An Entrepreneurial Ecosystem is All We Need

Even though India is home to some of the best known outsourcing service companies, offering jobs to hundreds, it has been criticized time and again for the lack of its entrepreneurial ecosystem. Entrepreneurship is essential for a country’s economy to thrive. However, dearth of true seed capital, funding, stringent regulatory norms of the government and lack of awareness are some of the reasons that had apparently hindered the entrepreneurial spirit in India.

However, it is encouraging to see that the scenario is changing. I would rather believe the entrepreneurial ecosystem has just started to emerge. In fact, the recent announcement by the Ministry of Finance, Ministry of Micro Small and Medium Enterprises, Ministry of Agriculture and Ministry of Information Technology to promote angel investment and early funding to startups in India can be a turning point in this regard.

As per the announcement, a special group has been formed to facilitate angel investment and venture capital funding. The group aims at encouraging investments from the government and the private sector and would recommend steps to build an entrepreneurial ecosystem. The group will also look at policy issues with startups and encourage participation.

If all this is implemented well, the entrepreneurial landscape in the country would be altered. If we examine the issue by reeling back to five years from now, the current situation is certainly better. But there is a long way to go. A report by the Department of Science and Technology stated that less than 30% of incubated companies in India sustains, the rest perish (According to DST, a successful business is one which has managed to survive at least five years). The success rate is between 65% and 70% in the US, Canada and several other developed economies. And this is seriously a matter of concern.

The need of the hour is therefore an entrepreneurial ecosystem that should be nurtured and promoted in the Indian economy. Whether it is manufacturing, retail or IT,  startups play a significant role in bringing to the market new and innovative products, services and offerings that its larger counterparts often ignore or fail to offer. Besides, small IT firms and startups also play a role in job creation at various levels. It is therefore important for entrepreneurship to be nurtured and promoted in the country.

Talking specifically about technology startups, until now, only a handful of IT or management institutes support incubation centers that encourage aspiring IT professionals to think out of the box and pursue their own ventures. Even if there are some innovation training programs for IT startups in India, most of the time, those in the smaller cities and towns in India are  left out.

Early stage funding is an ongoing problem that remains the major challenge with startups. Venture capital is difficult to get in India, even when a product or service is ready for the market. Angel funding is more or less non-existent. Although it is encouraging to see that the regulatory environment in India has improved, and online formalities have started to emerge, the power of the Web has not been utilized in our country – thanks to the poor broadband penetration!

Be it the current policy framework, education or governance – every structural impediment calls for immediate and concerted actions. From this perspective, the government’s recent initiative  – if effectively executed and monitored – can encourage exciting business ventures and lead to a holistic entrepreneurial ecosystem in india.  All we can do is just wait and watch!

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