What developing countries can learn from India's entrepreneurship ecosystem

HYDERABAD, India — India’s largest technology incubator — only 2 years old — is launching its first 90-day accelerator program, thanks to a new Microsoft partnership. The Hyderabad-based T-Hub has already seen hundreds of startups pass through its doors, and plans to welcome the first 10 startups to the new accelerator program in February, connecting those entrepreneurs to new revenue sources and helping them assess shortcomings in their distribution channels, according to T-Hub CEO Jay Krishnan. T-Hub’s quick success and now global reach involving corporates, investors, and academia is just one recent example of India’s leapfrogging entrepreneurial ecosystem. While the vast South Asian country has been seeing an increasing number of startups over the past five years, sectors such as fintech are now growing so rapidly in India that developing and developed nations alike are taking note. Much of today’s digital transformation can be traced to government-led regulation and policy shake-ups under tech-minded Prime Minister Narendra Modi, “whose only agenda is reform,” according to Krishnan, and who launched Startup India in 2016 to boost bank financing and slash taxes for startup ventures. The mobile internet explosion of the past few years paired with affordable data packs from telecom operators has also added fuel to the entrepreneurship fire. To be sure, capital isn’t always readily available, mentorship opportunities remain minimal and access to international markets still poses a challenge. But there are key lessons to be learned from India — namely, the speed and scale at which the nation has adopted complementary tech and policies, and the way decision-makers have leveraged international networks and built layered software platforms with future development in mind from the beginning. India’s transformation is happening at a time when “there is a new, symbiotic relationship between entrepreneurs and the public sector,” Global Entrepreneurship Network President Jonathan Ortmans told the audience at a breakout session during the Global Entrepreneurship Summit held in India’s growing tech capital, nicknamed “Cyberabad.” “It’s not just that [entrepreneurs] are interesting and that startup culture is popular; it’s the fact that as we’ve built up these people in our societies who want to try their hand at something new, they are moving away from the simple work of inventing another app to figure out how to deliver something faster, and they’re moving into the complex world of energy, transportation, health care, and so forth,” Ortmans said. India is a crucial case in point: GES saw Ajaita Shah, who founded her company Frontier Markets to bring solar power to the last mile, emerge as the Grand Champion of the event’s pitch competition out of a pool of 75. The four founders of Indian startup Saathi, meanwhile, are taking on the taboos attached to menstruation throughout the country, as well as addressing environmental concerns, by producing affordable, eco-friendly sanitary pads. A tech-motivated public sector It’s largely government reform that has opened the door to an increasing amount of innovation over the past few years, according to T-Hub’s Krishnan. It was India’s Telangana government, in fact, that spearheaded the creation of T-Hub, then handed the reins to Krishnan. Startup India, launched by Modi in 2016, is also meant to increase the ease of doing business, moving a once lengthy in-person paperwork process online and clarifying what qualifies as a startup. They are changes that Saathi co-founder Tarun Bothra said greatly aided in his own quest to get the sanitary pad startup off the ground, and that Upasana Taku, co-founder of India's largest independent mobile payments network MobiKwik, said could have greatly helped during “the first two or three years where I really stumbled around, just trying to get responses from regulators,” she told Devex of her experience in 2009. But it’s a specific software stack — known as the India Stack — that has garnered international attention and fundamentally changed the way the bottom of the pyramid operates in the country. It began with an ambitious biometric digital identity system called Aadhaar, which assigns a unique number and QR code to every citizen using their photograph, fingerprints, retina scans, and proofs of address. Today, more than 1 billion Indians are registered in this database. The government took it further with an accompanying national payment interface designed as a public good, allowing any bank, payment company, or developer to build on top of it. “In the past, the bottom of pyramid had to wait for actual cash,” Krishnan told Devex as an example. “If I’m a farmer, back in the day — and by that I mean a year ago — I had to wait for the wholesaler to give me cash, and he had to wait to get it from his supplier. Now, I digitally transact with you and that digital piece is as good as cash anywhere in the value chain. I don’t need that paper note in my wallet anymore.” The availability of an open software stack suddenly meant that tech startups could use the framework to develop mobile apps and make services available to a large section of the population instantly — one of several catalysts for India’s “overnight” digital transformation. Modi’s financial inclusion mission can be traced further back — to his internationally lauded Pradhan Mantri Jan Dhan Yojana, the flagship financial inclusion drive to expand access to basic savings accounts. One million new bank accounts were opened in a single day, and 300 million have been opened since, according to the PMJDY website. The financial inclusion efforts can also be traced more recently to his controversial and widely criticized attempt to crackdown on illegal wealth by banning high-value currency notes last year. “It was an effort to curb black money and corruption,” Melissa Rakman, who advises global companies on their strategy and investment in India, told Devex. “The secondary goal, which has become the bigger success, is rapidly moving the country toward digital transactions.” The payments piece is what makes India leaps and bounds ahead of other nations, said Rakman, who worked on a project last year with a global impact investor and several consultants to examine the next wave of countries to adopt advanced fintech solutions. “Some of the countries we looked at were in Europe — like Germany — and they are not even doing what India is doing,” she said. Rakman credits some of the progress to a “forward-leaning, tech-comfortable government to create policies that work with the private sector,” but it’s also due to the fact that India already had a strong entrepreneurship ecosystem and pool of well-known founders, both in India and around the world. “That was leverage,” Rakman explained, “A very deep network of companies and technical people that have become champions to move this forward. I think that’s a lesson learned — to leverage your existing strengths of the private sector.” The grassroots-led ecosystem of the future While government-led initiatives can pave the way for innovation, there is still room for entrepreneurs themselves to help create an environment to build and support their ideas. And a more grassroots-led movement is what will launch India’s startups to the masses, several founders at the Global Entrepreneurship told Devex. “We vastly overestimate what the role of government should be,” said Amit Chandra, managing director of global alternative investment firm Bain Capital. “Everyone has this attitude that the government should be the solution provider to every problem.” But entrepreneurs also have a responsibility to create an enabling environment, he said, in order to do more than create shareholder value and “bring society with you” on the journey. By “grassroots,” many speakers at GES referred to the importance of reforming education and building it into the culture from a young age to enforce that it’s OK to take risks, to fail, and to try again. “We need to revamp the education system to promote creative design and critical thinking for kids at a younger age to be tuned to solving problems,” Varun Chandran, chief executive officer of marketing data software company Corporate360, told Devex. “From there, larger innovation will happen.” India Stack and the fintech revolution it has fostered could certainly be seen as a lesson for other countries, but it’s a sticking point for many that an Indian entrepreneur has yet to export a major innovation. Instead, they more often pick up ideas from other countries and adapt them to their own, albeit incredibly diverse, country. “If you look at Ola Cabs, it’s Uber. If you look at Quickr, it’s similar to Craigslist. If you look at Flipkart, it’s Amazon. They’ve just customized them and added some special incentives to make them attractive here,” said Navin Chandra, director for Maventus Software Technologies’ India office. Corporate360’s Chandran stressed the same message, adding that an innovative India tech export will be the ultimate litmus test for the success of the culture the government and entrepreneurs are trying to create. “We need to build out global innovative products from India that are desired by masses all over the world,” Chandran said. “That is the payday for our programs and policies.” Read more Devex coverage on entrepreneurship.