Entrepreneurship and Venture

Capital
COI I OQUl UM
incIudes debate by practitioners and
academicians on a contemporary topic.
l M Fundoy, Rujosh Nur, Dnosh Awusth,
Kuushu Mohtu, Vshnu Vurshnoy,
Rukosh Rowur, und K Rumuchundrun
fntropronourshp s tho drvor of growth. lt hops croutng nnovutvo ontorprsos whch
provdo founduton for budng u nutons compottvonoss. Lntorprso crouton noods rsk
cuptu. Vonturo cuptusts provdo rsk cuptu und fuctuto tho dovoopmont of
ontropronourshp. 1horo uro sovoru ssuos routng to ontropronourshp dovoopmont und
vonturo cuptu thut dosorvo sorous dscusson. 1o put thoso ssuos nto porspoctvo, tho
Contro for lnnovuton, lncubuton, und Lntropronourshp und Lntro Cub ut llMA orgunzod
u puno dscusson whch wus coordnutod by l M Fundoy, Frofossor ut lndun lnsttuto of
Munugomont, Ahmodubud.
Somo of tho koy quostons thut tho puno hus uddrossod to uro:
Whut s tho contrbuton of ontropronourshp n tho oconomc dovoopmont of
lndu:
Whut fuctors huvo fuctutod or hndorod tho dovoopmont of ontropronourshp n
lndu:
Whut roo hus vonturo cuptu puyod n fostorng tho growth of ontropronourshp
n lndu:
Whut do ontropronours ook for from vonturo cuptusts othor thun tho cuptu n
tho growth of thor ontorprsos:
Whut uro tho oxporoncos of vonturo cuptusts und ontropronours vs--vs tho
ntorfuco botwoon vonturo cuptu und ontropronourshp:
1ho foowng uro somo mportunt ponts thut omorgod from tho puno dscusson:
1horo s u droct nk botwoon ontropronourshp und tho oconomc growth. 1horo
s somo ovdonco thut ontropronourshp hus mudo contrbuton to lndus growth.
luctors rosponsbo for tho sow growth of ontropronourshp und uck of nnovutvo
sprt ncudod tho fuuty oducuton systom, ubsonco of propor ncontvos und
onvronmont to nnovuto, uck of prouctvo und fuvourubo govornmont pocos,
non-uvuubty of rsk cuptu, und tho lndun mndsot fuvourng comfortubo und
socurod curoor chocos.
Lntropronourshp s u proroqusto for budng our nutons gobu compottvonoss.
1horo s no short-cut.
1ho boruzuton of tho lndun oconomy und tho ncrousod uccoss to tho gobu
cuptu huvo puvod wuy for ontropronourshp dovoopmont und for fucng
ntornutonu compotton.
1ho roo of vonturo cuptu n fuong tho growth of ontropronourshp s novtubo.
Vonturo cuptusts nood to puy u prouctvo roo.
1ho lndun oxporonco shows thut vonturo cuptu s cupubo of croutng u
fuctutng onvronmont to bud ontropronourshp cuturo und hop ontropronourshp
dovoop us u proforrod curoor opton.
Vonturo cuptusts shoud puy tho duu roo of fnuncors und montors. 1hoy
shoud fuctuto tho notworkng of ontropronours wth customors, dstrbutors,
fnuncu nsttutons, consutunts, otc.
Lfforts shoud bo mudo by pubc und prvuto soctors to crouto crtcu muss of
vonturo cuptu funds, ospocuy to fnunco sturt-ups und vonturos of tho frst-tmo
ontropronours.
1ho oducuton systom n lndu shoud focus on dovoopng ontropronourshp sks
und rsk-tukng ubtos of studonts.
KfY WORDS
fntrepreneursbip
Venture CapitaI
lntrapreneursbip
lnnovative fntrepreneurs
Risk CapitaI
lncubation
lnitiaI PubIic Offerings (lPOs)
fxecutive Summary
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 99
I M Pandey I M Pandey I M Pandey I M Pandey I M Pandey: Welcome to the panel discussion on
Entrepreneurship and Venture Capital. I would like to
thank IIMAs Centre for Incubation, Innovation, and
Entrepreneurship (CIIE) and Entre Club for organiz-
ing this discussion and involving V VV VVi kal pa i kal pa i kal pa i kal pa i kal pa for co-
ordinating the publication of the proceedings.
The purpose of this debate is to look compre-
hensively at the macro or policy level issues and to
evaluate the role of venture capital in the development
of entrepreneurship in India. We need to understand
the kinds of problems which we face in this country in
developing entrepreneurship and finding finances for
good enterprises. To discuss these issues, we have a
distinguished panel that includes entrepreneurs,
venture capitalists and management professors. I
welcome Mr Vishnu Varshney, Dr Dinesh Awasthi, Dr
Rajesh Nair, and Mr Kaushal Mehta and thank them
for sparing their time and agreeing to share their views
with us.
Let me raise certain questions at the outset to
provide a basis for the discussion. We would like to
hear the experiences and research findings of our
discussants. What has been the contribution of
entrepreneurship in India? What
has contributed to or hindered
entrepreneurship development in
India? In the US, the economic
growth has been fuel l ed by
entrepreneurship. So, we would
like to understand the role of
entrepreneurship, if at all, in
economic development of this
country. What factors have
facilitated the growth of entrepre-
neurship in India? And if it has not grown to a
noticeable extent, as it has done in the US, Western
Europe or Japan, then what have been the hindrances?
We also need to understand if capital is a critical factor
in the development of entrepreneurship. Many think,
and perhaps rightly so, that cash is king. Hence, we
need to examine the role of venture capital vis--vis
entrepreneurship. Have venture capitalists played
their role as suppliers of venture capital adequately?
Have they played a role other than providers of finance?
Research shows that venture capitalists have a much
more important role in developing entrepreneurship,
particularly in developing countries like India, than
just as providers of capital. When we talk about the
presence of one-third of the scientific population in
India, then we need to know: what is happening to this
pool of resource in terms of creating enterprises? Where
do we stand in utilizing this resource? Are we able to
utilize our entire talent and if there are people who
have ideas and still are not able to really develop them
into business propositions, do we perceive some greater
role to be played by venture capitalists and government
and in what direction? And then again, what conditions
are required so that venture capitalists could play their
role?
Our first speaker is Dr Rajesh Nair. Dr Nair is a
medical doctor. He holds a post-graduate degree in
management from the Indian Institute of Management,
Ahmedabad. He is a first generation entrepreneur and
is the co-founder of Indegene Lifesystems Pvt. Ltd., of
which he is currently the Managing Director.
Rajesh Nair Rajesh Nair Rajesh Nair Rajesh Nair Rajesh Nair: Since time immemorial, the test of
generating economic surplus has always been the key
variable behind enduring nationhood. Today, for
India, creating surplus to the maximum extent possible
has emerged as the prime economic task as well as the
basis of national survival and
development.
Empirical evidence points
towards a system that promotes
individual creativity within a
framework that allows free play
of market forces as the most
optimal one for creating this
surplus. Technology has always
been a critical economic differen-
tiator, but the role of intellectual
property and ideas in driving
production efficiencies has been gaining importance
in achieving national competitive advantage.
While the Indian government has been successful
in building up monopoly services (ONGC, SAIL, Air
India...), the ability to innovate and succeed, given
competition, has been absent to a large degree. The
resounding successes of companies like Reliance,
Infosys, and Wipro within India in the past two decades
clearly points towards the fact that entrepreneurship
or intrapreneurship either in start-ups or within
corporate structures is the key driver of future national
growth. The governments role would increasingly
morph into that of a regulator, a facilitator, and a
maintainer of public services.
Culturally, entrepreneur-
ship requires freedom. It
requires a confident national
character that rewards risk-
taking and accepts failure as
an inevitable consequence
of starting-up.
l00 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
Trading at individual or group levels has always
been present in India. However, the lack of organized
commercial structures or companies can clearly be
attributed to cultural and political issues. Culturally,
entrepreneurship requires freedom. It requires a
confident national character that rewards risk-taking
and accepts failure as an inevitable consequence of
starting-up.
Openness towards external influences is also
critical for cross-pollination of ideas. The intelligence
and analytical capability of the Indian minds has never
been an issue. Neither is the ability to innovate within
constraints. The constraints have been a social system
that regulated economic behaviour via restrictions on
mobility (e.g. caste system pre-1947) or via social
promotion of risk-free options (government jobs). The
economic constraints were lack of access to capital,
high transaction costs (bribes and red tape), and
adverse policy regimes which promoted government
non-profit enterprise over private enterprises.
Socially, it required a generation of Indians who
had global exposure (e.g. Dhirubhai Ambani in Aden,
Narayana Murthy in Europe or Premji in the US) and
never felt the ignominy of being ruled by an external
power (post-1947 generation) to develop the vision
required to build a large-scale organization.
The liberalization of the Indian economy, coupled
with increasing access to global capital, has been a
critical factor economically. We have seen the first
phase of venture capital-based businesses. On the
whole, the net effect has been extremely positive. The
spirit of private enterprise has been let loose and the
nation has seen examples of high quality successes
along with massive economic rewards. More
interestingly, governments have seen first hand the
power and benefits of private enterprise in creating
jobs, providing positive externalities (Bangalore has
been turned into a high-tech city with rapid growth
prospects by Infosys and Wipro), and building national
competitive advantages (software development and
BPO both have been found by private sector). For
the entrepreneur, the financing options have suddenly
become wider making the process of transitioning from
idea stage to implementation easier. The mind-set of
the venture capital industry also has brought in a
performance-based work ethic that promotes equitable
rewards for supernormal efforts. However, we have to
accept the fact that the venture capital industry is also
learning and maturing. Things can only get better.
To make venture capitalists role in developing
entrepreneurship more effective, several factors need
to be taken into consideration:
One critical factor would be entry of experienced
industry hands into the venture capital industry.
Nothing can compensate for hands-on experience
of the issues. Fresh consultants, however bright,
will go through a difficult learning curve.
The past boom and bust cycle has brought home the
fact that different businesses have different time-
scales to mature. An appreciation of this factor along
with an investment philosophy that exhibits
maturity would lead to lesser disappointments.
Networking is still missing in the Indian venture
capital sector compared to western markets. The
value addition to an investee company, which can
be provided by a venture capitalist who sits on the
board of potential partners and allies, is
tremendous, but one which requires real in-depth
relationships.
Market depth would help the venture capitalists
play a more effective role. This can happen both by
venture capital differentiation (angel, mezzanine,
pre-IPO, etc.) as well as an active primary market
(Indian as well as global).
Access to capital has shortened the companys
growth phase significantly. It has also been possible to
build out to a critical threshold via access to capital.
The venture capital industry has also changed
drastically over the last two years and has definitely
shown better maturity.
I M Pandey I M Pandey I M Pandey I M Pandey I M Pandey: Thanks Dr Nair for your excellent ideas.
Our next speaker is Dr Dinesh Awasthi. Dr Awasthi is
the Director of Entrepreneurship Development
Institute (EDI), Ahmedabad. Before joining EDI, he was
Professor at IIM, Lucknow.
Dinesh A Dinesh A Dinesh A Dinesh A Dinesh Awasthi wasthi wasthi wasthi wasthi: I do not have the benefit of working
either as a venture capitalist or as an entrepreneur.
Since I teach entrepreneurship, I will base my
deliberations on a few theoretical constructs. According
to me, there are four types of entrepreneurs. The first
are the innovative entrepreneurs. Then there is a large
segment of entrepreneurs that is imitative. The third
are the Fabians who do not change their business
processes until they are sure that everything is finally
settled down and they are confident to make profits.
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 l0l
Then there are drones that do not change even if they
realize that there are profits. They continue to operate
in their old mould and finally make an exit. The largest
number of entrepreneurs, even in developed societies,
falls in the category of imitators. The developing
economies have higher share of Fabians. Innovative
entrepreneurs are a minuscule minority. When we talk
of venture capitalism we talk of those in the first
category the innovators.
Every self-employed may not be an entrepreneur
but every entrepreneur is necessarily self-employed.
To start an enterprise, one needs a different kind of life
history, a background before you go to Initial Public
Offerings (IPO). In our country, we do not have any
definition of medium enterprises; whatever is not small
is large. Any enterprise, which has an investment of
ten million rupees in plant and machinery, is a small
enterprise (barring a few selected segments wherein
the limit is 50 million rupees) and beyond this, every
enterprise is a large enterprise. We do not, therefore,
have medium enterprise sector in India. The
contribution of small enterprises
in manufacturing and industrial
services sector is pretty significant,
i.e., it contributes 40 per cent to
the industrial output, 35 per cent
to direct exports, provides
employment to about 20 million
people, and Rs 15 billion are its
exports figures. These figures
would go up by 20 per cent to 30
per cent if we include informal
sector as well. The contribution of
the entrepreneurs to the economy
is about 40 per cent of GDP.
Entrepreneurship was the major casualty during
the British Raj. The education system, introduced by
Lord Macaulay, was meant to produce clerks who
would support the British-put administration in place.
During those days, a government job was not only a
source of permanent income but also provided direct
access to power. People would respect a government
employee, a bureaucrat. Making money through
business was considered derogatory. We never
respected those who made money. This is the kind of
social and cultural ethos we had. But all this is history.
Now things are changing very fast.
After Independence, our entire planning was led
by the public sector because of certain compulsions.
But if the public sector had not been there, todays
private sector would also not have been so resilient;
because, at that point of time, private capital was shy.
They did not have enough financial muscle to enter
into infrastructure sector. We had put all sorts of caps
on the private sector. However, at that point in time,
enamoured by Russian planning, we kept control on
private initiatives to avoid concentration of income
and wealth in a few hands. Small industries were given
high priority. They survived because they were
protected from large industries in terms of product
reservation and preferential price purchase policy of
the Government of India. It gave them somewhat
assured markets. There was hardly any incentive to
upgrade technology or product as it needed additional
deployment of resources on the part of entrepreneurs.
Hence, quality became the first casualty. Whatever was
manufactured, the consumer had to take it or leave it.
The situation was almost similar in the large industry
sector. For example, there were only two kinds of cars
in the country for 35 to 40 years.
Naturally Indian industry
became not only inefficient but
the innovative spirit was also lost.
If we lose creativity, we lose
competitive edge. We did have a
very significant quantum of
technical manpower. But those
who were better endowed left the
country for greener pastures in
the UK or the US. We were left
with people who were not
creative or innovative by and
large.
Another fallout of these policies, especially quota,
permit, and controls, was the emergence of a new, rent-
seeking class. This class took quota for raw materials,
sold off the same in the black market, and happily made
their money. After 1991, they were the first to go out of
business. Sickness in the Indian industry had seeped
in due to these kinds of people.
The government policies promotional and
protective did help a very large number of small-
scale entrepreneurs during the 50s, 60s, and 70s. Quite
a few of them grew and became large. After 1991, we
had a change in policy framework. We became more
liberal and open; we started encouraging transfer of
The main issue now is how
to augment the supply of
globally competitive entre-
preneurs. Probably, the
answer lies in the education
system. One would be wiser
by introducing entrepre-
neurship in the education
system itself and come out
of the Macaulay hangover.
l02 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
technologies which resulted in the emergence of a lot
of hi-tech ventures. Take the example of software
industry. Last year, its exports were around US$ 6.5
billion (2003); this year they are estimated to be about
US$ 8.5 billion and the estimates for the year 2008 are
a whopping US$ 50 billion. It is partly because people
took advantage of the opening up of the economy and
partly because of the B-to-B (Back to Bangalore) factor.
The growth of Bangalores IT sector is mainly due to
the capital provided by the people who are working in
the US the NRIs.
The question as to which factors presently
determine entrepreneurship is difficult to answer. A
recent study by Global Entrepreneurs Monitor, based
on the perceptions of
entrepreneurs, indicated
new busi ness oppor-
tunities, participation of
post-secondary education
programmes, cultural and
social values, and strong
physical and professional
infrastructure as some of
the factors which deter-
mine entrepreneurship
supply. The main issue
now is how to augment
the supply of globally
competitive entrepren-
urs. Probably, the answer
lies in the education system. One would be wiser by
introducing entrepreneurship in the education system
itself and come out of the Macaulay hangover. A
conducive policy framework that fosters emergence
and growth of entrepreneurship should be made.
Finance, one of the most critical factors for fostering
entrepreneurial supply, will have to be made accessible.
The emergence of venture capital in India would surely
go a long way in nurturing entrepreneurship. New
ideas will have to be encouraged even if they look
somewhat crazy. These are the likely ideas that have
potential to revolutionize the world. They would need
both policy and financial support. They would need
angels (investors) and they would need venture
capitalists. It is a challenge before the financial sector.
If we do not respond proactively now, it could be never.
We may get relegated to a country that produces drones
or at best Fabians. Let us help the emergence and
growth of innovators.
I M Pandey I M Pandey I M Pandey I M Pandey I M Pandey: Both Dr Nair and Dr Awasthi have brought
out the importance of government in the development
of entrepreneurship. We may go into the debate about
the role of government and then whether we had real
entrepreneurships or not in this country. Some argue
that India never had a dearth of entrepreneurs; the
Indian government, particularly after Independence,
has done a good job of supporting entrepreneurship;
and a number of excellent enterprises have been created
that have helped in wealth creation. A number of entre-
preneurs became rich as they worked hard. Why is our
economic development still so slow? For example, let
us compare ourselves with a country like Japan. In
spite of the disastrous
effect of World War II,
Japan reconstructed itself
and grew fast and became
an economic power. Why
are we taking so long to
grow? Can t we learn
from the experiences of
Japan and the Western
countries and reduce the
learning curve and the
time cycle of achieving
growth? We need to look
at some of those factors
which are impeding en-
trepreneurship, enterprise development, and economic
growth in this country. Let us give its due to the
government or if you want to criticize, let us criticize
it. But now, things are changing; there are people in the
government and bureaucracy who think differently.
What policy initiatives are needed to leverage these
changes?
We now have yet another entrepreneur to share
his views with us. I introduce Mr Kaushal Mehta to
you. Mr Mehta is the CEO of Motif (India) based at
Ahmedabad. He has MS in Electrical Engineering and
an MBA degree from the US.
Kaushal Mehta: Kaushal Mehta: Kaushal Mehta: Kaushal Mehta: Kaushal Mehta: One global rule that any country
should follow is that the government should not be in
business. It is the avenue of entrepreneurs. I am
definitely of the opinion that entrepreneurship in our
country is inherent and massive in scale and is second
to none on this planet. In fact, when we go out on the
Why is our economic development still
so slow? For example, let us compare
ourselves with a country like Japan. In
spite of the disastrous effect of World
War II, Japan reconstructed itself and
grew fast and became an economic
power. Why are we taking so long to
grow? Cant we learn from the
experiences of Japan and the Western
countries and reduce the learning curve
and the time cycle of achieving growth?
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 l03
streets of Ahmedabad versus Silicon Valley, we see
entrepreneurship in all its forms. The Silicon Valley is
a hot bed of successful start-ups. There are very few
people originally from Silicon Valley. Everyone comes
here from India, China, Pakistan or some other place.
The very same Indians go from India to the Silicon
Valley and become successful entrepreneurs. They have
the same academic, social, and cultural background.
What matters is the infrastructure that exists in a
particular environment. HP and Intel are the forefathers
of Silicon Valley. Many of these companies had spin-
off companies started by managers who, after working
for many years, left to start another company. That is
how the engine of growth started. The value venture
capitalist can add is that he can suggest a bank, refer
legal attorneys who provide legal services for all their
investee companies, etc.
I disagree with the notion that every new company
means a new idea (there is a difference between a new
idea and a new company). For example, Microsoft has
four product lines. The windows
operating system is a remarkable
innovation but MSN is an ISP kind
of a player. The company did not
invent that, it imitated me too.
We look at innovation; there is the
new product line, the X-box, which
is a game machine. First it was
Nintendo, then Sega, then Sony,
and then Microsoft. Each of the
newer businesses is now two
billion dollar revenue stream for
Microsoft. At least two out of four
are me-too products. So who says that you have to
have a new idea/product to start a new company?
After working for seven years in the Silicon Valley,
I had some great ideas too. I thought that my food bills
are taken care of so I should experiment for two or
three years. For an investor, a person having some
experience in an industry is a factor to be looked into.
I would define an entrepreneur as someone who can
find a need in the market, provide a service, and make
money. But to make it really rampant you have to have
individuals who have some kind of exposure.
Take the example of Mr Narayana Murthy. Before
Infosys, he started his career at IIM, Ahmedabad as a
Systems Administrator. So people spend time working
elsewhere before they venture out to start a company
of their own. I am not saying that a 19-year kid with a
bright idea cannot start a company. But the investors
do look at the experience of a person in a particular
industry.
The investors also look at how much of his own
money the entrepreneur is willing to invest. The Silicon
Valley in the US is instrumental in wealth creation.
Everyone there has stock options. This is one thing we
have followed at Motif. Everyone, including the office
boys, is a stock option holder. The idea is whenever
Motif has an exit, there would be wealth creation.
Amongst the few hundred employees we have, even if
five want to start their own company, the success of
those five new Motif entrepreneurs would be the
measure of our success. That is how a chain reaction is
started.
What is the value of venture capitalists to
entrepreneurs? There were so many areas in which I
thought I could have never pulled it off without the
active support of my venture capitalist. For me, this is
my first company, but for the
venture capitalists who have been
investing in companies for more
than 40 years they had been
there, done that before. They
know the processes like setting up
a company, contract negotiations
with customers, infrastructure,
etc. It took Infosys ten years to
reach where they are now. The
company was worth nine crore
rupees in 1982 and Rs 900 crore in
1992. So, for ten years, there were
talks about the founders thinking whether they should
continue or not. The point here is that there are certain
value additions that our investors or venture capitalists
give us.
For instance, when we learnt that our very first
customer, Priceline Webhouse, which sold groceries
online, was closing down. We heard on CNBC that the
company had closed down and we were about to hire
200 employees for them. The first one to call me was
one of my venture capitalists who told me not to worry
as these things will happen. That is where you have
the comfort level that these people are going to stand
behind you in times of crisis, because they have
invested in the individual, not just the business plan.
They told me You think we look at the business plans
I would define an entre-
preneur as someone who can
find a need in the market,
provide a service, and make
money. But to make it really
rampant you have to have
individuals who have some
kind of exposure.
l04 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
and ROI? We first look at the individual. Can we trust
this person, can we work with this person? I had e-
mailed to my venture capitalist a financial report of
about 16 pages. Within 30 seconds he said that item
four on the third page regarding depreciation amount
did not seem to be right. That is the level of experience
he has when he looks at numbers. Whatever the
entrepreneur assumes as cost is always underestimated
and whatever is assumed as revenue is overestimated.
There was a talk about people returning to the
country and some examples were given. Interestingly,
I purchased a book for my son on Indian leaders and
that included freedom fighters. On reading that book,
I realized that 80 to 85 per cent of the leaders, who had
actually gone out of India, more likely to Cambridge
or Oxford, experienced what independence meant and
came back to India and told the British to leave the
country. So I fully agree that sometimes outside ex-
posure is necessary.
I M Pandey: I M Pandey: I M Pandey: I M Pandey: I M Pandey: Contribution of entrepreneurship in India
is tremendous when you go by some of the statistics
like about 40 per cent contribution to GDP and
employment generation, etc. For example, just four to
five years ago, our exports were quite small. They have
grown tremendously during last seven or eight years
to US$13.5 billion. Today
hal f of that i s bei ng
contributed by IT industry.
It is a matter of pride and
achievement. However,
when you see longitudi-
nally, we do find that there
has been tremendous
progress in the IT sector.
But let us face hard facts.
What we export as far as
IT is concerned, is one per
cent of the worlds total
export of software and related services. It is one third
of Microsofts revenues and the largest software
company in India, viz., TCS, is half of the 25
th
of the
software company in the US. We are still so small in
spite of whatever growth has taken place in the IT
sector. How do we accelerate pace of entrepreneurship
in India?
I now invite Mr Vishnu Varshney to speak and
throw light on the interface between entrepreneurship
and venture capital. Mr Varshney has an MBA from
the US. He is the CEO, Gujarat Venture Finance Limited
(GVFL) and is amongst the first venture capitalists in
this country. He has significant contribution in
developing venture capital in India.
V VV VVishnu V ishnu V ishnu V ishnu V ishnu Varshney arshney arshney arshney arshney: Any entrepreneur contributes to
the society in which he lives. Entrepreneurship can be
divided into three different eras. One was the pre-
British era, where there were lots of entrepreneurs and
artisans in various sectors. All these artisans were
outstanding and famous throughout the world. There
were merchants from Gujarat and Kerala travelling all
over to East Africa and other countries. In my
childhood, I had read that agriculture is number one,
business is number two, and working for somebody
else is the worst; it is next only to begging. So, in India,
our ethos has always been entrepreneurial. It is part of
our culture. When the British started establishing
themselves here, entrepreneurship flourished. But it
flourished only in those areas which were not
competing with their own industry in Europe. The East
India Company was founded to exploit this country.
There were about a hundred textile mills in India and
the oldest one started in 1860. The jute industry of
Bengal is more than 150 years old. There were other
industries also but the
British allowed only jute
and cotton industries to
grow. The US capitalism
started after they achi-
eved independence. In
India, we started properly
after 1947 or 1950 to be
precise.
The difference bet-
ween China and India is
this: Chinese are better
entrepreneurs because
they love money more than anything. In India, we are
told that if you are rich, you are a baniya which is
synonymous to being bad. This happened because
during the colonial rule, government jobs were
considered as securities. Except for Gujaratis and
Marwaris, every Indian felt secure in a government
job. Lord Macaulay created an education system which
was a major impediment to our innovative process.
India could not create innovators or inventors as there
has been a tremendous conditioning of Indian minds
What we export as far as IT is concerned
is one per cent of the worlds total
export of software and related services.
It is one third of Microsofts revenues,
and the largest software company in
India, viz., TCS, is half of the 25
th
of the
software company in the US. We are still
so small in spite of whatever growth
has taken place in the IT sector.
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 l05
in the past 150 years. People have become risk-averse.
Besides, social factors also impeded entrepreneurial
development. People, even today, think that taking up
a job is much better than taking a risk and starting
your own venture. If you take up a job after college,
you will soon have a comfortable existence. You go to
work in the morning, come back late, you work very
hard and help build up a company, but for somebody
else. You gain no gratification, except your ration-
alization that you worked for such and such a company.
This kind of a mindset has to change. Families also
play a very important role. Even families are risk-
averse. You have to have an independent thinking, you
should really have a passion and commitment to start
your own business and be on your own. Once you fall
into the comfortable existence trap, you will never
be able to get out of the cycle. The other scenario could
be that you work for four to five years and then start
your own venture. This re-
quires a lot of commitment
and courage to leave the pre-
sent job. As time passes by the
risk-taking capacity goes
down.
The cultural issue is that
failure of any kind is con-
sidered a stigma. Anyone who
declares bankruptcy is ostra-
cized. After Independence,
the government, in a socia-
listic pattern, associated itself
with entrepreneurship. But
the bureaucrats became very possessive and did not
want to lose their control on businesses. In 1951, the
Government of India created State Finance Corpora-
tion Act and money was given at a subsidized rate.
But we have also adopted a culture of not paying back
and not being answerable and accountable because of
a poor legal system and corrupt institutions.
I would also like to comment on the role venture
capitalists have played in developing and funding new
ventures. Venture capitalists have lost a lot of money
during the recession and there has been no regulatory
support. In fact, this is the only country where venture
capital is regulated. In the US, it is not bound by rules
and there are no guidelines. I struggled for ten years to
get the regulations in India streamlined. Ideally, there
should be no regulator. The venture capital industry in
this country, which was worth two billion dollars about
two years back, is now worth 500 million dollars. The
total number of companies supported by venture capital
is more than 2,000. We have been unfortunate in that the
venture capital movement started only in 1985-86.
In the US, there are more than 1,200 venture
capitalists. The mission statement of many of the
venture capitalists is to build businesses and not just
get rewards. When you build businesses, you
automatically get rewards. Venture capitalists are now
playing safe. They are investing in companies which
are already well established and are moving away from
providing seed capital to start-ups. The motive is purely
commercial. Very few have the purpose of building
businesses and this approach is not right. It is an
anomalous situation in this country that the venture
capital industry, which was started at the initiative of
the Government of India, is declining due to govern-
ment apathy and indiffe-
rence.
How can we make ven-
ture capitalists role in entre-
preneurship more effective?
We should follow the Israel
model. In Israel and in the
US, a law was enacted as per
which the federal govern-
ment refinanced all the
venture capitalists. Of course
there were bankruptcies. But
what was the percentage?
Even if 20 per cent of the
companies go bankrupt and 20 per cent are frauds,
we will still end up making money. So, the government
should come forward to fund such companies. And
funds need to be better utilized. There is a Rs 10 billion
fund lying idle with the Department of Science and
Technology which is supposed to be disbursed among
innovative, technology-oriented companies. In Israel,
there are a large number of venture capitalists that are
funded by the government to promote innovation and
technology. Private investors question the wisdom of
investing in a technology-oriented, small start-up
because of the risk involved and lack of incentive. The
thinking is that in all likelihood, the company is going
to fail. A private investor will never invest in such a
company. It is the government, which should take the
initiative and it should follow the Israeli model. Funds
Venture capitalists are now play-
ing safe. They are investing in com-
panies which are already well
established and are moving away
from providing seed capital to
start-ups. The motive is purely
commercial. Very few have the
purpose of building businesses
and this approach is not right.
l06 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
should be disbursed through such agencies as SIDBI,
which in turn, give money to the small, regional funding
agencies. Venture capital business is a localized
business. Based in Ahmedabad, I think it is not wise on
my part to make an investment in Chennai because
monitoring and nurturing becomes very difficult. We
have to create regional vehicles through which money
can be disbursed.
When you give government money to companies,
do not hold them accountable for losing it, if it has
been lost honestly. We have to accept that venture
capital money will be lost. Only 30 per cent of the
companies become successful and provide returns even
in the US and Western countries. In India, only 20 per
cent companies will do so. The government has to take
the initiative for another ten years to promote
innovation and support venture capitalists in this
country. Hopefully, by then, the industry would have
matured.
The entire enterprise culture
of US is based on venture capital.
It never had any subsidized
interest rate or term lending
institutions like GIIC, GSFC,
UPFC, etc. Entrepreneurs have to
go to venture capitalists. Venture
capitalists evaluate their com-
panies on their merits and they are
ready to write the amounts off if
the company fails. But they also
have the backing under SBIC. In
India, insurance companies and pension funds are the
highest contributors to venture capitalists. Indian
entrepreneurs are highly individualistic and are very
bad team leaders. They cannot form a team. They are
very secretive about their work. They would promise
me that I will get ten times of my investment but if I ask
them for details of the complete process, they would
refuse as they are scared that I will reveal the technology
to a third party.
Another issue that I would like to highlight here is
that despite the fact that we talk about very high ideals,
we have lost our ethos. The value system has
deteriorated because of a weak legal system. We have
a very inefficient legal system that does not inspire
confidence of outside venture capitalists. Why is
Foreign Direct Investment (FDI) lower in this country
than China? It is because we have a very time-
consuming, corrupt legal system. If a lawyer from my
side gets better fees from my opponent, he may start
defending him. In civil suits, it takes several years for
a case to come on board and then for hearing. So people
are not interested in following the legal course due to
the time consumed and the high cost. People pursue
short-term goals. The quick-rich mentality is really
spreading very fast. There are some exceptions though.
As a venture capitalist, I have helped many entrepre-
neurs who have made very successful companies
through their honesty and hard work.
I M Pandey I M Pandey I M Pandey I M Pandey I M Pandey: Thanks Mr Varshney. The question is:
how do we leverage our advantages? Dr Nair and Mr
Varshney have raised very interesting issues. They
talked about our higher education system and its
strength. If we have one-third of the scientific and
engineering talent in this country, are we able to harness
it optimally? All of us have the data what is actually
happening! Of course, Mr. Varshney brought out very
clearly the issue of legal system
that hinders development and
financing of enterprises. There-
fore, we need to know what do
we do? Do we have enough incen-
tives to innovate in this country?
The role of bureaucracy has been
directly or indirectly questioned.
It creates more problems rather
than playing a facilitating role.
How do we change the mindsets?
What is the governments role? If
you say government did a good job or that it did badly
in certain areas, what do you expect the government to
do now if you want to develop entrepreneurship?
In the context of venture capital, Mr Varshney
mentioned that venture capital contributes towards
the development of entrepreneurship. What kind of
risks are involved in financing new enterprises, par-
ticularly in high-tech where the risk is high? Venture
capitalists make money in 20 per cent of the enterprises
and the remaining fail. Are there incentives for venture
capitalists to continue financing high-risk enterprises?
Isnt that the venture capitalists have to perhaps play
a far greater role in developing high-tech enterprises
in India? Our research of high-tech enterprises in India
and other countries reveals that the entrepreneurs look
for more than financial support from venture capita-
lists. The high-tech entrepreneurs would like venture
Do we have enough incen-
tives to innovate in this
country? The role of bureau-
cracy has been directly or
indirectly questioned. It
creates more problems
rather than playing a facili-
tating role.
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 l07
capitalists to help them in building their image; to
provide them flexibility in raising funds, particularly
when they reach the growth phase; to identify good
people to work in their organizations and influential
persons to be members of their board; and to introduce
them to the networks of customers, financial insti-
tutions, consultants, poli-
cy makers, etc. Entrepre-
neurs certainly do need
initial financing and nur-
turing; they do want ven-
ture capitalists help in
IPOs, but, later on, more
important for them is the
flexibility of financing and
networking. They want
venture capitalists to intro-
duce them to a large vari-
ety of financing avenues
and facilitate raising of
finance from various sour-
ces. They want help in re-
cruiting good and vigorous people. They have ideas,
but they are not known. They want venture capitalists
to make them known to those who matter for the growth
of their enterprises. Hence, for developing the pace of
entrepreneurship, we need to develop a vibrant venture
capital in India which is capable of not only providing
finance but also providing help in management and
strategic thinking of entrepreneurs.
Editor Editor Editor Editor Editor s Note s Note s Note s Note s Note: :: :: We are also including here the written
comments of Mr Rakesh Rewari and Professor K
Ramachandran on the topic of Entrepreneurship and
Venture Capital. Mr Rakesh Rewari is a post-graduate
in management from Jamanalal Bajaj Institute and is
currently the CEO of SIDBI Venture Capital Limited
(SVCL). Professor K Ramachandran has a Ph. D. in
Entrepreneurship from Cranfield University, UK. He
has taught at Indian Institute of Management,
Ahmedabad and is currently Professor in Entrepre-
neurship and Strategy, Indian School of Business,
Hyderabad.
Rakesh Rewari Rakesh Rewari Rakesh Rewari Rakesh Rewari Rakesh Rewari: Entrepreneurship is linked to risk-
taking and finding innovative ways of doing business.
Innovation can be in any field and need not be restricted
to technology. Growth is closely linked to entrepre-
neurship and any successful case results in better
products, improved ways of doing business, and
employment generation. Success stories encourage
greater entrepreneurship. The role of entrepreneurs
in making the Indian software industry global has
played a major role in economic development in India.
The increase in professionals willing to take a risk
and become entrepreneurs has been a positive
development. The break-
ing down of trade barriers
and benchmarking com-
panies at a global level are
positive signs for deve-
loping entrepreneurship.
The change in mindset to
set up professional com-
panies, observe global
markets, benchmark com-
panies with international
standards, and profi t
sharing with manage-
ment team have contri-
buted to the development
of entrepreneurship. The
system needs to accept that failures will occur and are
closely linked to entrepreneurship and risk-taking.
The success stories of Silicon Valley and Israel are
examples of how venture capital has fuelled the growth
of entrepreneurship. Entrepreneurship requires risk-
taking and financing such enterprises, which may
result in failure. This can only be done by venture
capital. Entrepreneurship may develop without
venture capital in micro level projects. In such situa-
tions, venture capital is needed to scale up growth.
Venture capital has played a maj or role in
developing entrepreneurship in India by building up
professional companies which compete globally. It has
made smart money available for projects which cannot
be funded by conventional methods.
The quality of entrepreneurs has improved
considerably in the last decade. Entrepreneurs have
the motivation to compete globally and the necessary
attributes to build successful companies. There is a
need to provide considerable level of handholding to
build up such companies in India particularly at the
seed stage.
We need a critical mass of venture capital funds
looking at early state, start-ups, and incubation
projects. This needs to be supplemented by angel
funding. The global models of private/public
The high-tech entrepreneurs would like
venture capitalists to help them in buil-
ding their image; to provide them
flexibility in raising funds, particularly
when they reach growth phase; to
identify good people to work in their
organizations and influential persons
to be members of their board; and to
introduce them to the networks of
customers, financial institutions, con-
sultants, policy makers, etc.
l08 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
partnerships like the SBIC
model needs to be replicated
in India. This will increase the
number of entrepreneurs
being financed at the early
stage. The role of venture
capital in developing entre-
preneurship will evolve once
we have the critical mass avai-
lable in India. We need to
reach the level of venture
capital being a partner with the entrepreneur in the
enterprise. This can be achieved only if we have the
above framework in place.
K Ramachandran K Ramachandran K Ramachandran K Ramachandran K Ramachandran: Venture capital has played a pivotal
role in breaking the myth that entrepreneurs are not
born, but can be created, a new paradigm for the first
generation high-tech entrepreneurs to draw confidence
from. The IT driven boom in industrialization in India
in recent years and the resultant wealth creation has
given further fillip to the growth of entrepreneurship
and venture capital industry, each supporting the other.
Incidentally, we have been having risk capital support
for private sector initiatives in economic development
as I M Pandeys research (Venture Capital: The Indian
Experience: New Delhi: Prentice Hall of India, 1996)
suggests, most of it coming from family and/or some
public institutional sources.
The spurt in the growth of venture capital industry
and high-end entrepreneurship is a part of the growth
phenomenon in the small-scale sector that we have
been witnessing in India over the years. The small scale
sector has grown at rapid rates in terms of numbers,
turnover, and employment since long, disregarding
major changes in the techno-economic environments
at different points in time. The wide spectrum of
activities that cover small enterprise sector has firms
with different combinations of technology and financial
intensities. Traditionally, venture capitalists support
ventures with potential for high growth but with
perceived high risk, and technological and financial
intensity. Such consistent growth of the small enterprise
sector is a reflection of the inherent supply of entre-
preneurial pool available in India. It is also a reflection
of the potential to have high quality entrepreneurs once
the facilitating environment turns more friendly and
networked.
A l arge number of
factors have contributed to
this growth: The key to any
entrepreneurial success is an
attractive opportunity that
provides for decent returns
and growth possibilities. The
growth in the IT sector,
particularly after the arrival
of the Internet in the second
half of the 90s, is a mani-
festation of the role of market attractiveness in
generating entrepreneurial activities. Since the role of
a product/service is to offer solutions to customers
problems, a key quality of a good entrepreneur is to
identify areas where the existing products and services
that offer sol uti ons to customer probl ems are
inadequate. Often, this is not articulated but an entre-
preneur spots them. New frameworks and methodo-
logies now exist to assess market attractiveness of a
new product (Ramachandran, K How to Spot Winning
Opportuni ti es, New Delhi: Tata McGraw Hill,
Forthcoming).
The phenomenal growth in the services sector in
recent years is a reflection of the latent need that exists
among customers to have better solutions to their
problems, particularly in hospitality, travel, tourism,
and healthcare industries. On the same lines is the
growth in IT-enabled services sector that is being
experienced now, reflecting possibilities of taking
advantage of the potential of the Internet to save costs
through outsourcing; this has caught the attention of
venture capitalists in a big way. This is also a reflection
of the current trend among venture capitalists to move
away from high-risk investment while focusing on high
market returns. Whether this is because of the
dominance of bankers and financial experts in the
venture capital industry now is an intriguing question.
In the Indian context, formation of venture capital
companies such as ICICI Venture (originally called
TDICI) and GVFL (Gujarat Venture Finance Limited)
in the 1980s created the driving force to push up high-
tech entrepreneurship in India. The 90s saw awareness
about venture capital growing multi-fold, particularly
in the latter half, when more people started seeking its
support, which led to a spiraling growth in the venture
capital industry in the country. Simultaneously, the
government removed many of the hurdles that existed
Entrepreneurs in India have the
motivation to compete globally
and have the necessary attributes
to build successful companies.
There is a need to provide consi-
derable level of hand-holding to
build up such companies in India
particularly at the seed stage.
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 l09
in the regulatory environment that prevented flow of
overseas funds into the venture capital pool. The net
result was multi-fold growth in the size of the industry,
with several new venture capital funds from India and
abroad springing up within a short period of time.
Unfortunately, the year 1999-2000 saw this industry
going on an over-drive when the entire industry
competed to find and invest in any firm with a dotcom
tail added to its name. The implications of these are
elaborated later. However, a major gain out of this
process was the widespread awareness that it created
about the attractiveness of choosing entrepreneurship
as a career option for highly qualified and competent
individuals.
While venture capital facilitates the birth of a new
entrepreneurial baby, it is the availability of appropriate
quality infrastructure that provides the walkers for
it to climb up and grow. In-
dustrial estates as a concept
provided the vehicle for
rapid start up for a number
of entrepreneurs who other-
wise would have found the
journey tough. Indeed, in-
dustrial estates were set up
indiscriminately in many
places, with the hope that
entrepreneurs would flock
there. This assumption pro-
ved wrong in many cases;
one of the problems with
this strategy was over-em-
phasis on economic infrastructure without caring for
social infrastructure. Industrial estates flourished in
places which were otherwise attractive but lacked both
economic and social infrastructure. Again, IT is the
best case to illustrate. The key attributes of economic
infrastructure for IT industry are high quality Internet
connectivity, dust-free cool work environment, and
commuting facilities. The software technology parks
created both in the private and public sectors have
facilitated the formation of a number of IT companies
in several cities. The reason for the growth of IT
particularly in Bangalore (the same strategy is being
followed by Andhra Pradesh) is not only because it
provides world-class economic infrastructure but also
because of its attractiveness as a place to live and relax.
We can notice a similar trend towards synergizing
economic and social infrastructure for promoting
biotech enterprises, which is another industry that is
attracting a lot of venture capitalists attention now.
The 1980s saw a major initiative driven by the
government and its industrial development agencies
(IDBI and SIDBI in particular) to promote entrepre-
neurship across the country. Although it did not focus
on high technology, it created widespread awareness of
what entrepreneurship is and the process involved in
creating business ventures. Despite its weaknesses, it
had a salutary effect, and entrepreneurship was no longer
considered taboo by the time we reached 1990s. In some
ways, the entrepreneurship development programmes
of those days provided the right impetus for a take-off
of an entrepreneurship culture in India. This was
supplemented by focused initiatives made by several
other agencies. For instance, the Department of Science
and Technologys National
Science and Technology
Entrepreneurship Develop-
ment Board (NSTEDB)
promoted the formation of
entrepreneurship parks in
technology institutions.
NSTEDB did provide the
technology flavour required
for growing high-tech entre-
preneurship in India and, in
turn, the venture capital
industry. These positive fac-
tors have to be considered
after factoring in the impact
of a number of hindering variables, some of which are
mentioned below:
The term entrepreneur has always been as-
sociated with a number of indicative adjectives such
as cheating, unscrupulousness, greed, opportunism,
and selfishness. Making money that too through
business, was always looked down upon by most of
the Indian society. As a result, entrepreneurship was
never considered a serious career option for most bright
and capable people. It was considered as an option for
otherwise unemployable people. We have travelled a
long way from there, but there are still many among us
who believe that entrepreneurship is a gifted quality
that too for a few people belonging to select com-
munities. The venture capital industry has immensely
contributed in smashing this myth by shifting the
Entrepreneurship was never consi-
dered a serious career option for most
bright and capable people. It was
considered as an option for otherwise
unemployable people. We have tra-
velled a long way from there but there
are still many among us who believe
that entrepreneurship is a gifted
quality that too for a few people
belonging to select communities.
ll0 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL
emphasis from mere financial resources to intellectual
capital as a critical success variable for business.
Controls hamper natural growth. This is true with
governments too. In its anxiety to preserve and
channelize resources in the most efficient and equitable
way, the post-Independence governments in India
relied heavily on controls while encouraging
industrialization. Unfortunately, most of these controls
became hurdles to free flowing entrepreneurial
activities. The Licence Raj played the spoilsport for
many budding entrepreneurs. It is only in recent years
that we have seen signs of any movement from this
position towards a more open approach based on trust.
The role of a facilitating environment is particularly
important for a society, which is largely anti-
entrepreneurial. The rapid growth in IT entrepre-
neurship is often attributed to the absence of govern-
ment interference in it.
Finance being one of the limiting factors of
entrepreneurial opportunities, banking institutions
have played a major role in the process of creating
entrepreneurship in India. Although banks have
provided both long-term and working capital to firms,
their capabilities in assessing entrepreneurial needs
and responding equally fast have been questionable.
Several studies (Morris, et al; Overcoming Constraints
to the Growth and Transformation of Small Firms, New
Delhi: Oxford University Press, 2001) have underlined
the need for banks to follow a flexible strategy while
servicing entrepreneurs. In some sense, this lack of
sensitivity is a reflection of the traditional conservatism
of banks, but also a lack of capabilities in adequate
measures to understand and respond to the needs of
entrepreneurs. This is where venture capitalists score.
In other words, we have been living with an anti-
entrepreneurial culture and an institutional network
that have not been sufficiently proactive to compensate
for the cultural shortcomings and pull the entre-
preneurial talents hidden behind.
It is against this background that we have to analyse
the role of venture capital in the development of
entrepreneurship in India. Some of the key attributes
of a good venture capitalist are his/her own entre-
preneurial mind-set and willingness to travel with the
entrepreneur not only as a financier but also as a mentor.
This is particularly important for developing entre-
preneurship because of the global average of about 80
per cent start-ups failing in the initial few years. Succe-
ssful venture capitalists have always played this dual
role effectively. In fact, such grooming is part of esta-
blished family businesses all over the world, where the
entrepreneur and the mentor belong to the same family.
Venture capitalists have facilitated technology
intensification in the economy. Often, it is a paradox
that people who have money do not have technical
and managerial expertise and vice-versa. Venture
capitalists have to plug this hole by offering funds and
other inputs to technology-savvy entrepreneurs who
otherwise do not have much of capital to spare. Many
of the successful high-tech firms in India have been set
up with venture capital support. My own study
(Management Strategies of Venture Capital Funded
Firms, Journal of Entrepreneurship, June 2001) of
companies funded by ICICI Venture and GVFL have
shown that but for the support provided by these
venture capitalists, many of the successful firms that
we see today may not have been born or at least would
not be where they are now.
However, it is dangerous to assume that entre-
preneurship would not develop without venture
capital support. In some ways it depends on the way
venture capital is defined. Not all the people with great
ideas go to venture capitalists nor all ideas with great
potential attract support from them.
The major contribution of venture capital in India
has been building confidence among youngsters that
they can do it. Both venture capitalists and young
entrepreneurs, that too with a strong technology and
management background, very often speak the same
language and share the same passion. This has
facilitated the process of creating trust between these
groups much faster.
Unfortunately, the talent pool in the venture
capitalists is not very rich in India. Venture capitalists
in the country do not have the right mix of capabilities
to be called a venture capitalist. Most of them have
background in finance and not in enterprise
management. Several of the senior executives hardly
have any industrial experience to count. Experience
of starting and running enterprises during the dotcom
era has to be taken with a pinch of salt as it is an
aberration and not a normal phenomenon. The mad
rush to invest during the dotcom days has to be seen in
this backdrop.
There should be concerted efforts to build
entrepreneurial capabilities in venture capitalists. They
VlKALPA - VCLLML 28 - NC l - IANLAkY - MAkCH 2003 lll
should be able to build entrepreneurship and provide
the mentoring support. This requires wide experience
of handling a variety of situations. There should also
be a dialogue among entrepreneurs, technology R&D
laboratories, and venture capitalists. At present, all
these three groups of high value-added growth operate
independently. Harnessing of the energies around
technology, finance, and entrepreneurship can unleash
the growth process immensely.
This may be a process of evolution of the industry
because it is impossible to get all the capabilities in
place before we embark on the journey. We need more
angels who may or may not bring capital to the table
but who would provide high quality mentoring inputs
that are scarce now. This angel pool of managerial and
entrepreneurial expertise blended with high quality
project finance and capabilities of venture capitalists
can be very useful for the next phase of growth of
venture capital industry in India.
My own interactions with entrepreneurs and
venture capitalists and research in this area point to
the need to have platforms to share experiences and
learn from each other. Indeed, the current flux should
lead to a state of stability when prudence is expected
to prevail and high quality entrepreneurs will grow
with the support of venture capitalists.
Conditions for lnnovation
Innovaton s votl. It toqutos lnovlodgo. It oiton toqutos gtoat
ngonuty.
To succood, nnovatots must buld on thot sttongths. 5uccossiul
nnovatots lool at oottuntos ovot a vdo tango. 8ut thon thoy asl,
\hch oi thoso oottuntos its mo, its ths comany, uts to votl
vhat vo (ot I ato good at and havo shovn caacty iot otiotmanco?
-nd inally, nnovaton s an oiioct n oconomy and socoty, a chango
n bohavout oi customots, oi toachots, oi iatmots, oi oyo sutgoons
oi oolo n gonotal. Ct t s a chango n a tocoss that s, hov
oolo votl and toduco somothng. Innovaton thotoioto alvays has
to bo closo to tho matlot, iocussod on tho matlot, ndood matlot-
dtvon.
Peter Drucker
Innovaton and Inttotonoutsh
ll2 LN1kLPkLNLLkSHlP AND VLN1LkL CAPl1AL