlisted ones get about Rs 5 lakh in funding; they also get mentored for 10-15 hours a week for four months before “graduating”. It’s a sort of finishing school for student start-ups and one of the parameters Guglani considers for selection is how much “skin in the game” the promoters have.
Eventually, though, the biggest challenge student start-ups face, as previously mentioned by MDI’s Singh, is the quality of the Big Idea. “Successes are more likely from students with outstanding innovations. These can be laboratory-level innovations in the science and technology space or business model innovations,” says IIM-B’s Kumar.
Graphic by Sandeep Bhatnagar/Mint
This is the third part of a series on student start-ups, which will run through April and May.