Universities playing ‘key role’ in growth of start-ups

Entrepreneurship and start-up activities in India have not only grown significantly in numbers and geographic spread, but also in terms of creating a dynamic support system to foster entrepreneurship, enhanced levels of innovation and employment creation, according to a new analysis.

The most important trend is that education institutions in India are beginning to play a vital role in developing entrepreneurial competencies and include entrepreneurship as a core course in business education, according to a new report.

There exist, however, a number of threats to the continuing development of the Indian start-up ecosystem because of prevailing social conventions regarding education and career choices and the relative difficulty of doing business in India.

“Still, there is general consensus among informants that India has much potential and increasingly also the know-how to become a more innovation-driven economy than is the case today,” concludes the analysis published by the Danish Agency for Science, Technology and Innovation, or DASTI.

The aim of the analysis, Entrepreneurship and Start-Up Activities at Indian Higher Education Institutions, was to inspire Danish higher education institutions and companies to take an interest in the opportunities India offers in this field.

The report said that India is witnessing a tremendous rise in the start-up creation and business incubation, driven by an extremely diverse, inclusive entrepreneurial landscape and easy access to capital.

It started with the National Science and Technology Entrepreneurship Development Board, or NSTEDB, which launched the Science and Technology Entrepreneurs Parks in the early 1980s and the Technology Business Incubators in early 2000. A number of academic and non-academic institutions have now joined forces, the DASTI report says.

With more than 3,100 start-ups and a predicted rise to 11,500 by the end of 2020, according to NASSCOM – the National Association of Software and Services Companies – India is building its very own Silicon Valley. India is the third-largest start-up location globally with more than 800 start-ups created each year and more than US$2.9 billion in funding received since 2010.

With a strong venture capital and private equity backbone of more than 70 active players in just 2014, and more than 550 angel investors and 80 incubators and accelerators, the youth in India are being “groomed to succeed with new and innovative ideas”, the DASTI report says.

Role of universities

The most important trend, DASTI identified, is the role of education institutions in developing entrepreneurial competencies.

“Greater emphasis has been laid down in the recent past on benefits of entrepreneurial-focused education at the universities, instilling the confidence in students to turn ideas into reality. These could be in the form of structured mentorship programmes, short courses or other forms of training.”

Incubators are also cropping up in India with more and more universities and autonomous organisations setting these up on or off campus. Most of the institutes have incubation facilities that are open to external applications at minimal expense.

Most of the top business schools and technical schools offer entrepreneurship education in the form of short- and long-term programmes, the report says.

For instance, the NS Raghavan Centre for Entrepreneurial Learning in the Indian Institute of Management Bangalore has a management programme designed for entrepreneurs and family businesses; while the Indian Institute of Technology Madras incubation cell consists of alumni dedicated to providing funding along with the technical and business mentorship needed for a start-up to succeed and thrive.

The start-up ecosystem growth has also brought together faculty members and students at universities and institutions to join in with their own ventures.

Many faculty members across universities in India are now working with start-ups either independently or collaboratively with students and co-faculty members. Faculty members of Indian Institutes of Technology, or IITs, from across India, including Bombay, Delhi, Madras, Kharagpur and Hyderabad, are leading the trend of joint start-up collaboration, the DASTI report says.

The Economic Times reported that IIT Madras has so far incubated 19 companies where faculty is involved.

Opportunities for students

But opportunities are also being provided for students to set up ventures. About 40% of the incubated companies at the Society for Innovation and Entrepreneurship, IIT Bombay are student-faculty projects. IIT Hyderabad has two successful start-ups which are joint ventures between students and faculty.

"We are witnessing an increasing trend of joint collaboration between faculty members and their current and graduated students, with research being translated into commercial ventures/companies," Tamaswati Ghosh, CEO, IIT Madras Incubation Cell told The Economic Times.

The government of India has contributed significant risk funding to promote an entrepreneurial spirit among students. It has launched two new investment and loan programmes for start-ups and small and medium-sized enterprises or SMEs, with a combined budget allocation of INR120 trillion (US$1.76 trillion).

The Finance Ministry is also investing in venture capitalist funds for meeting the equity requirements of start-ups and has set up an India Aspiration Fund to support the entrepreneurial ecosystem, the DASTI report says.

The report sought to present an overview of the multi-faceted world of entrepreneurship and the start-up ecosystem in Indian higher education institutions.

It found that although the origin of incubation centres in India is a recent phenomenon, they have managed to contribute significantly in promoting an entrepreneurial culture within the country.

The start-ups have also demonstrated the potential to create breakthrough technologies and fascinating service delivery mechanisms. The Indian government is equally involved in promoting the start-up culture by way of risk funding and in designing effective policy framework.

“Funding, in general, is not seen as a demotivating factor for growth of the start-ups. Almost every institution in our sample receives regular grants from the government and sufficient inflow of funds from the private investors,” the DASTI report says.

Alumni-Student Mentorship Programmes are considered an important development tool for the success of a venture and university students working as interns with the incubated start-ups constitute a key element in the entire process.

The concept of deferred placement is slowly gaining momentum at the institutes. A lot of them are now following the deferred placement structure in order to encourage students to work on creating their own venture.

However, interviews with institutions indicated that peer pressure for placement in secure jobs with predictable monthly incomes is still a social force preventing many Indians from pursuing the entrepreneur path, according to interviews with representatives of Indian institutions.

“For Indian students, the concern of re-paying student loans is particularly pertinent and more often than not leads to conventional career choices in a job market which is challenged by an increasing redundancy of jobs due to technological advances,” the DASTI report says.

It warned that the tolerance of failure is still low in Indian society. “The interviews for this analysis often pointed to the need for introducing entrepreneurship and start-up at a much earlier stage in the education system to inculcate curiosity, creativity and innovation impetus in the students.”