The demanding math of venture capital (VC) with its relentless hunt for the next Unicorn are creating an imbalance in the entrepreneurial space. When the Ubers, Airbnb’s, BenevolentAI, Paytm’s, Flipkarts and Zomatos of the world emerge, their success leads to flashy headlines—in turn feeding the investment frenzy. The quest for the next Unicorn accelerates and becomes more feverish. While there is no doubt that venture capital has been central to the growth of entrepreneurship and has given birth to world-altering companies, the time is ripe to focus on expanding far beyond the Unicorns, if one also wants to solve the pending job crisis of emerging economies. The attention of investors, incubators, accelerators and policy makers must target broader areas of business because opportunities in Bharat are everywhere. More importantly, it must raise the ambitions of entrepreneurs in Tier 2 and 3 cities, and in sectors and companies where revenue growth is aligned with job growth, a critical need for India today, everywhere.
Today, there is a need for a more sober view of entrepreneurship. Developing economies, such as India, need to have a broader vision of what entrepreneurship can deliver, aside from innovation and fast returns.
For Bharat, the role and impact of entrepreneurship must be considered at three levels:
1. Entrepreneurship must create high-value, family-supporting jobs, thus creating a virtuous circle of increasing the standards of living for all.
2. Entrepreneurship must ignite Bharat and not just India – it must uplift society, impacting Tier 2 and 3 cities, and not stay restricted to narrow urban pockets.
3. Entrepreneurship must generate real wealth, and not stay singularly fettered to valuations in a money game
Given that GDP growth has dropped to 5.8%, consumption is dwindling, wages are not keeping pace with labor productivity, and unemployment is at a 45-year high, every means to counter this trend must be deployed. Fueling entrepreneurship to create employment, generate new wealth and boost consumption, is one of the answers.
Unicorns that are few and far in-between are unlikely to take the nation down the path of improved employment and consumption. The need is for more modest but practical interventions such as creating a hierarchy of entrepreneurial companies that serve the broader purpose of generating employment where it is needed most. This means policy makers, investors and the startup ecosystems must target the bottom millions of companies creating five to ten jobs, the tens of thousands of companies creating hundreds of jobs, the thousands of companies creating thousands of jobs and the hundreds of companies creating lakhs of jobs. This will trigger systemic change, easing the job crisis from the bottom upwards. Small and Medium Businesses (SMBs), generally created by entrepreneurs relying on native business instincts and deep knowledge of their markets, are the solution.
India has 63.4 million non-agricultural SMBs – each a genuine, grass-roots entrepreneur with a deep understanding of local needs and markets. They employ over 111 million people and contribute almost 29% to India’s GDP. It’s the 111 million employed that demonstrates their potential. Globally, SMBs account for close to 70% of all new jobs created. If processes and policies support SMBs in Tier 2 and Tier 3 cities, the nation would be well on its way to innovating and improving employment. One study by a leading analyst shows that the micro, small and medium enterprise (MSME) sector – which includes such entrepreneurs – could increase their contribution to India’s GDP from the 8% in 2011-12 to 15% by 2020.
There is ample evidence to suggest that this can be done. Take the case of Intimate Fashions in Kanchipuram. It is one of the thousands of businesses that have sprung up in the region, drawing busloads of women every day from nearby villages. At Intimate Fashions, 2500 of them have been employed to manufacture high-end innerwear for Victoria’s Secret. These workers are proud that they can now support the education of their children, pay for healthcare and buy small comforts and luxuries for the home. The transformation was made possible by a Tamil Nadu government program which trains women from poor communities in the region and World Bank loans that support entrepreneurs. Village committees identify the jobless, the entrepreneurs provide them with the jobs. It is a match made in heaven, taking prosperity to those on the margins of finance and employment.
The good news is that when the policy, capital, market expertise and business networks are channeled for the right set of outcomes, entrepreneurship finds a deeper and broader purpose—that of creating better lives. It is this approach that demands to be explored in order to ignite the spirit of entrepreneurship across the nation.