We Indians are big dreamers – no doubt about it. Many realize their dreams and many, obviously, don’t. These were my thoughts when I left the venue of yet another startup-investor meet held in Pune. I got a distinct feeling that every Indian entrepreneur wants to be another Mark Zuckerberg. But is this too big a dream? Or is Mark Zuckerberg II around the corner, waiting to happen?
Indians are Indians. There is no other way to describe us. We are told that our culture is steeped in tradition and as a result we are required to follow the past. This mindset of living in the past means that we rarely dare to venture into the future. Our culture is our biggest asset and our biggest enemy. An article by Indiana University highlights the different factors which means Indians are less likely to embrace entrepreneurship.
The Indian psyche undergoes a total transformation once they settle abroad. This is probably due to the fact that they leave the baggage of the past behind. The US is strewn with success stories of Indians. From Amar Bose of Bose speakers’ fame to Sabeer Bhatia who sold Hotmail to Microsoft for $400 million, the US landscape is replete with prosperous Indian entrepreneurs. In a Forbes article, Neesha Bapat claims that Indian entrepreneurs founded 13.4% of Silicon Valley’s startups and 6.5% of those nationwide, though they form only 1% of the US population.
Yet now the Indian mindset is undergoing a radical change. Youngsters are more likely to question the wisdom of the past. Mark Zuckerberg and his ilk are the new gods with devoted followers. The interest shown by foreign investors is another motivating factor. As a result the Indian entrepreneur may break the shackles of the past and risk their future.
I have been digging into the background of Indian startups who have managed to get funding. Bhavish Aggarwal and Ankit Bhati, co-founders of Olacabs, an Indian Uber, are IIT Bombay Alumni. They recently received $210 million as series D investment. Fasso’s received $20 million this month. Not surprisingly both co-founders are MBA graduates from IIM and INSEAD. Box8, another QSR (quick service restaurant) that received funding, is run by IIT alumni. In fact, founders of eCommerce startups like Flipkart, Snapdeal and Myntra are all from IIT or IIM. The conclusions which I have drawn are obvious.
We Indians like to back horses from well-known and established stables. No Indian will invest in a person who has little academic qualifications. If you want to attract investment, you better be from either IIT or IIM. What do you do if by chance if you are from a small town and still have big startups dreams? There is a way out for them as well. You must go abroad, work for a couple of years and then come back to setup your business in India. Every Indian settled abroad (whom we call NRI or Nonresident Indian) is venerated and honored by the locals. It also adds an indelible stamp of success. It is like a certificate of accomplishment which you can dangle in front of investors.
There is a curious trend in successful startups which I have noticed. Most of the founders are from one part of India – Rajasthan. The Indian eCommerce market is dominated by the Agrawal community. The reason is simple. This community has been doing business for centuries. My local kirana (grocery) shop is run by a Marwari (an ethnic group from Rajasthan), who claims that he was initially funded by relatives from his village. Perhaps this is the secret of this success – availability of funds?
Now this business ecosystem has simply been transferred to the online stage. Startups from this community probably get support from friends and relatives who understand business and its related risks. On the other hand, there are very few startups from South India, though this part of the country is known for producing tech geniuses. Lack of conducive environment could be one reason for this situation.
And another trend has become obvious from my research. Indian startups in the brick and mortar space tend to attract investments. Indians want to see deals happening – goods changing hands. They want to invest in physical products – eCommerce enterprises are therefore seen as a safe bet. We Indians don’t understand the concept of investing in ideas. Facebook would have never taken off from India. Social media itself is a little known animal and least understood. ‘How can Facebook make money?’ would have been the first question raised by an Indian investor. This blindness cannot be pinned on any one cause. Probably, it is our mindset which leads to this aberration in our vision. It is also possible that we lack the financial muscle to back startups that are idea based.
However, not everything is lost. We have seen how Alibaba, a Chinese eCommerce platform, raise a whopping $25 billion from US-listed initial public offering. Both China and India have similar demographics. The purchasing power of Indians has gone up and so have valuations of our home grown eCommerce entities. Flipkart flaunts a valuation of $15 billion which was unimaginable a year back.
The Indian startup community is young. There are very few investors and huge crowds are chasing them. Most of these early seed investors are from abroad. There is a need to include the Indian community to participate in this growth story. There are many rich Indians who traditionally play the stock market. These individuals can be influenced to divert their investments into startups by educating them about the virtues of this modern business model. This will enable a vibrant and lively startup environment.
And who knows – another Mark Zuckerberg, in a different avatar, may emerge from India. Although, on second thoughts, Indian startups are likely to witness a boom in investor interest in coming years, making it a fertile ground for sprouting a million Zuckerbergs.