Zerodha’s founder & CEO Nithin Kamath had no Plan B. “Had I been a student of an IIM or Harvard, I would have known that if this doesn’t work out, I’ll be able to find another job.” A B-school education is a parachute alright, but one that would have kept him from pursuing his dream, he says. Whatever success the bootstrapped and cashflow-positive online stock trading start-up has earned, he feels, is because of the 10-12 years he spent in the capital markets before co-founding the venture with brother Nikhil. His firm, Zerodha, is among the 100-plus unicorns in the country today—a crowning glory for India’s start-up story as it now hosts the third largest start-up ecosystem in the world after the US and China—with more than 77,000 DPIIT registered start-ups. “Ours is a country which needs hundreds of thousands of entrepreneurs because of our varied customer base, geography and demography, and tonnes of very real problems,” says Padmaja Ruparel, Co-founder of Indian Angel Network and Founding Partner of IAN Fund. “But 90 per cent of Indian students are focussed on getting a high-paying job after completing their education. We are in a job-oriented economy, not a start-up economy, yet,” says Rajeev Warrier, Executive Vice President at Wadhwani Foundation’s Wadhwani Entrepreneur. Their National Entrepreneurship Network programme enables institutes to set up an entrepreneurship programme to support aspiring student founders and start-ups as well as train the faculty in supporting such student.
And even within the small number of students that take up entrepreneurship, engineer-founders dominate the landscape. Graduates from the other islands of educational excellence in the country—B-schools, especially the Indian Institutes of Management (IIMs)—have mostly stuck to risk-averse corporate jobs. One would imagine B-school graduates to be at the forefront of setting up new businesses, having soaked up business expertise during their management course. But that’s not the case. Sample this: there are 5,489 start-ups founded by graduates of Indian Institutes of Technology (IITs)—Bombay, Delhi, Guwahati, Kanpur, Kharagpur, Madras, and Roorkee— while graduates of IIMs (Ahmedabad, Bangalore and Calcutta) have produced 1,517 start-ups as of October 10, 2022, per Tracxn data. Of India’s 108 unicorns, 60 have founders from the same set of seven IITs mentioned above while 25 have founders from IIMA, IIMB and IIMC. It would be ac curate to say that there are way more engineer-founders in the country today than manager-founders. “The number of (management) students who start up on their own [after graduation] may be around 2-3 per cent,” says Rishikesha T. Krishnan, Director of IIMB. Of course, the sheer num ber of engineering graduates far outweighs the number of MBA graduates as India produces an estimated 1.5 million engineers and 300,000-plus MBA graduates per year.
Then, there’s the overarching emphasis on tech among Indian start-ups. “Anything that is not tech-driven tends to, perhaps, not draw the same level of attention or support from investors,” says Suresh Ramanathan, Dean of Chennai-based Great Lakes Institute of Management. Add to that the average age of engineering graduates versus management graduates, and the variation starts making sense. “A lot of people get married (after completing their post-graduation), and parents ask whether the spouse is earning anything,” says Bhagwan Chowdhry, Faculty Director of I-Venture@ISB, the start-up accelerator and incubator of Indian School of Business (ISB), Hyderabad. And let’s not forget the hefty loans that most students have to take to fund their Rs 25-30 lakh manage ment courses. “Many times, students have to pay off loans. Even if they have good entrepreneurial ideas, they may not want to pursue them immediately. But if you look at it five-ten years down the line, many of them do go into entrepreneurial roles,” says Krishnan of IIMB. All of these reasons combined certainly delay management graduates’ plunge into entrepreneurship, further shrinking the pool of manager-founders compared to engineer-founders. “Risk-taking ability is higher at the undergraduate level and goes down at the MBA level… So, that makes it a little less feasible for them to end up in entrepreneurship, even though the skill set is higher,” says Vikram Gupta, Founder and Managing Partner of IvyCap Ventures, a home-grown, IIT/IIM alumni-based venture capital (VC) firm, whose portfolio includes Purplle.com and Bewakoof.com.
While management graduates taking to entrepreneur ship straight out of college may continue to be a small number for the foreseeable future, B-schools are not immune to the charms of the start-up space. “We decided some years ago that every MBA student at IIMB needs to develop an entrepreneurial orientation,” says Krishnan. Chowdhry says that ISB was started 20 years ago with the idea of preparing managers to work for the Amazons and Googles. “Now, we notice that many of our alumni graduate from those corporate jobs, and start companies of their own. Today, entrepreneurship is a big piece of business education,” he adds. Great Lakes’ mission is to develop future-ready business leaders as well as entrepreneurs. “We want to participate in the start-up ecosystem. Entrepreneurship is a core part of our curriculum,” says Ramanathan.
The way they look at it, it’s not necessar ily about producing start-up founders and certainly not right after B-school. But it’s about creating a problem-solving mindset among students and showing them that they do not have to limit themselves to working for large corporates. Varun Nagaraj, Dean at S.P. Jain Institute of Management and Research (SPJIMR), sees two age groups for entrepreneurship: at 21-22 when fresh graduates are eager to test out some cool tech-driven idea; and seventen years after finishing undergraduate education, by which time they have had a good set of experiences, broadened their horizons and built a network. The second category is where B-schools can add value to future entrepreneurs, if they have taken on an MBA. “If you’re a 21-year-old trying to build a firm, you’re thinking: I use this app. Can I come up with another that does something else? If you’re a 29-year-old, you’re probably thinking: How can the EV charging infrastructure around Mumbai be improved?” Of course, MBA graduates are required in droves to steer India’s multitude of businesses. But even in start-ups, they have a role to play, say professors. “In the early stages, founders often need partners with complementary knowledge… Many start-ups today like to bring in an MBA graduate into the founding team,” says Krishnan, listing the examples of Delhivery, WhiteHat Jr and bigbasket that have IIMB alumni in their founding teams. Investors also point out that tech and non-MBA founders who scale up fast sometimes struggle with management skills. Besides, B-schools also serve as a meeting ground for future co-founders and core team members.
And the institutes are stepping up their efforts to inspire entrepreneurial thinking. For instance, The IIMAvericks Fellowship Program, launched by IIMA in 2012-13, pays final year students deciding to become entrepreneurs a salary for two years. If their start-up doesn’t work out, they can come back and sit for placements again. ISB has launched a similar one-year scholar ship for students interested in entrepreneurship from the class of 2023. IIMB—which is located in India’s start-up capital of Bengaluru—introduced a compulsory course on entrepreneurship a few years ago, has an active entrepreneurship club, gets students to work with the companies incubated on campus, and offers deferred placements. Great Lakes—which has seen healthy enrolments for the entrepreneurship courses introduced last year—is also exploring start up scholarships. But the professors admit that adoption is very low. “I won’t say that there’s a large number of current students who are interested [in the scholarship programme]. But there are many others in whom we are planting the seeds, because we know they will be back in this game five years from now,” says Chowdhry.
A second-year IIM Lucknow student, who wishes to remain anonymous, says that the fast-paced and rigorous curriculum of 18 months, excluding two months of internships, leaves them with little time to think about start-up ideas: “I’m going to graduate in five months, but I have not seen a single person discuss a business idea here till now.” According to him, entrepreneurship can come in two ways—out of a curiosity to start something of your own, or when a conventional job is not working out. For example, he points out that consultancy jobs have a high churn rate.
The challenge becomes pressing with the lure of high-paying jobs. “The challenge is how to change the student’s mindset and bring in a culture of entrepreneurship, which becomes very difficult at the top-tier institutes because of their high-paying job offers,” says Warrier of Wadhwani Entrepreneur, which has partnered with IIMC, IIM Nagpur, and Institute of Engineering and Management, among others. He adds that a good start-up idea with a minimum value proposition and prospective customers will be taken up by India’s start-up nurturing ecosystem. “But the problem is that ideas are not reaching that stage.” This is where B-schools with their vibrant incubators—that have a confluence of talent, ideas, academic expertise and industry patronage—can play a significant role in the Indian entrepreneurship story by orienting students towards upcoming fields and possible start-up ideas, experts say. “Only then will students think of starting up as an option and speak to prospective users,” says Warrier, himself an IIMB alumnus.
Indeed, several top-tier institutes are setting up their own incubators, entrepreneurship cells or accelerators. Not limited to their students or alumni, budding start-ups from anywhere that make the cut can get a physical space to operate out of along with access to the best management professors and labs equipped with cutting-edge technology. They are also tapping into their rich network of alumni to forge founder-mentor-investor connections to help start-ups get their story right, get funding and grow. The earliest examples of such initiatives are IIMB’s NSRCEL and IIMA’s CIIE.CO that were set up over 20 years ago. In September 2021, ISB started I-Ventures@ISB to nurture start-ups and connect them with its 13,000-strong alumni network. It also plans to build a global corridor by March 2023 by partnering with a few Silicon Valley schools and VCs in London and the Netherlands to enable start-up ideas from India, which may be more feasible outside the country and vice-versa, while Great Lakes started the AIC– Great Lakes Balachandran Incubator in November 2019.
But that’s a small percentage of the thousands of B-schools and 750-odd districts of the country from where the next big idea could come. Indore, Nagpur, Bhopal, Mysuru, Ahmedabad, Pune, Chandigarh, Jammu, Guwahati and several other smaller cities and towns are emerging as vibrant start-up hubs, sometimes benefiting from the good educational institutes around them. The presence of these institutes generates interest among angel networks to at least meet with the entrepreneurs and understand what they are doing, IvyCap’s Gupta says. “But the founders’ minds are constrained in terms of the scale they can take the business to. They need coaching on thinking bigger,” he says. IAN’s Ruparel adds that entrepreneurs have to be made more aspirational. “Their problems and solutions could be useful in other parts of the country and the world as well,” she says. B-schools are well placed to engage with the industry around them, collaborate with their sister institutions in smaller cities, hold investor and mentorship events, and leverage tech to understand the gaps in the product value chain, experts say. Agreeing, Great Lakes’ Dean Ramanathan says that they can serve as the consultant for all start-ups incubated in the surrounding areas by offering their mentorship and expertise through products on market research, financial planning, HR planning, etc. If India aspires to become a $25-trillion economy in 25 years, a majority of that growth is going to come from start-ups and it will have to come from all levels of cities and towns, says Gupta. “The bigger responsibility of these institutions should be to provide the right coaching and mentorship infrastructure for entrepreneurs in the region in which they are operating in. That’s what is lacking today.”