Skip to main content

In Conversation with Dr Ajay Kela, President and CEO, Wadhwani Foundation

1.    Can SMBs in India be the answer to managing the troublesome increase in unemployment and underemployment?

Globally 70% of all new jobs that are created are created by startups, and small businesses and that’s the reason why we are focused on supporting startups and small businesses. Small and Medium Businesses (SMBs) are critical to every economy, and they have traditional strengths with suppliers and distributors based on trust and strong personal relationships, their manufacturing and service lines reasonably well tested, intimate knowledge of their markets and their customers, small operations facilitating larger retention of employees and a frugal, lean approach to business.

2.    What kind of gamut of small businesses is Wadhwani Foundation looking for growing and scaling?

India has 63 million small businesses. Majority of them have five employees, and on the other hand, there are also 1.2 million businesses which employ anywhere between 100-1000 employees which have demonstrated a successful business model with an average of 500 employees and many of them have the potential to grow 2x. So this is the situation where the entrepreneur has his BMW and bungalow, but the opportunity is such that every employee can get a BMW and a bungalow, but this is not leveraged. Just to give an example, in Silicon Valley, if you get to $ 5 billion, you’re not happy, you want to get more and more.

This bucket of 100-1000 employees which is somewhere around Rs 25 crores – 400 crores is less than 5% of 63 million in India whereas China has 30% such companies and that’s the gap where we are focused on, i.e. companies which have 100-1000 employees in between the Rs 1 crore to 400 crores, with priority support for those who have the potential to grow 2x. These companies are ready to leverage business and strategy consulting help but cannot afford it. We identify this market segment to provide business consulting services.

3.    What is the kind of support Wadhwani Foundation provides to the startup sector in India?

Given that we are a substantially large Foundation, our intent is to work on a national scale, and the whole idea is to create an ecosystem where we have a significant impact on the growth of the country. As you know, India has more than a million people entering the workforce every month. So the country is in need of at least 8-10 million jobs a year, and this is substantial for any entity including us. Even if we try to target 5-10% of this number, we are targeting creating a million jobs a year. So, it’s not about supporting 10, 20 or 30 but 1000s of startups, and no single entity can do this on its own; even if they have funds, there is no way for to manage the selection of thousands of startups. Hence, our intent and vision are to build vibrant city-based entrepreneur ecosystems – 100 global and 50 in India, which would be like multiple Silicon Valleys. Right now we are seeing the emergence of Bangalore and Delhi NCR as startup ecosystems where you have service providers and funders but the need in India is to have these ecosystems in Tier 2 cities. If you look at Silicon Valley, in any social gathering you will find angel funders, service providers etc, and it starts with Stanford. So, we are trying to create a similar ecosystem.

Let’s take an example of Marwaris in Indore; they have a lot of money and Rs. 1 crore for them to invest may not be a big deal. But they don’t really know how to invest in startups, evaluate or structure deals with startups. So our vision is to help overcome such drawbacks through adequate networks. Similarly, we work with tax accountants as they are offering funds to support startups.

We need to create a wonderful startup ecosystem. In programs like Wadhwani NEN, we educate college students, and we have a program to educate on becoming angel investors. If you look, India has now 400 incubators. Each of these incubators supports anywhere between 20-30 startups. Majority of them are not doing any good to the startups. NITI Aayog has now funded 100 of these. But most of them don’t know how to support a startup. So, we create programs to upgrade all incubators in the country, and now we have a partnership with NITI Aayog and Gates Foundation to roll out that program. We have already done two batches of 40 NITI Aayog funded incubators where we train them and give them digitized offerings in which we personalise support for the startups, and we do diagnostics on where they are strong and areas of weaknesses, and then put a digital solution to it.

5.    Can you throw some light on the Wadhwani Catalyst Fund? What are the grant details and any limitations?

The whole idea is to find organizations that have a prominent focus on job creation and job fulfilment which is in sync with our own mission of high-quality job creation. So we are encouraging such like-minded organizations by offering grants and also our solutions. There is no competition concept for us. Anyone who is involved in job creation and job fulfilment is actually serving our overall mission, and if we can help them in their journey, we will support them and help them to scale through the Wadhwani Catalyst Fund (WCF) and our offerings.

Wadhwani Catalyst Fund (WCF) is primarily a grant, and we are not looking for investment and ROI. I don’t think there is a limitation in terms of money available. We have a coffer of 1.5 billion dollars. In fact, today, we are finding the limitation on the right set of companies that are delivering the goods. So, in the beginning, we have allocated around 25 million dollars. Therefore, the challenge is not relating to funding an organization but finding one that is creating high-value jobs at scale.

6.    Pandemic has worsened the economy, especially the salary sector, with a much lower GDP, rising unemployment and many jobs being lost. What are the 3 things that can make an opportunity of this situation or help in reskilling the workforce? 

The COVID crisis has had a massive impact on the economy across most of the sectors, but there is also has a positive side to it and a tremendous opportunity. Companies that were holding themselves from a thin thread will collapse and vanish. Others will leverage the opportunity and scale-up. Digitization has become easier, with government officials, doctors and other professions adopting it. It is an opportunity that is massively accelerated, which we should support and encourage. We have rolled out a programme called Wadhwani Sahayata fund of INR 200 crores where we are teaching companies to accelerate their growth and scale even in these difficult times, irrespective of the sector, for example, healthcare space, logistics etc.

The Government has rolled out a massive loan stimulus esp. for MSMEs, but on top of the capital, companies also need business consulting in terms of customer acquisition, broken supply chains, disrupted internal processes, cash management and employee retention. So we need a lot of hand-holding and that is why we are intervening to support those who we think have the potential to grow in a triage situation.

7. What do you think would be the survival rate of Indian businesses in this pandemic?

It’s difficult to arrive at a number, but small businesses have struggled a lot, be it any sector. However, this does not necessarily mean that it is bad for the country. The economy always goes through some or the other crisis every 5-10 years; so there is an opportunity as well. It is not a bad thing that x number of companies won’t survive because their fundamentals are weak enough anyway. Therefore, it opens opportunities for others to grow. The demand will come back, the human population will need all of this, so demand is not going away. It was a cleansing process that was happening, but there are opportunities. That is what we are trying to do for 20,000 SMEs in the bucket of 100-1000 employees which have the potential to survive the crisis. We are making similar programs for startups which have the potential to grow, ideate, accelerate their growth and support them.

Source: Deccan Herald