ENTREPRENEURSHIP DEVELOPMENT UNDER GOVERNMENT SUPPORT

(in India Through Business Incuba)

Abstract :

 

The specific requirement of the project, the structure of the instrument and its accuracy levels in measuring data, from business incubation community. The source of data needed to come from the four different important incubation players such as Business Incubator Managers, Incubatee Entrepreneurs, Academicians who are engaged in Business Incubation Activities and Policy Makers.

 

Introduction :

 

Importance of this Study :

 

This study is the first of its kind in India and therefore it is hoped that this study will provide some useful insights, policy implications and recommendation for new entrepreneurs who are attempting to introduce change and development to attract our nation’s growth. This study is also expected to extend our understanding about the extent of successful entrepreneurship development and change polices in improving performance.

PRELIMINARIES

 

Research Methodology :

 

The research methods involved in this study should be based on three phases.

 

In Phase I, crucial concepts to be generated using a variety of means such as literature review, focus group interviews and content analysis of relevant documents. In Phase two, the themes of the research are elaborated through open ended, non-standardized interviews. Finally, in Phase three, data are gathered using appropriate measuring instruments.

 

Phase II of the research was essentially qualitative in its design. Interviews to be conducted for the purpose of understanding the view of the Incubator Managers, Incubatee Entrepreneurs, Academicians and Policy Makers.

 

Phase III of the research consisted of a quantitative survey, a questionnaire to be distributed to various Incubator Managers, Incubatee Entrepreneurs, Academicians and Policy Makers. Survey research is particularly well suited for studying attitudes, opinions and orientations. A high response rate increases the probability that the respondents will accurately represent sample, thereby reducing the chance of bias (Moore 1983).

 

Five Generation of Innovation

  1. Technology Push

  2. Market Pull

  3. Coupling of R&D and Marketing

  4. Integrated Business Process

  5. System Integration & Networking

Department of Science and Technology (DST)

Department of Science & Technology (DST) was established in May 1971, with the objective of promoting new areas of Science & Technology and to play the role of a nodal department for organizing, coordinating and promoting S&T activities in the country.

The Department has major responsibilities for specific projects and programmes as listed below:

  1.  Formulation of policies relating to Science and Technology.

  2. Matters relating to the Scientific Advisory Committee of the Cabinet (SACC).

  3. Promotion of new areas of Science and Technology with special emphasis on emerging     areas. 
    3A. (i) Research and Development through its research institutions or laboratories for development of indigenous technologies concerning bio-fuel production, processing, standardization and applications, in co-ordination with the   concerned Ministry or Department;
         (ii) Research and Development activities to promote utilization of by-products to development value added chemicals.

  4. Futurology.

  5. Coordination and integration of areas of Science & Technology having cross-sectoral linkages in which a number of institutions and departments have interest and capabilities.

  6. Undertaking or financially sponsoring scientific and technological surveys, research design and development, where necessary.

  7. Support and Grants-in-aid to Scientific Research Institutions, Scientific Associations and Bodies.

  8. All matters concerning: 
    (a) Science and Engineering Research Council; 
    (b) Technology Development Board and related Acts such as the Research and Development Cess Act,1986 (32 of 1986) and the Technology Development  Board Act,1995 (44 of 1995); 
    (c) National Council for Science and Technology Communication; 
    (d) National Science and Technology Entrepreneurship Development Board; 
    (e) International Science and Technology Cooperation including appointment of scientific  attaches  abroad (These functions shall be exercised in close cooperation with the Ministry of External Affairs);
    (f) Autonomous Science and Technology Institutions relating to the subject under the Department of Science and Technology including Institute of Astro-physics, and Institute of Geo-magnetism; 
    (g) Professional Science Academies promoted and funded by Department of Science and Technology;
    (h) The Survey of India, and National Atlas and Thematic Mapping Organization; 
    (i) National Spatial Data Infrastructure and promotion of G.I.S; 
    (j)  The National Innovation Foundation, Ahmedabad.

  9. Matters commonly affecting Scientific and technological departments/organizations/ institutions e.g. financial, personnel, purchase and import policies and practices.

  10. Management Information Systems for Science and Technology and coordination thereof.

  11. Matters regarding Inter-Agency/Inter-Departmental coordination for evolving science and technology missions.

  12. Matters concerning domestic technology particularly the promotion of ventures involving the commercialization of such technology other than those under the Department of Scientific and Industrial Research.

  13. All other measures needed for the promotion of science and technology and their application to the development and security of the nation.

  14. Matters relating to institutional Science and Technology capacity building including setting up of new institutions and institutional infrastructure.

  15. Promotion of Science and Technology at the State, District, and Village levels for grass- roots development through State Science and Technology Councils and other mechanisms.

  16. Application of Science and Technology for weaker sections, women and other disadvantaged sections of Society.

India is one of the top-ranking countries in the field of basic research. Indian Science has come to be regarded as one of the most powerful instruments of growth and development, especially in the emerging scenario and competitive economy. In the wake of the recent developments and the new demands that are being placed on the S&T system, it is necessary for us to embark on some major science projects which have relevance to national needs and which will also be relevant for tomorrow's technology. The Department of Science & Technology plays a pivotal role in promotion of science & technology in the country. The department has wide ranging activities ranging from promoting high end basic research and development of cutting edge technologies on one hand to service the technological requirements of the common man through development of appropriate skills and technologies on the other.

The best solution to solve a problem of unemployment, in country like India, is to have as many Job Creators as possible, so we need Entrepreneurs. Various Government and Non Government agencies are doing lot of work to promote Entrepreneurship. Particularly Government of India is doing great work to promote Techno Entrepreneurship by providing support through various agencies under the umbrella of Department of Science and Technology (DST). Even it has established National Science and Technology Entrepreneurship Development Board under DST.


I will try to give information and study, mainly exploratory, related to these support activities to convert Techno-innovation to Techno Entrepreneurship by keeping main focus on Technology Business Incubation approach in India. Here I am trying to give conceptual model to establish relationship between Techno Innovation and Techno Entrepreneurship. And this will be substantiated by various Techno Innovation and Techno Entrepreneurship illustrations of real life.

 

Here, the major focus is given to Technology Business Incubation approach to support and create Techno Entrepreneurship from Techno-innovation.
This paper will show a research gap, in the context of India, in the area of Techno -
entrepreneurship through Technology Business Incubation. This can be further useful for research in broader sense in future in this context.

 

ENTREPRENEURSHIP

Definition Entrepreneurship is neither science nor an art . It is the practice. It has acknowledge base .

-- Peter Drucker

 

Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is a creative human act involving the mobilization of resources from one level of productive use to a higher level of use. "It is the process by which the individual pursue opportunities without regard to resources currently controlled."Entrepreneurship involves a willingness to take responsibility and ability to putmind to a task and see it through from inception to completion. Another ingredient of entrepreneurship is sensing opportunities, while others see chaos, contradiction, and confusion. Essence of Entrepreneurship is going against time with maturity and serving as a change agent.

ENTREPRENEURSHIP DEVELOPMENT UNDER GOVERNMENT SUPPORT

(in India Through Business Incubation)

Phase I :

 

Literature Review / Focus Group Interview :

 

Defining Entrepreneur;

 

A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

 

Someone who basically:

 

1. becomes aware of a need (product or service)

2. Creates a business to fulfill that need

 

Due to the nature of entrepreneurs, they cannot be summarized in one definitive way but they all

have common traits. These are some of the most common:

 

• Flexible ‐ able to work whenever needed

• Self Motivated ‐ can motivated themselves to take action

• Good Common Sense ‐ Can make judgments sensibly and accurately

• Good timing ‐ requires patience and know when to jump in and get things done!

 

There are also multiple types of entrepreneur and these can be broken down to the acronym

SMILE

 

S System, someone who is happy to buy a proven system and use it (eg. franchisee)

M Money, someone who measures their success by the number in the bank

I Innovator, the creative among you who enjoy developing new ideas

L Lifestyle, for those who want their hobby as their job and to earn money from it

E Empire builders, those who want power and influence and to see their brand.

 

Ups and downs of being an entrepreneur :

 

Can make a lot of money: The richest people in the world are entrepreneurs of one business type or another.

 

Risk: The financial risk in starting up a company does not guarantee a fixed flow of income for Yourself or your loved ones at first.

 

Independence: Many people don’t like to be answerable a boss and prefer being in control of their working lives. They are leaders as opposed to followers.

 

Time: Running a business may be heavily demanding on your time.

 

Control: Being in charge of how time is spent and other areas of work management lead to greater autonomy and control over life.

 

Isolation – Many people starting their own business may feel lonely of not properly supported. It is a different work culture and requires a great deal of self motivation.

 

To reduce the risk factor to the budding entrepreneurs Government of India launched DST in 1997 which objectives give below.

SCOPE OF ENTREPRENEURSHIP DEVELOPMENT IN INDIA

 

In India there is a dearth of quality people in industry, which demands high level of entrepreneurship development programmed throughout the country for the growth of Indian economy.

 

The scope of entrepreneurship development in country like India is 

tremendous.

 

 

Especially since there is widespread concern that the acceleration in GDP growth in the post reforms periodhas not been accompanied by a commensurate 

expansion in employment. Results of the 57th round of the National Sample Survey Organization NSSO) show that unemployment figures in 2003-04 were as high as 8.9 million. Incidentally, one million more Indian joined the rank of the unemployed between 2005-06 & 2007-08.

 

The rising unemployment rate (9.2% 2008 est.) in India has resulted on growing frustration among the youth. In addition there is always problem of underemployment. As a result, increasing the entrepreneurial activities in the country is the only solace. Incidentally, both the reports prepared by Planning Commission to generate employment opportunities for 10 crore people over the next ten years have strongly recommended self-employment as a way-out for teaming unemployed youth. We have all the requisite technical and knowledge base to take up the entrepreneurial challenge. The success of Indian entrepreneurs in Silicon Valley is evident as proof. The only thing that is lacking is confidence and mental preparation. We are more of a reactive kind of a people. We need to get out of this and become more proactive. What is more important than the skill and knowledge base is the courage to take the plunge. Our problem is we do not stretch ourselves. However, it is appreciative that the current generations of youth do not have hang-ups about the previous legacy and are willing to experiment.

 

These are the people who will bring about entrepreneurship in India. At present, there are various organizations at the country level & state level offeringsupport to entrepreneurs in various ways. The Govt. of India & various StateGovernment has been implementing various schemes & programmes aimed atnurturing entrepreneurship over last four decades. For example, MCED in Maharashtra provides systematic training, dissemination of the information & data regarding all aspects of entrepreneurship & conducting research in entrepreneurship. Then there are various Govt. sponsored scheme for the budding entrepreneurs. Recognizing the importance of the entrepreneur development

in economic growth &employment generation, Maharashtra Economic Development Council (MEDC) has identified entrepreneurial development as the one of the focus area for Council activities two years ago. Various Chambers of Commerce & apex institutions have started organizing seminars & workshops to promote entrepreneurship. Incidentally, various management colleges have incorporated entrepreneurship as part of their curriculum. This is indeed a good development. This shows the commitment of the Govt. & the various organizations towards developing entrepreneurial qualities in the individuals

SCOPE OF ENTREPRENEURSHIP DEVELOPMENT IN INDIA

 

In India there is a dearth of quality people in industry, which demands high level of entrepreneurship development programme throughout the country for the growth of Indian economy.

 

The scope of entrepreneurship development in country like India is 

tremendous.

Especially since there is widespread concern that the acceleration in GDP growth in the post reforms periodhas not been accompanied by a commensurate 

expansion in employment. Results of the 57th round of the National Sample Survey Organization NSSO) show that unemployment figures in 2003-04 were as high as 8.9 million. Incidentally, one million more Indian joined the rank of the unemployed between 2005-06 & 2007-08.

 

The rising unemployment rate (9.2% 2008 est.) in India has resulted on growing frustration among the youth. In addition there is always problem of underemployment. As a result, increasing the entrepreneurial activities in the country is the only solace. Incidentally, both the reports prepared by Planning Commission to generate employment opportunities for 10 crore people over the next ten years have strongly recommended self-employment as a way-out for teaming unemployed youth. We have all the requisite technical and knowledge base to take up the entrepreneurial challenge. The success of Indian entrepreneurs in Silicon Valley is evident as proof. The only thing that is lacking is confidence and mental preparation. We are more of a reactive kind of a people. We need to get out of this and become more proactive. What is more important than the skill and knowledge base is the courage to take the plunge. Our problem is we do not stretch ourselves. However, it is appreciative that the current generations of youth do not have hang-ups about the previous legacy and are willing to experiment.

 

These are the people who will bring about entrepreneurship in India. At present, there are various organizations at the country level & state level offeringsupport to entrepreneurs in various ways. The Govt. of India & various StateGovernment has been implementing various schemes & programmes aimed atnurturing entrepreneurship over last four decades. For example, MCED in Maharashtra provides systematic training, dissemination of the information & data regarding all aspects of entrepreneurship & conducting research in entrepreneurship. Then there are various Govt. sponsored scheme for the budding entrepreneurs. Recognizing the importance of the entrepreneur development

in economic growth &employment generation, Maharashtra Economic Development Council (MEDC) has identified entrepreneurial development as the one of the focus area for Council activities two years ago. Various Chambers of Commerce & apex institutions have started organizing seminars & workshops to promote entrepreneurship. Incidentally, various management colleges have incorporated entrepreneurship as part of their curriculum. This is indeed a good development. This shows the commitment of the Govt. & the various organizations towards developing entrepreneurial qualities in the individuals.

History of Entrepreneurship in India

 

The history of entrepreneurship is important worldwide, even in India. In the pre colonial times the Indian trade and business was at its peak. Indians were experts in smelting of metals such as brass and tin. Kanishka Empire in the 1st century started nurturing Indian entrepreneurs and traders.

Following that period, in around 1600 A.D., India established its trade relationship with Roman Empire. Gold was pouring from all sides. Then came the Portuguese and the English. They captured the Indian sea waters and slowly entered the Indian business. They forced the entrepreneurs to become traders and they themselves the role of entrepreneurs. This was the main reason for the downfall of Indian business in the colonial times which had its impact in the post-colonial times too. The colonial era make the Indian ideas and principles rigid.

A region of historic trade routes and vast empires, the Indian subcontinent was identified with its commercial and cultural wealth for much of its long history. Gradually annexed by the British East India Company from the early eighteenth century and colonized by the United Kingdom from the mid-nineteenth century, India became an independent nation in 1947 after a struggle for independence that was marked by widespread nonviolent resistance. It has the world's twelfth largest economy at market exchange rates and the fourth largest in purchasing power. Economic reforms since 1991 have transformed it into one of the fastest growing economies however, it still suffers from high levels of poverty, illiteracy, and malnutrition. For an entire generation from the 1950s until the 1980s, India followed socialist-inspired policies. The economy was shackled by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, the nation has moved towards a market-based system.15 Entrepreneurship is the result of three dimensions working together: conducive framework conditions, well-designed government programmes and supportive cultural attitudes. Across these three perspectives of entrepreneurship, two major conclusions are apparent. Firstly, the economic, psychological and sociological academic fields accept that entrepreneurship is a process. Secondly, despite the separate fields of analysis, entrepreneurship is clearly more than just an economic function.

Quoted by Jawaharlal Nehru, Discovery of India, (1947). p. 302.

 

There were three distinct classes in village India: (i) the agriculturists, (ii) the village artisans and menials, and (iii) the village officials. The agriculturists could be further divided into the land-owning and the tenants. Labour and capital needed was either supplied by the producers themselves out of their savings or by the village landlord or by the village moneylender. These credit agencies supplied finance at exorbitant rates.

 

SEED  SUPPORT SYSTEM (SSS) FOR START-UPS IN INCUBATORS

 

Preamble: Technology Business Incubators (TBIs) and Science & Technology Entrepreneurs

Parks (STEPs) are a facility to incubate technological  ideas or technologies under  development to enable them to reach the market place. It helps the young firms to survive and

grow by providing specialized support services during the  critical period of a business venture i.e. the start-up phase. The goal is to nurture successful indigenous technologies and growth oriented entrepreneurs/ enterprises.  Around 55 STEPs/TBIs have been promoted at the institutions of higher learning e.g. IITs, IIMs, NITs, NID, ICRISAT etc. by the National Science & Technology Entrepreneurship Development Board, of the DST across the country. 

The requirement  :  While the STEPs/TBIs are able to support the “Space + Services + Knowledge” requirements, wide gap exists in supporting the typical & specialized capital requirements of a technology driven start  up  which are not being addressed properly  through existing mechanisms.  

 

The basic idea of the proposed financial assistance is to equip the STEP/TBI with the much needed early stage financial assistance to be  provided to deserving ideas/technologies. This would enable some of these innovative ideas/technologies  to graduate to a level where they can then be  fit for seeking normal lending commercial banks /FI’s  route in their way to the successful commercialization process. Thus the  proposed assistance is positioned to act as a bridge between development and commercialisation of technologies. 

 

Guiding Features of the Proposed Assistance under SSS:

 

♦ The Seed Support would be disbursed to incubates (physical resident units within STEP/TBI) who are registered units and there exist a proper legal agreement between the incubate and STEP/ TBI.  

♦ The funds would cater to early stage funding for indigenous ideas and technologies requiring up-scaling and related work 

♦ The funds would be  disbursed to the deserving incubates with proper due diligence by the STEP/TBI. 

♦ This assistance would be used by the incubated entrepreneur only  and would not be used by the incubator for facility creation.

♦ The fund would be managed by identified TBIs/STEPs selected by NSTEDB

♦ A modest seed financial support with an upper limit of Rs. 50.00 lakhs to a start-up.

♦The terms of disbursement to the selected incubates should be linked to Benchmarks/milestones  as per the business plan/project proposal.  

♦ The selection and disbursement of the proposed support would be based on 

    ¾ Simple procedures

    ¾ Fast decisions

    ¾ Periodic Checks   Broad Areas to be covered under the financial assistance

The start–ups would be supported primarily on the following 

♦ Product development

♦ Testing and Trials

♦ Test Marketing 

♦ Mentoring

♦ Professional Consultancy ( To attract Professors of institutions  to work with small firms) 

♦ IPR issues 

♦ Manpower for day to day operations 

♦ Any other area as deemed necessary and recommended by the Selection Committee of individual STEP/TBI. 

Mechanism of Selection, Disbursement , Governance and Fund Management of SSS

1. STEP/TBI would take measures to enhance the capacities of the TBI team to manage the seed fund and equip them about the financing process and due diligence of a start-up.

2. Normal time range of utilization of the SSS  by the STEP/TBI would be three years from the date of receipt of the first installment of funds.

3. Each of the TBI/STEP implementing SSS  would devise a proper mechanism and governance structure involving the right experts to evaluate the prospective incubates under physical incubation  for seed fund support.

4. Each of these TBI/STEP would constitute a Management Committee and should associate good fund managers as consultants for proper implementation and management.

5. NSTEDB would disburse the  financial assistance  of maximum Rs. 200 lakhs in installments to the recommended TBIs/STEPs with a ceiling of Rs.50.00 lakhs for a startup, to be disbursed phase-wise based on progress milestones of the start-up.

6. The STEP/TBI CEO would be responsible for its proper disbursement and management.

7. STEP/TBI would have flexibility in disbursement of Seed Support to the potential incubates with proper due diligence in the form of  soft loan / royalty sharing /minority equity stake of the STEP/TBI depending on case to case basis.

8. The STEP/TBI would  execute an  agreement with the selected incubate after sanction of the seed support and it  should be signed before the release of the first installment of seed fund.  Subsequent disbursement schedules should be linked to the progress milestones of the incubate venture for a period normally linked to the incubation period.  The TBI/STEP should ensure that the necessary terms and conditions related to the Seed support agreement recovery schedule are  clearly defined and is a part of the Seed fund agreement.

Some of the suggestive clauses on seed fund recovery already in practice by some of the STEP/TBI   are given below: a) The loan repayment period can normally vary from 2-5 years depending on the revenue model and moratorium of interest payment which can be around 6 months. In some cases STEP/TBI can also  accept post dated checks as a part of the Seed fund payment recovery schedule. 

b)   The loan agreement provides for repayment of loan after a moratorium of one or two years after full disbursal based on the project. The interest is @6% per annum and repayment is in 5-8 half yearly installments depending on the quantum of loan. If an incubate fails to pay the installments on time as per the schedule mentioned in the agreement, penalty of 2% on total due amount shall be charged. If an incubate defaults in making payments repeatedly then part / full outstanding loan amount with interest shall be converted into fully paid equity. There is also a provision to right on IP in case of repeated default.

c) In case the agreement is for royalty sharing, the incubate has to pay a royalty of 4% of

Gross Revenue from sales of the product, for the period of 3-5 years from the launch of the product.

d) In exceptional cases the local selection committee would be empowered to relax certain conditions on recovery depending on case to case basis with convincing justifiable reasons, and these cases should be reported to the Department. 

9. Various programmes should be organized periodically by STEP/TBIs implementing seed support to enhance the investment readiness of the incubates.

10. Seed Fund to an  incubate  is also regarded as a means to attract and raise external angel / venture capital funding. This would be an important parameter to judge the success of the seed fund being implemented by STEP/TBI.

11. Encouragement to STEPs/TBIs who implement it successfully by way of showing growth of the seed support fund through the  reflows from the loan/royalty /realization of equity stake  for funding future proposals. 

12. Submission of a detailed report on the status of utilization of grants along with Utilization certificate and statement of audited expenditure for every disbursement made by Department in favor of the Seed Support.

The National Science and Technology Entrepreneurship Development Board (NSTEDB)

The National Science and Technology Entrepreneurship Development Board (NSTEDB), Department of Science and Technology, Government of India has been in the forefront in setting up Business Incubation Centres to encourage development of start-up companies and to generate employment among S&T graduates. (www.nstedb.com). The NSTEDB has already catalyzed and supported several Science and Technology Entrepreneurs Parks (STEPs), Technology Business Incubators (TBIs), in addition to many Entrepreneurship Development Cells (EDCs), in different parts of the country. NSTEDB has a plan to set up many more such institutions in the coming years. There are a number of other institutional mechanisms existing and promoted by other Departments of the Government of India in developing business incubation in emerging areas of science and technology such as the Software Technology Parks of India (STPIs).

Promotion of Business Incubation in the country, even though a mandate of the Government of India, requires the active participation of other agencies such as the industries and associations to cover a large spectrum of activities. The Government also needs independent mechanisms to collect the necessary feedbacks on the programmes and activities and for the promotion of this concept to a wider audience. The role of industry associations in the country in promoting the interest of the industries is well documented. Therefore, it was felt imminent that there is a need for an association to promote, encourage, and help the national agenda of business incubation through institutional mechanisms such as the STEPs, TBIs and STPIs. The association can also function as a mentor and facilitator for the incubators set up in the country.

The Indian STEP and Business Incubator Association (ISBA) was set up in 2004 as a registered professional body to promote business incubation in India.

ISBA aims to promote business incubation activities in the country through exchange of information, sharing of experience, and other networking assistance among Indian Business Incubators, Science and Technology Entrepreneurs Parks (STEPs) and other related organizations engaged in the promotion of start-up enterprises.

In order to achieve the objectives indicated ISBA would pursue the following activities:

To hold annual General Body meeting and identify opportunities in promoting technology business incubation and co-operation among the incubators and other related organizations

Provide advice on finding out the requirements and conditions for starting an incubator, creating business plan, recruiting incubator managers, and incubator development issues;

Maintain and update a data base containing the contact information of business incubation experts;

Lobby for Indian incubators at national and international levels;

To organize workshops, conferences, seminars, or training services;

Publish a newsletter;

To organize media conferences and other activities to create awareness about the incubator programmes and get public participation;

Undertake any other activities, which will fulfill the objectives of the ISBA; and Assist the NSTEDB in evaluating and monitoring the activities of the Business Incubation programmes in the country.

** 500 companies are incubated in India annually as compared to about 8,000 in china. Less than 150 startups are promoted by venture capital or angel investors annually in India as against over 60,000 angel investment alone in US. **

** Source: Planning Commission – Creating a Vibrant Entrepreneurial Ecosystem in India. **

A. Sivakumar

MBA, MPhil (Envn. Mgnt)

Consultant , Steinbesis India Network

Mobile : +91-9842175722