Prime Minister Narendra Modi's forthcoming visit to the San Francisco and Bay Area - a geographical and mental space, more popularly known as Silicon Valley - has the potential to become a watershed event in India's quest for achieving rapid growth in an increasingly innovation-driven global economy. The fact that this visit comes almost immediately after the PM coining his new slogan, Start-Up India, Stand up India and his appeal to make India the number one startup nation, has obviously created added excitement and expectations. As the only prime minister to visit Silicon Valley after Jawaharlal Nehru, Modi, as if, is letting the world know that India has made a tryst with its entrepreneurial destiny. How quickly the country is able to redeem its pledge and catapult itself to the position of numero uno startup nation will now depend upon the PM's preparedness for executing a well-thought-out strategic plan.
For crafting a judicious plan, Modi's exposure to Silicon Valley's experience can indeed provide him with great insight into the promises and turbulences of the fascinating world of start-ups today.
Post dotcom-era start-ups
In a world where technological uncertainties have reached jaw-dropping level, the start-ups from Silicon Valley have remained as the trendsetters in a wide range of sectors. Many of these start-ups are still quite successful in quickly achieving multi-billion dollar valuations, like their predecessors from the dotcom era. But, it is also important to notice that the current-generation start-ups are distinctly different from their dotcom ancestors on several aspects.
One, they don't spend a hefty amount to start their businesses. Today, it is easy to start a business without even owning an office space or a server, whereas during the 1990-2000 a large portion of start-up investments would have gone for acquiring office space, equipment, etc.
Two, the new start-ups are not in a hurry to implement their exit strategies, unlike the dotcom businesses of yesteryears who were always impatient for running to IPO with their dazzling, but often deceptive, revenue models. The tech start-ups of today are more focussed on rapidly increasing their customer base instead of finding a route for exit. For example, the online photo-sharing start-up, Instagram, launched by two entrepreneurs in 2010, had more than 100 million active users at the time of its acquisition in 2012 by Facebook. Or, say Uber - founded in 2009, though officially launched only in June 2010 - could generate about 6,000 users just within six months of its launch.
Three, many of the current start-ups are purely social media businesses covering the entire spectrum of social media - personal networks, interest-based networks, e-commerce, media sharing networks, social publishing and so on. Firms like SocialFlow, Nexgate, Snapchart, Prollie, Shiftgig, BeFunky, Pinterest, and Nextdoor are offering customers ways to increase audience engagement, social media auditing, knowledge sharing, content management, measurement of individual contribution to social media, photo-editing and a host of other services.
On-demand start-ups are the current low-hanging fruits
The mobile app-driven start-ups that have been popping up everywhere these days, many are from Silicon Valley (and also from other hotspots like New York, Massachusetts and Texas), should be of special interest to Modi. Using their mobile applications they are able to offer a range of no-tech or low-tech services to customers at a relatively low cost and with high convenience. These start-ups are called by different names (often, depending upon how one looks at their services or business models): sharing, collaborative, on-demand or peer-to-peer startups. They are Uber, Airbnb, Luxe, Lyft, Instacart, Thumbtack, Nanny in the Clouds and Postmates, just to name a few.
From taxi ride to home cleaning, instant food delivery to car parking, plumbing to agribusiness services - relying on a large freelance workforce such start-ups are creating a new, uberised, economy around exchange of goods and services. They may not be creating many salaried jobs, but are able to create plenty of decent income-generating work for the needy and aspiring people.
Many on-demand start-ups can be seen as low-hanging fruits at the initial stage of a country's transition to a digital economy. It is really a no-brainer to see the scope for their growth. Increasing number of nuclear families with double income, changing lifestyle, hassles of driving and parking, etc are some of the factors fuelling their demand. Ola Cabs and Jugnoo are good initial examples of the potential for growth of the on-demand sector in India.
Modi will soon come under tremendous pressure to produce the jobs that he had promised during the elections for a staggering number of youngsters, many with very low levels of education, entering the job market at a rate of one million per month. Because of the huge demand for all kinds on-demand services, promoting startups in this sector can be a real option for him for immediately creating attractive income-generating activities for many.
Meetings should be more important for start-ups than media splash
Quite often on-demand startups from Silicon Valley and elsewhere have been able to grow their businesses very fast, thanks to huge demand for their services. For many services - be it domestic help or instant food delivery, electrical work or valet parking - the possibility of scaling up the business critically depends upon a very new set of managerial and entrepreneurial skills.
Technology-wise some of the problems of fast growth are increasingly becoming easy to solve for these start-ups. The principal agent problem, which probably has been the most critical issue so far for growing a business of simple service delivery geographically, will be even more manageable with every passing day. Big Data and feedback loop with IoT (Internet of Things) have been rapidly increasing the scope of monitoring and measuring processes at different locations even for a start-up. But, with growth the HR, cultural and other issues, such as contractor management, customer relationship management and pricing can also become quite tricky. It is no wonder that some research reports have clearly shown the changing nature of skills required by the economy during the last eight to ten years (discussed earlier in another article).
Take for example, the once high-profile San Francisco-based start-up, Homejoy that offered home-cleaning services at an affordable price. Founded in 2010, the firm grew very fast (even started offering services as far as in Canada and the UK) and was successful in raising $40 million. Eventually, the firm closed down in July this year. Media reports mentioned that coming under pressure to deliver the promised services Homejoy even hired homeless people for delivering its services, though the nature of their services required certain level of training and high level of trust!
If Modi wants to pick up the low-hanging fruits to generate decent income-generating activities for the young population, who may become increasingly restless very soon, then Silicon Valley - because of the large number of start-ups in the sharing economy occurring from there - can certainly provide him with a good understanding of the technology and entrepreneurship related issues of this emerging sector. Therefore, any interaction of the prime minister's with successful new-age start-ups, like Uber, Airbnb, Luxe and Thumbtack would be of immense significance because such startups are also easily launchable in India.
No one can question that Modi's visits to Google or other Silicon Valley biggies, most of whom are already present in India for quite some time, are important for attracting investment and also for job creation, though on a limited scale. Such visits to high-profile companies and also his MSG-type of repeat performance in the SAP Centre can also generate a huge amount of media interest, which has its own value. However, importance of such events should not be over emphasised for startup development in India. Indian entrepreneurs can hardly be helped by today's 450bn-dollar Google to manage and grow their bootstrapped start-ups, even if our own, Sundar Pichai, is occupying the top slot in the company.
Need for ecosystem in India for innovation-led growth
Besides seeking Silicon Valley's input in addressing India's immediate problem of job creation for millions of poorly educated population, Modi must also explore how to prepare a strategic plan for creating a Silicon Valley-type ecosystem in India. Knowledge institutions like Stanford University, San Jose State University and University of California (Berkeley) together with some other educational organisations are the nerve-centre of the Silicon Valley ecosystem. This nerve centre is providing the most critical knowledge-support to both the budding student-entrepreneurs and also to the local companies.
It is truly an astonishing achievement of Stanford University that alone has probably produced more celebrated technology entrepreneurs than every other US university combined. Thanks to educational institutions of the Silicon Valley life-shattering innovations in diverse fields, such as energy, nanotechnology, augmented reality, 3D Printing and robotics are continuously emanating from there.
India's dream to become the number one start-up nation in the emerging knowledge economy will remain a pipedream if we fail to create such ecosystems in different parts of the country. Therefore, prime minister's discussions in Silicon Valley must lead to new initiatives for creating conducive environment in and around the Indian universities and other higher learning institutions for boosting growth of innovative start-ups in the coming days.