'80% of start ups fail because they don't have a support system to help them in the very early phase.'
'It's not just an idea that takes an entrepreneur through the initial three years of journey.'
'What plays a definitive role in making a start-up successful is idea+team+capital+mentors+access to a larger ecosystem.'
Though the legendary start-up Infosys began its journey more than four decades ago, the start-up scene in India was taking only baby steps till recently.
Undoubtedly, the Start-up India programme launched in 2016 gave a major boost to the start-up scene in India.
As per the data released by the government on June 30, 2024, the Department for Promotion of Industry and Internal Trade (DPIIT) has recognised 140,000 start-ups in India, up from 300 start-ups in 2016.
Twenty years ago when IIT Bombay set up the Society for Innovation and Entrepreneurship (SINE), one of the earliest incubators in the country, the scene was very different from what it is today.
"The future is going to be widespread with a lot of ideas coming in the fields of AI, energy space, sustainability and climate, data analytics, EV, Robotics, sensors, semiconductors, space, defence, etc," Shaji Varghese CEO, SINE, IIT Bombay, tells Rediff.com's Shobha Warrier.
The first of a two-part interview:
When SINE was established 20 years ago, the start-up scene in India was just evolving. How do you describe those days?
Way back in 1999 or close to 2000, information technology was just picking up, and a lot of ventures were being set up in the fields of IT and ITES.
At that time, the board of governors at IIT Bombay decided that it could be a good idea to have a some kind of support mechanism for students to take up entrepreneurship rather than become job-seekers.
So, in 1999 they set up a small pilot programme in the computer science department. The facility was set up by the Kanwal Rekhi School of Information Technology (KReSIT) and was more in the field of information technology.
They earmarked a small area where students could come and work on their ideas. They provided them with a support system like giving access to the Internet, providing laptop, etc. so that the students could convert their ideas into ventures.
Was this facility available only for IIT-B students?
Yes, it was mainly for IIT-B students, and 13 start-ups were set up during 1999-2004.
Looking at the response received from the students, it was then decided that we should have a full-fledged incubator-like facility to support start-ups among students.
SINE was formally created in 2004, structured as a not-for-profit organisation, and as a society.
What was the role they had planned at that time for SINE?
The role was to create an ecosystem that will encourage and support innovation and knowledge based entrepreneurship at IIT Bombay.
The incubator was just a three-member small team. This time, the incubator was not just providing infrastructure but also supported the students in setting up their company.
Even the start-up culture had not picked up at that time. Though it was still very early stage, an IT boom was taking place in India. A lot of ventures were created but more in the services sector.
SINE decided then it would largely focus on the ideas coming from the students at IIT-B itself, and on product companies rather than the ones providing services. That was because the services companies could easily scale up by raising money.
This was the initial thought process.
How was the response from students at that time when entrepreneurship was not looked at positively by families and society?
There were some proposals from students, not on the scale that we see today.
Only enterprising students looked at entrepreneurship as an option.
But they faced a lot of challenges in those days.
Yes, parents were not keen that students took up entrepreneurship. They even complained to IIT-B asking, 'Why do you encourage students to take up entrepreneurship instead of taking up jobs?' And students used to get high paying jobs in those days.
Considering there was no real playbook and as we were one of the earliest incubators in the country, we were also learning what kind of support to provide, how to provide, how to mentor, etc. All these things evolved over a period of time.
Today, most of the incubators follow the set-up process we did way back in 2004-2014.
The 3-member team slowly grew to a 10-member team by the end of the decade. But the ecosystem had not really taken off even then.
Start-ups became a buzzword only after Flipkart, Oyo, Ola etc started raising significant amount of funding from large VC funds.
Many reports say there is an exponential growth in the number of start-ups in India in the last decade. Even families also have started accepting entrepreneurship as an option.
Failure of an entrepreneur is not looked at with shame today. How did these changes in the attitude come about?
There are two major factors behind these changes. First is the success of ventures like Flipkart, Ola, Oyo, etc. For example, when people book an Ola cab, they know that it is a start-up.
Investors were ready to put in money even in the start-ups that were not profitable.
Students in general became a little more enterprising as they saw that there are support systems both at the institute level, government level and ecosystem level.
There are a lot of VCs chasing good ideas.
So, students found investors ready to put in money if they had a bright idea.
When did the attitude of investors change towards interesting ideas?
From the tech point of view, affordable smart phones and good connectivity opened up opportunities in e-businesses, logistics, fintech, etc.
If the Internet was earlier a source of information, people started transacting using the Internet. People found they could build new-age businesses founded on the internet and a number of businesses started in fintech, logistics, e-commerce, etc.
If you recollect, from 2004-2008, we saw a lot of Internet companies opening up and growing. And they started making money too.
This made investors saw real value in these companies.
Even the employees also started making money and seeing value in start-ups.
This triggered a kind of systemic change in the acceptance of start-ups to a level that was unprecedented.
We started seeing an unprecedented entrepreneurial growth, all due to multiple factors coming together: Good ideas, capital coming, improved infrastructure, India growing to a huge market, UPI coming to the picture, growing middle class...
And the government also started putting emphasis on start-ups as a means of creating jobs.
It is a mix of many factors coming together at the same time and creating some kind of an avalanche.
You will soon see the same kind of avalanche with AI and robotics coming in.
When did you start seeing an attitudinal change among young engineers? When did they become ready for risk taking?
When they saw the success of some of their seniors.
When they saw their seniors going out to pitch their ideas and raising money.
When they saw early stage investment coming to these ventures..
Then the entrepreneurial bug bit the others too.
If you look at the trajectory of VC investment, it picked up in the last 10, 15 years on an year on year basis.
That fuelled the students to come out with new ideas. Not just students, even professionals who were working elsewhere were ready to leave their well-paying job to work on their ideas.
Those were the pick-up points.
It is generally said that only 2 out of 10 start ups succeed. But the success rate at SINE and at the IIT Madras Research Park is 80%.
How do you manage such a high success rate?
80% of start ups fail mainly because they don't have a support system to help them tide over the very early phase.
That's where we come into the picture.
It's not just an idea that takes an entrepreneur through the initial three years of journey.
What plays a definitive role in making a start-up successful is idea+team+capital+mentors+access to a larger ecosystem.
And this is provided on a consistent basis over a period of 3-4 years at SINE.
Obviously, the strike rate improves significantly. When they know that there is a support system, only the perseverance of the founder is required to overcome the valley of death. That's why our success rate is 80% compared to the normal rate.
If a start-up is set up outside of an incubator, they have to figure out a workplace first and pay a huge rent for that.
Then they have to look around for potential customers, investors, mentors, etc.
There are a lot of such challenges ahead.
Entrepreneurship is not just about developing a product.
IMAGE: Shaji Varghese, CEO, SINE.You need to get it validated. You need to have the first five customers believing in you.
If you just go on your own and try to market your product, a large corporate may listen to you. But he may not have the confidence to take the conversation forward.
But if the same person gets incubated at SINE, you are operating from within a campus where you have access to technology, various types of grants, resources to lab facility and mentors, exposure to investors very early on and customers willing to listen to you.
All these will be a long, drawn out process if you are outside an ecosystem.
And they make a lot of difference in the success of a start-up.
Feature Presentation: Aslam Hunani/Rediff.com
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