There are three key factors that have created the right conditions for a start-up boom in India:
> There is huge, latent demand; an intensive need for disruptive, low cost solutions that can reach the masses, in order to meet challenges on many fronts - education, health care, water, and agriculture to name just a few. Start-ups are designed to create disruptive solutions.
> With the success of start-ups like Flipkart, there is a large supply of eager entrepreneurs that want to make an impact and make it big. The millennials are not driven by getting a 'steady job'. They are more independent and willing to take risks.
> The barriers to entry have never been lower with respect to infrastructure (easy to get in, elastic, cloud-based infrastructure such as Amazon Web Services), and global reach (ability to leverage Google, Apple and the marketplace that has democratised access). Large scale cell phone penetration can be tapped to provide innovative solutions to the masses.
Most of the focus in the past has been on providing products and services needed in the West at a lower cost. For instance, the IT-services boom was triggered by cost arbitrage between the East and the West. What is needed now is to shift focus to solving the problems faced by Indians. For instance, most Indians lack adequate health care. If start-ups can use digital technologies to provide affordable good quality medical diagnosis, those solutions will have applicability not just in India but all over the world, including in rich countries like the US. This is the reverse innovation opportunity that Indian startups should target. By shifting the focus and solving local problems while at the same time keeping in mind reverse innovation possibilities, start-ups can serve as the catalyst to channel the energy in areas that will help take India global.
For example, Amazon introduced Easy Ship in India because sellers in India lacked the logistics capabilities. Amazon takes care of picking up from the seller's location. At the same time, customers get trackable shipments. Now, this is a service that is available in other countries.
In particular, there are low hanging fruits in the areas of healthcare and education. If start-ups can create disruptive solutions here, there is a latent market of 3 billion people that can be served with these same solutions. In addition, many so-called advanced countries, are struggling to cope with out of control healthcare costs and an expensive education system that is out of reach for many, and are looking for solutions that will bend the cost performance curve in a disruptive way. On the other hand, start-ups by their very nature are very risky. Amidst all this euphoria, this message of risk may get lost. It is therefore, important to build a strong and robust ecosystem.
"It takes a village to raise a startup," says Tahir Hussain, CEO of Collide Village, an accelerator programme that is focused on data-driven approaches to making sure start-ups in the programme are focusing on problems worth solving, and there is a good product-market fit.
The 'village' includes:
> Mentoring organisations: For example, Lemon Ideas, based in Nagpur, is a start-up mentorship organisation dedicated towards fostering the start-up ecosystem in India that has a formal programme and a partnership with several funding organisations.
> Venture capital: TLabs is a start-up accelerator as well as an early-stage seed-fund focused on Indian internet and mobile technology start-ups.
> Early adopters: Consumers and enterprises that are willing to give these start-ups a chance; those that see the early benefit of the disruptive cost-performance curve (knowing that there may still be deficiencies that need to be ironed out along the way)
> Academic and research institutions: CIIE, for example, is an IIM Ahmedabad initiative to promote entrepreneurship and bridge gaps in the ecosystem.
> Government: Kerala Startup Village is a good example of a public-private partnership that aims to launch 1,000 technology startups over the next 10 years and start the search for the next billion-dollar Indian company.
We have mentioned one example in each category just for illustrative purposes. We know there are others that are active in each of those areas. However, many more are needed in each of those categories and serving in more parts of the country, in order to scale the potential startup boom.
More than anything else, we need a mindset change. Rather than, 'Make in India', why not 'Innovate in India' as the slogan?
Coxe Distinguished Professor, Dartmouth's Tuck School of Business & a Marvin Bower Fellow, Harvard Business School