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India turns to 'ideas' economy to drive growth

Posted: 18 Oct 2010     Print Version  Bookmark and Share

Keywords:entrepreneur  financial services  platform 

India is already attempting to reinvent itself to keep its economic growth engine going. Known for several decades now as an economy of inventions, business process outsourcing, and technological innovation, India now intends to develop ideas.

Some of India's venture capitalists and technology experts believe that the country is now ready to create the next leg of its economic revival by developing ideas from entrepreneurs and thinkers.

N.R. Narayana Murthy, co-founder of Infosys Technologies and the founder of Rs.602.38 crore ($129 million) venture capital (VC) firm Catamaran, said the VC firm receives 30 to 40 ideas from entrepreneurs each week and that most of their progenitors "are willing to take risk." "They have understood the power of entrepreneurship and wealth creation," he said.

Some ideas that have already been turned into actual businesses include Eko India Financial Services' financial transaction platform that delivers basic banking services through mobile access devices; Gridbots Technologies, which makes industrial, educational and domestic robots for the domestic market; GQuotient Systems' green ICT solutions for information and communications technology optimisation; and Indrion Technologies India' infrastructure automation solutions for embedding context sensitivity into applications for the industrial, enterprise and public utility/service markets.

While a large part of India's 120 crore population still lives in extreme poverty, the country has risen to become one of the fastest-growing developing nations in the world, driven by an entrepreneurial spirit and sense of innovation that created large companies such as Tata Technologies and Wipro.

However, Bob Kondamoori, managing director of venture capitalist firm Sandalwood Partners, said India will need to move away from the "me-too" mindset, wherein someone tries to copy a business that has proven to be successful. "If a product or service comes out of the U.S. or elsewhere, there is a tendency to think that it should be copied here, probably tweaked a bit to fit into the Indian environment," he said.

India also needs to deal with some challenges, such as the costs of starting a business, according to Sun Microsystems co-founder Vinod Khosla, who later became a general partner at VC firm Kleiner, Perkins, Caufield & Byers and is now is a partner at Khosla Ventures. "To do business in India, you have to be a little creative and innovative to thrive," he said. "But I am still quite positive on India. The way to grow an economy is through entrepreneurship and capitalism, and India seems to have figured out the right formula.

This is where VC firms step in. ""It's all about connecting with the right VC and getting someone to vouch for you; otherwise things just don't happen," said Partha Ray, who failed to secure funding for a semiconductor project with partner T. Rai. The two have returned to their office jobs after failing to secure funding but they are still dreaming of securing financing for the project in the future.

S. Janakiraman, co-founder of MindTree Consulting (now MindTree Ltd.), believes that VC and private-equity firms have cut back on financing projects after the 2009 economic downturn. However, he is confident that it is just a temporary setback.

Also seen as challenges to entrepreneurship in India are banks' preference for hard assets over intellectual property as collateral, companies' provincial outlook, lack of capable product managers and government support, and dearth of customers willing to buy new products from start-ups.

"I see a spark in India, and if this country if given the right platform - government support, an organised initiative - innovation will take off," said Ravindran Govindan, executive chairman of Singapore-based Mercatus Capital.

-Sufia Tippu
EE Times

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