Off to a good start

Sushma Ramachandran

THE uproar over e-commerce giant Flipkart delaying hiring graduates from IIM- Ahmedabad has highlighted the enormous interest that young people now have in the startup arena. The allure of joining startups has eclipsed the attractiveness of multinationals, and even the prospect of working abroad. The news nowadays is that fresh management graduates are rebuffing huge dollar salaries and preferring to rough it out in a homegrown startup company.

Flipkart, however, has gone beyond being the small venture in a back room. Competing with Amazon, the e-retailer is now in the big league. The problem is that it has reached this status by being funded by optimistic investors who have been prepared to overlook its continuing failure to become profitable. Morgan Stanley, in a hard-headed move, has downgraded its value significantly over the last six months. The company has shrugged off the bad news. But then it created doubts in the minds of even its most ardent supporters by announcing  a six-month delay in hiring management graduates who must have turned down other lucrative offers for the chance to work with the biggest Indian startup retail venture. 

Whatever may be the fate of this company, these developments only underscore the fragility of the startup world. There is no doubt that there will be a shakeout and many unviable ventures will close down. Already, the numerous startups in the grocery segment have begun winding up, leaving just a few big players in the field. But young entrepreneurs are not deterred by such reports and startups are continuing to proliferate not just in the Indian Silicon Valleys of Bangalore and Hyderabad, but even in small towns across the country. 

The availability of broadband Internet has made it possible for potential businesspersons to launch their ventures from anywhere, instead of having to move to big cities. This is virtually a paradigm shift for entrepreneurs in the country. And it has taken place largely due to benign neglect by the establishment. The only positive contribution of the government has been to spread broadband facilities all over the country. Even this has not been provided in as widespread or as consistent a manner as in other countries, like China. The big digital leap to reach all consumers, however, is certainly on the way, though it may take some time for the entire country to be covered.

The government may now be trying to play a positive role in nurturing and incubating these new ventures, but has so far not succeeded in making much impact. For instance, the concession to give tax exemption on profits for the three of the first five years of operation is not going to be of much help. Simply because startups rarely make profits in the first five years of operations.

What is of critical importance, however, is easy access to funds. Angel investors abound, but there is still not enough finance available for those with viable projects. The decision to set up a $1.5 billion Startup Fund is welcome, but the question remains, will it be easy to access this capital or will it be the same problem of red tape all over again. 

Even so, the outlook remains bright for startups. What is of greatest significance is that the culture of entrepreneurship has become a part of the mindset of Indian youth. For those who have been fortunate enough to acquire the skills needed to be part of the digital age, simply getting a job is no longer the sole aim of life. The entrepreneurial bug has hit them and there are startups in all kinds of areas to ease the problems of daily life. 

Most successful ventures have begun with a problem being faced by the founder, who then decided to launch a venture to deal with the issue. It could be in the health area where it is difficult to locate doctors or to find caregivers or medical information. It could be in the transport sector where the global unicorn, Uber, has been copied by the local Ola. Or in mass transport where the Uber model is being applied to meet the needs of bus-goers. The list could go on and on, but the point is, the aim of each startup is to make life easier for the common man.

Reflecting the huge interest in fate of these ventures, the media is now providing space for news specifically on startups. Both print and online media now have regular segments devoted to news about budding entrepreneurs, including the funding to each venture. Special interviews are devoted to founders of companies who are viewed as celebrities in the startup space. At the same time, both success and failure are highlighted, which is actually an educational process for those still on the sidelines.

In this context, one must accept that failed startups have to be allowed to fall by the wayside. This is also part of the evolutionary process of the startup system. There should be no tears shed over the ventures which have failed, as many of the entrepreneurs go on to learn from these failures to script other successes. 

The most spectacular story of success after a failure is that of Steve Jobs who launched a company that failed and then returned with his learnings to Apple, to make it one of the most successful companies of all time. Fortunately, the recent introduction of the new bankruptcy law will help ease the pain for closing down unsuccessful ventures. Other options like mergers will also happen as a part of the shakeout process, like that of Taxiforsure with Ola. 

While this entire startup culture is to be lauded, the country has to face the fact that there are millions on the other side of the digital divide. No wonder then that lakhs apply for even the lowest rung of a government job which spells lifetime job security. The need of the hour is the revamping of our public education system, so that the yawning digital divide is bridged, thus bringing about a level playing field for all youth of this country.