Loans to encourage entrepreneurship? You must be joking Mr. Jaitly

March 28, 2016

When I read the news of “Stand up India” program, first thought that came to my mind was “entrepreneurship can not be thrust upon anyone by giving money in hand”. On the contrary entrepreneurship is all about brining your ideas to life despite having all the odds stacked against you. Second thought that went thru my mind was why government wants to encourage only one section of the society to be entrepreneur. Entrepreneurship should be encouraged for anyone who has deserving ideas irrespective of caste, religion and gender.

Lets take the first case. 
What is entrepreneurship? First of all entrepreneurship is a mindset. It is about developing new ideas, being creative, being innovative in every aspect of the business. These aspects include raising money for starting the business. If one is really serious about his / her business, he/she would find ways to start it and develop into big one. If you go and ask any successful entrepreneur he/she would tell how despite having the problem of raising capital for the business, he /she became successful. Real entrepreneurs thrive more when the odds are higher.

In my experience, no country has been able to develop entrepreneurship by throwing money at people. I have seen how Singapore, a very rich country, flush with money, is trying very hard to create successful entrepreneurs. Government has in last 8 years ( that I have seen) created many schemes, incentives, programs, infrastructure for encouraging people take up entrepreneurship. Some aspects have worked, some have not. But there is no scheme through which Banks are told to give loans for entrepreneurship. There are other implications of ‘loan’ that I would discuss further in this article.

Even in the silicon valley there are no government backed loans by the banks that entrepreneurs are given. Here it is strict meritocracy and based on your ability to bring about innovation.

I am not saying that entrepreneurs don’t need access to funds. But giving loans through banks and that too based on caste, defeats the whole purpose of entrepreneurship. While I have no issue in providing support system for weaker sections of the society for entrepreneurship, but not at the cost of people. This support system can be developed from within the society itself. For example, Dalit Indian Chamber of Commerce is an excellent initiative. It provides platform for aspiring and budding entrepreneurs of Dalit society. It also helps create a network and support system.

I have the first hand experience of running a network for entrepreneurs in Singapore. I am personally going through this journey of entrepreneurship since 2009. So, I know that the support system, networking etc are crucial aspect for encouraging entrepreneurship. Access to funds is definitely important part of it. But it has to be based on strength of your ideas, ability to execute and building and running business successfully.

Money doled out in the form of loan and an affirmative action most often fail to deliver the result and it is painfully true for entrepreneurship. You can not build the mindset by doling out money. You are only developing crutches that are so detrimental in entrepreneurship.

Second aspect is about extending these loans based on caste. It is a laughable thought that access to  money (or lack of it) was a reason for not developing entrepreneurship in a particular section of the society. I understand the affirmative action that we have in place for education and jobs. I support that completely. But there is no logic nor any historical reason to extend these actions in the field of entrepreneurship. If India wants more entrepreneurs, if India wants more ideas and innovation, it should remove all discrimination in extending such help.

I have no problem if private institutions or chamber of commerce etc have plans to extend money to groups of society.  It is their private issue. But when Government is getting into the business of extending the loan through government owned bank, it is giving away money of all the citizens. Especially in the field of entrepreneurship we don’t need any discrimination. There is no historical reason that exists for lack of entrepreneurship in a particular society for lack of access to funds. ( the argument that is used for reservation in education was that historically Dalits and large section of the society were deprived of it because of their caste) Actually this challenge (funding) is faced by everyone who aspires to be an entrepreneur.

Government can create entrepreneurship development cells, special incentives for innovation ( I have seen them in many parts of the world) through various bodies that can work closely with industry bodies. But extending loans through banks have a serious ramifications. Lets look at them.

Typically banks give loan against collateral (which is a good business practice). If anyone has an asset worth Rs. 1Cr to pledge and take a loan you don’t need a separate scheme for them.  Since this is not the case, then government, it seems, want to treat these loans against the business idea? Does that mean banks would become angle investors? Do you think banks have a mechanism to access the intangibles and decide to invest in startups? When the success ratio of thorough professionals in this field is not more than 10%, what is the likelihood that banks would be able to recover money?
In all likelihood it would become a way to doling out money without any assurance of getting it back. Very soon it would turn into similar thing as ‘loans to farmers’ and then degenerate into ‘loan waiver’ program.

When the banks are crumbling under mounting NPAs do you think they need another potentially NPA developing scheme? Just think about the enormity of possible NPAs. Rs 1Cr given to a modest number of 1 lakh people would mean Rs 1Lakh Cr money down the drain?

The last part that comes to my mind is a pure political angle. Since I believe that this government has good intentions and is really working hard for the development of the country, I do not want to think deeper in the possible dirty political game that could be associated with this move.

To conclude, my points are :
– You can not develop entrepreneurship by giving government money through loan. You need incentives and schemes against innovation and measurable deliverables.
– By giving loans for entrepreneurship for a particular section of the society, government is discriminating against deserving ideas. There is no proof that only a particular society needs money for entrepreneurship; on the contrary anyone with good idea and ability to execute needs to be supported.
– To support upliftment of a particular society or entrepreneurship within that society, there are private institutions such as Dalit Indian Chamber of Commerce who are doing a good job. Government can help strengthen such initiative.
– By giving the loans through banks, government is potentially creating huge NPAs.

PS : I must say that these thoughts are based on the news item that appeared in all national newspapers. I did not have a chance to look at the intended mechanism of the scheme. 
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Capability and Capacity

October 12, 2012

When I was discussing the challenges of growing our business and hiring people, I said that our priority was to build the capability first and we can build the capacity later on. When I thought about this statement more, I realised that many organisations go through this challenge. Very often we have to take decision about hiring people in a given budget.

For example, the question that I was trying to address was whether to hire 2 people at entry level skills versus hire only 1 at an expert level.

With 2 people, it lowers our risk of failure (seemingly), it also allows us to regulate the cash flow.

On the other hand hiring one expert and having a cash outflow equivalent of two, increases the risks, if things don’t work out.

However the key question for me was more about capability vs. capacity. 1 expert gives us capability and 2 entry level skills gives us capacity. Based on the current needs I decided to go for ‘capability’ building.


Pearls of wisdom on entrepreneurship

October 4, 2010

Last week, I attended one of the talks that SMU-IIE regularly organises. I went to the talk with no particular expectations. My main motive was to get out of my office seat and be among the people. .

But after the talks, I felt thousand times grateful to SMU-IIE for organising it and bowed million times  to the speaker for such a wonderful insight. So let me share with you what I learned.

Firstly about the speaker. Dr. Bala S. Manian has been an entrepreneurial innovator, investor and a mentor in the Silicon Valley entrepreneurial community for the last three decades. You can read his bio at the above link. What makes him special is the fact that he has been on the entrepreneurial scene for long, much before it was fashionable. Has seen through 7 ventures successfully.

Now what I learned :

The one bit of advice which set me thinking most and which I liked was :

There are pieces of information with many people, someone who can organise it and present it gives knowledge but one who brings this knowledge with real life experiences is bringing wisdom.

My take on this bit is that, many of us know what is right thing to do. We know a lot about various subjects through reading. For example, by reading internet and books one can give good lecture on entrepreneurship, but when it comes from the person who has been there and seen it, it has weight, it makes more sense. Does this means we should spend time in listening to such people – no.. very clearly this means we should spend time in “doing” it, practising it, then we can preach.

On various other pieces of wisdom that he shared, that is important for the entrepreneurs and entrepreneurship are :

“It is not about state of mind, but ability to execute what is in your mind”

“Ability to read people, gives you ability to lead people”

“You need to be a good communicator, but more important is the ability to listen”

“Need to have passion bordering on addiction” and “Self confidence bordering on arrogance” But should also know the borders.

“Will to succeed is more important than desire to succeed”

” You go to school only to learn to how to learn”

“Risk taking is important, but more important is the ability to deal with and manage uncertainties”

Some interesting thoughts on business plans :

You need a business plan but the purpose of the business plan is “to show your analytical thinking ability, it is not a roadmap”. Another piece of wisdom was so important ” You should not believe in your own B**Sh**”. This was in the context of the what we communicate externally. While is good to be bullish and come across as a confident person, we should know the reality.

He also talked about VCs, about exit strategies, about pace of advancements in technology, about the importance of mentors.

On a particular question regarding pace of change and a narrow window of go to market, how should entrepreneurs look at it, his advice was very helpful. He said, ” if you find you are little late in coming to market with a particular product, you can re-purpose it for next problem to solve. You would be the first one with ready answer”. In this context he also mentioned that don’t get hung up on a particular product per se, focus on the opportunity. If you know the opportunity well, you can find different technologies to solve the problem. In the same context he said ” the answer we get depends on how we frame a question”.

He also talked about India’s strategic place in this context. His advice was India offers an opportunity to entrepreneurs to fail inexpensively and hence is a good place to leverage.

For me this was a great learning. I am sure most others who attended would have found it too.

Note : This is an attempt to share my learnings. This not a transcription of the talks. The words in ” ” are very close to what he said in exact words.


First year of entrepreneurship – Learnings

September 4, 2010

One year has passed much faster than I imagined, but it made me wiser ( thats what I think) beyond my expectations. I am trying to share my learnings without being judgemental about other people.

You are alone when it matters most : Even if you may have found support and encouragement from your professional network while making the plans, when it comes to execution you are alone and it becomes your sole responsibility. You can not count on any one else whatever they would have promised. People like to join you only after you are successful.

No amount of prior work experience is good enough : Even after spending 20 years in work, the situation and circumstances that you face are totally unique and you come to know about it only after you have taken the plunge. So if you get a chance to take the plunge earlier, don’t stop yourself.

Be prepared to avoid ” I have arrived” feeling : I am not sure if this happens with everyone, but I guess must be true particularly for those like me who start after long years in job. You are given feeling of special person, person who has shown courage by the people around you. While this is a good thing, very helpful in the beginning, but it might give you a feeling of ” I have arrived” and take you away from rational and practicality of the entrepreneurship. It might give you sense of accomplishment and slow down your hunger for real success. Just taking a plunge is not enough, succeeding is more important.

One thing I would like to share that happened with me.  I realised, pretty late,  that I made a classic mistake of not building enough pipeline even after running sales for so many years.  Every lead that I generated, I thought would convert into business. When I look back today and ask myself, what could be the reason for getting  into such complacency ? I realised that it might be because of the feeling of “I have arrived”, ” I could do no wrong” sense that might have been developed. Hence wanted to share this story.

Many possibilities, many avenues takes you nowhere : This again may be because of long years in the job. You tend to think – I know so many things, I have network in so many areas, I can do so many things and you get proposals for many business ideas. In the initial stages, it may sound good, it may satisfy your ego, it may give you feeling of being busy, but soon you would find, it has not taken you anywhere. This may happen despite you having a good business plan.

Sounding board : When you start as one man army, it is very important to have someone around you who is well wisher, aware of the market conditions and who can be your sounding board. At least I found it very difficult to keep talking to myself or keep coming out with ideas without someone around. It helps tremendously when you hear yourself talking. You immediately realise the wrong and right.

I have gone through many more personal learnings. It has been very enriching experience from that point of view. At the same time it has been challenging times. Things have not gone as per the plans. Lot of things have fallen through at the last moment bringing me back to square one etc.

Family support : I think if there is one thing that you absolutely need is family support. Entrepreneurship is as much a an emotional journey as a commercial venture. When you feel alone it is only your family that you can reach out to. That is the only support system you can count on. I am fortunate that I can count on such.

Now I think I am much more grounded to reality. Looking forward to next year.


Go Socially… Confidently

July 22, 2010

Lately I have been involved in helping companies leverage social networking tools for business development. It has been a nice experience of sharing what you learnt and what you practice to help others.

Straddling across so many tools – FB, Twitter, Orkut, Linkedin, Buzz etc –  becomes a daunting task. To update the status across each network and reply to people. When you are doing it for a business organisation, the challenges are even more. You have to be alert to look for mentions, references and respond accordingly. Today’s social media has a power to create positive or negative impact about your product and services within very short span of time.

Though there are some tools like (bit.ly, tinyurl etc) available that help you post your status across some of the networks simulteneously, those provide limited functionality. For a business it is important to monitor the response and get a sense of effectiveness of its efforts. You need more features such as :

1. Monitor number of responses to your news from each network – number of fans/ followers clicking from FB / Twitter / Buzz/ Linkedin etc This helps you to understand the effectiveness of the network. You can take corrective action or tweak your contents accordingly.

2. If your audience is spread across multiple timezones you need a tool to schedule your post at particular time intervals. For example on Twitter, when you tweet at a particular time, your followers may not be in a active mode in other timezone. When they get active after some time frame, your post might not appear on their timeline. You need to reach out to them in their timezone. That is why you need ability to schedule your post.

3. Auto Welcome message. If your business has more than 20 followers joining you everyday you, you need auto response to them else it becomes very time consuming activity

4. Many companies want to encourage their fans to discuss or post comments on its FB page or want them to re-tweet their posts. You would want to know most active fans/ followers per week or per day or per month.

5. You would want to see geographical spread of your fans / follower and number of visitors etc.

I have gone through few of such tools (there are many with some variations), but I found that what matters most is some one who can help you customise to your needs apart from offering the standard features. On that count I found this tool Go Socially to be best in its class. It is developed using open source components – PHP, MySql and hosted on Linux server. This company is promoted by very enthusiastic professionals who have returned to India after 8-10 years of working in USA. I am noticing this trend of professionals coming back to India after good experience and setting up own businesses. It is very encouraging. The team of Go Socially brings professional approach, global experience and understand the local needs – making their offering very competitive.

I liked their positioning of the tool – “You go where the consumers are, instead of waiting for them to come to you”

They have a one month trial subscription as well if you want to try it out first.

So now you can embrace the social networking tools for your business more confidently and can feel its effectiveness.


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