Recipe for increasing ROI of government expenditure on startups

Why is government involved in the first place?

image credits: TechCrunch
  • Job-creators reduces the stress of unemployment rates.
  • Generates skilled, in-demand forces and build capacity for more economic opportunities.
  • Drives the growth of knowledge economy.

How much are they investing?

DST, DBT, MHRD, AICTE, TDB, TIFAC, DSIR, CSIR, BIRAC, NSTEDB, NRDC, Startup India, Invest India, MeitY, MSDE, MSME, NITI Aayog (detailed list in the end) are various government (state and central) bodies that has allotted separate budget for promoting startups and innovation across the length and breadth of our country.

Well, I won’t be able to accurately share the number, though will make an attempt to give an approximate idea from available data:

  • Majority of the states have a dedicated entity for startup/innovation with a budget of around INR 500 crore as 5 year plans. A total of 30 states and UTs have notified and operational startup policies which brings the total to ~ INR 10/15,000 crore.
  • There are 54 Atal Incubation Centers and 20 Design Innovation Centers approved incubators that provides INR 10 crore as grant-in-aid support which brings to ~INR 700 crore. 49 institutions have Idea labs with a matching contribution of upto INR 55 Lakhs from AICTE ~ INR 26 crore.
  • On fifth anniversary of the Startup India initiative, PM Modi announced Rs 1,000 crore ‘Startup India Seed Fund’.

Considering all the 17–18 government bodies, I round up all to an approximate total of around INR 1 lakh crore for a period of 1 to 5 years.

What are the results?

Everyone in India now knows what a startup is. The perception towards startup founders has changed in a positive manner. The aspirations of millennial generation has changed. One can check detailed achievement report from various government bodies. 2 screenshots attached here to provide a quick glimpse. https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/5_years_Achievement_report _ PRINT.pdf

Areas that can improve ROI:

Increasing survival rate:

A study conducted by IBM Institute for Business Value (IBV) and Oxford Economics found that 90% of Indian start-ups fail within the first five years.

Facilitating originality and innovation:

Pick up any list of incubated startups and you will see lack of break-through original ideas. We are accused of mostly taking inspiration from US, UK counterparts. There is preponderance of added feature types or aggregation/one stop shop or segregation/niche based startups.

Lower environment cost and double expenditure:

(Its a nuanced perspective and one might take their own time to digest this fact) Imagine this- public money is used to support a startup which then created lot of negative environment impact (waste generation, harming ecosystem services, permanently destroying a natural resource, etc.) and then again public money is used to deal, process and recover that loss.

Recipe

Let’s look at each of them in detail:

Survival rate:

  • Rags to riches, zero to hero stories are not new in India. Nor it is an occasional occurrence. You can pick up any history book or today’s newspaper/magazine and you will find couple of them. Or just look around!
  • If you talk to any entrepreneur with substantial experience, they would tell you that funding should be the last thing in one’s priority list when building a company.
  • If you talk to all the startup founders who failed, hardly anyone would point out that funding was the main issue. Those who do, you can cross check with their mentors/employees/clients.

What I am trying to conclude here is that money is of course an essential component to run a startup but it is not the sole reason someone start their startup journey or fail in it. To emphasize this fact, I would take help from Simon Sinek who articulates it way better than my any attempts. He wrote this book- ‘Infinite Game’ (shameless plug- I highly recommend you to read/listen all of his books, podcasts)

There are 2 types of games: finite games (known players, fixed rules and an agreed upon objective that declares winners and losers. eg- football) and infinite games (known & unknown players, changeable rules and objective is to perpetuate the game. eg- life, business, friendship, marriage, health).

There are two currencies in the infinite game — Will and Resources.

Will is the answer to our conundrum. When startup founders or their team runs out of their Will to continue to pursue an idea/dream/vision, it rings the bell of its eventual death. They no longer find it worth pursuing/excited about it. Why? It doesn’t align or resonate with their true self. You understand it well, as you have also left some things behind that were not worth continuing according to you. There are uncountable problems in the world, not everyone empathize with every problem equally. On the other hand, without a doubt, everyone has at least one concern that one never gets tired of.

Having understood this, the obvious solution is to institutionally help, facilitate aspiring entrepreneurs to find their calling/why/purpose/passion/undying concern. I use the word ‘institutional help’ having all the rational sanity intact. It can be taught, it can be learnt, it can be codified and institutionalized. Not suggesting a PHD topic though. People like Simon Sinek, Sir Ken Robinson, Tim Urban and many other intellectuals have put out enough books, materials, step-by-step guides, explanations and courses that everyone has a free access to.

This will not just save the money that government spends on a startup, but it will save a generation! If you help a young adult save few prime years of his/her life and facilitate in choosing a fulfilling career path, they will do anything for the nation in return. I know it’s a bit cheesy and delusory ending to this topic, but that’s because it is one of my undying concern.

Originality and innovation

Ideas.. there is significant research in neuroscience and psychology on creativity. There are dedicated institutions and intellectuals who have dedicated their whole life behind researching how brain works. Let me share one insight in layman terms:

Play with me- at the count of 3, in no time, you have to say any 3 random words. Ready? 1..2..3. You are not allowed to think, just say any 3 random words that occurs first to your mind. Try again. Try once again. One last time for now. Thank you!

I would like to draw your attention to the recurring patterns in the game we just played. By chance if the first word comes to your mind is a furniture piece (say table), the next might be chair. If the first word is bat, the next might be ball. The red might be followed by orange and other colors. One body part might be followed by other body parts. We are inherently a survival machine. We try to survive with as least efforts as possible. Always choosing easiest paths.

New ideas or creativity is nothing but coming up with pink after saying table and ending with a giraffe. Connecting distant dots.

Dr APJ Kalam developed a very light material called Carbon-Carbon and it was a boon for India. One day an Orthopedic surgeon from Nizam Institute of Medical Sciences, Hyderabad visited his laboratory. He lifted the material (Carbon Carbon) and felt very light. Then he took Kalam to the hospital and showed his patients supported with heavy metallic calipers of 4kg. weight. He said to Kalam, ‘Please remove the pain of his patients.’ In three weeks, Kalam along with his team made the ‘Floor Reaction Orthosis’ 400 grams calipers and took them to Orthopedic center. The patients (children) did not believe their eyes. From dragging around 4 Kgs. on their legs, they could move around. Their parents had tears in their eyes.

Good news is- connecting distant dots can be taught, it can be learnt. Lateral thinking/creativity is like any other skill- say guitar or football, which can be enhanced through regular practice. Forget the notion that some people are blessed with it, anyone can develop that skill irrespective of age or gender.

It all boils down to two things:

2. Making a habit of not choosing the easiest path, in other words- break the arrogance of established patters in minds and generate multiple ideas, not necessarily all to be right/rational/possible.

Lower environment cost and further government expenditure

Most of today’s problems started when someone didn’t thought of long term repercussions of their actions.

In 2020, the online shopping giant, Amazon, said it emitted 51.17 million metric tons of carbon dioxide last year, the equivalent of 13 coal burning power plants running for a year

Just 2 decades back, Amazon was a small startup. Imagine the then investors asked Jeff Bezos about his plans to mitigate carbon footprint and waste generation and he was funded under a condition if he shared the total environment cost of his startup and his plans towards sustainable methods as he scale forward. Today’s green pledges would have been strategies then.

Precaution is better than cure

Not pointing to any startup in particular, and using names just for the sake of explanation. The startups of today with similar business models like Zomato, Swiggy, Ola, low-grade solar panels and I will need your help to continue this list, are generating huge carbon footprint. It will largely be government responsibility to handle the negative impacts on environment later. If such startups are funded by government grants, its a double expenditure of public money only benefiting the valuation of the startup. This problem is easily avoidable. As a startup ecosystem, government can take the initiative to make startups accountable or the investors for their environment impact right at the beginning, when one is doodling on tissue paper and not when court asks them after significant damage. A change in the format of business model canvas, design thinking canvas, pitch deck template and startup evaluation matrix can significantly help. Policy interventions around it can have significant impact.

(I have attempted redesigning business model canvas)

-Foram Chandarana

If you resonate with the ideas and want to discuss further, I await for your mail at foram.c95@gmail.com

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Foram Chandarana

Contemplative being, Eco-freak, Multipotentialite, Lateral Thinker, Systems Thinker