Several state governments are realizing belatedly that they need to provide a concrete, low transaction cost system for innovation and entrepreneurship development. However, when it comes to creating a flexible and friendly environment, the bureaucratic mindset often overtakes good intentions. The result is a plethora of rules and very few outcomes.
Way back in 1997, it was realized that unless an institutional platform emerges to reduce transaction costs of innovators, entrepreneurs and investors, the three will never meet. And finding all the three attributes in one person was very rare. Gujarat government came forward to create Gujarat Grassroots Innovation Augmentation Network [GIAN] at the first International Conference on Creativity and Innovation at Grassroots [ICCIG]. This was later adjudged to be one of the best incubators and was awarded by Dr.A.P.J.Abdul Kalam along with IIT Madras. The key principles involved in providing micro venture finance are based on the premise that early stage technologies require risk fund without any collateral or co-obligant. The micro finance is provided for activities for which market exists. The Micro Venture Innovation Fund [MVIF] or micro venture finance is needed for ideas and activities for which market does not yet exist. The micro finance rests on group guarantee. The micro venture finance rests on innovators own credibility and trust in one’s ability to stand apart from group. There is very seldom a chance that individual innovator is supported by local community or groups at a stage when ideas are fuzzy, results uncertain and individual seems idiosyncratic.
Accordingly, GIAN was set up to provide support at the doorstep of the innovator. First operational principle was never to call innovator to office, but office should reach the innovator. Unless support can be provided at the doorstep of the innovation based entrepreneur, the recovery of investment in the case of success will not become automatic. NIF recovered more than 70 per cent of the investment made under single signature to over 180 ventures across the country through MVIF set up in 2003 in collaboration with SIDBI. This proves that the concept is viable and can easily be scaled up. GIAN alone facilitated 144 patents for creative people in the state. Perhaps, there is no other incubator in the country, which has achieved so much with such meagre resources. How do we scale up GIAN all over the country and in the state?
We must trust that anybody who has invested part of one’s life and own resources in creating a proof of concept idea or solution to a socially important problem, deserves support only on that credential. No other supporting evidence or security is needed to make a person eligible for risk capital. If family does not support such a person, it is a positive feature because it shows the fortitudinous capacity of the individual. All the classical parameters used by bankers are in fact inverted in the case of MVIF.
The financial inclusion of innovators has so far not attracted the attention of the Central Bank or for that matter, state governments. We need a national initiative to support innovation based entrepreneurial ventures at district level through mobile, flexible, accessible system of decision and delivery. Just as spearhead teams for organizing milk cooperatives used to go from region to region, we will need online system with periodic face to face interaction to support innovators. Anybody having an idea with sufficient detail and/or a proof of concept can submit to the GIAN portal and within 15 days, would know if he or she has crossed the first hurdle. Within next 15 days, a local mentoring team will be constituted comprising faculty from polytechnic or relevant technical institution, a local successful entrepreneur and a representative of GIAN [could be already funded startup] to look at all such ideas in the region, process them after meeting innovators and disburse first installment of support on the spot. The mentoring team will meet and bring together innovators from two to three districts at one place and dispose of the cases within a month. No application will wait for more than a month and no innovator will travel beyond 500 kms. Over a period of time, once a micro ecosystem of entrepreneurs starts emerging, both distance and time limits will be compressed.
Without access to testing and calibrating facilities, such entrepreneurs may not go very far. All labs and workshops receiving public funds will be obliged to provide their facilities to the recognized startups at a very nominal cost. But, promptly and courteously. GIAN can facilitate such linkages when needed. The students of management, commerce and accounting can help the entrepreneur develop business and investment plans besides support for market research. The public media, particularly All India Radio, regional stations should provide low cost prime time visibility for such entrepreneurs to expand their markets. The public procurement policy will be significantly modified to encourage first generation entrepreneurs by requiring a very nominal earnest fee and without restrictions of minimum prior turnover. For defence and other strategic sectors, the young startups help develop the initial prototypes but are made ineligible for getting orders because of such conditions when the same prototype is approved for production. There are numerous cases in which this has happened already. We need a new culture and attitude to make MVIF a viable instrument for promoting startups.
About the Author: Prof.Anil K Gupta is a Professor at Indian Institute of Management, Ahmedabad and Coordinator,SRISTI and Honey Bee Network. He is theExecutive Vice Chair, National Innovation Foundation, Fellow(NAAS). Fellow, The World Academy of Art and Science,California 2001Distinguished visiting Faculty at Tianjin University of Finance and Economics, China Visiting Professor of Innovation Management in Emerging Markets, EBS, Berlin