Entrepreneurship and public policy

The Indian media is awash with news about technology startups and the rise of entrepreneurial activity. However, the hallmark of successful startup ecosystem is the number of other successful startups that spawn out of the existing ones. Individuals who work in firms that successfully exploit new market opportunities are usually innovators or have the potential to innovate. These individuals are characterised by a mindset that encourages new ideas, the taking of risks, and a penchant for success. The success of US startups can be traced to the creation of such an ecosystem — the ease of finding quality talent and the network effect of a tight knit ecosystem have positively impacted everyone involved.

India is on the verge of creating such an eco-sytem, but there is a lack of understanding, especially, among smaller startups about governments and its role in building such an environment. While there is a need to simplify regulatory aspects, startups themselves must start treating governments and policy makers as active stakeholders and not as mythical demagogues. Governments always play a catching up role in the technology curve, for a startup’s credo is to innovate, while the government’s primary motto is to provide basic public services and the two may not always overlap.

Quite often, firms merely focus on obtaining tax breaks or sops; instead, startups must engage with the government and prod for better civic amenities, push for reforms that enable ease of doing business and enact laws that are transparent. This is especially true for companies that wish to ‘disrupt’ the space they are working in, for a disruptive idea often operates within a gray area of existing law, and active engagement with lawmakers can help assuage regulatory chasms. Not doing this can lead to unnecessary hurdles in business and operations. It is understandable that lean startups cannot devote precious human resource to engage with the government, but the problem can be addressed by collective action. Several associations in India have played a pivotal role in shaping the IT-BPM industries’ footprint in India. Startups must actively engage with the existing organisations, or form new industry bodies that work in conjunction with the existing ones to engage in public affairs

As a thought experiment, the author would like to draw attention to a cultural characteristic. Many Indian startups are successful in B2B business models. However, there are very few successful B2C businesses, where the consumer pays for a service like an app, or a software that aids productivity(The exception to this are e-commerce sites). The author contends that this is a cultural challenge. Basic services in India like water, electricity, roads, fuel etc are highly subsidised or inappropriately priced and the consumer is not used to paying for these services, in such a scenario it is highly unlikely for a consumer to pay for individual technology services. It is in this context that an engagement between entrepreneurs and public affairs assumes a significant role.

Note: The post was inspired by a panel discussion that the author attended. Takshashila’s Pavan Srinath was a part of the panel. On a related note, he has also written about the eight fold path to good public engagement.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale

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