Forbes Magazine: Dearth of innovative SMEs not from lack of $, but lack of trained entrepreneurs

Studies have estimated that over $1 billion in possible venture capital financing has been infused into India in 2007. Instead of spurring a wave of innovative startups, however, this influx in capital has remained just that — surplus of capital. Unlike Africa or parts of Eastern Europe, the lack of wide scale SMEs in India is not due to a lack of startup funds. And given the number of qualified IIT and other engineering graduates that are pumped out of the education system annually, they are not the limiting reagent either. So what gives?

According to Sramana Mitra, India’s current engineers and management professionals are ill-exposed to areas beyond back office tasks and so do not have a refined understanding on how to place and market technology products in the market.

India’s meteoric rise in the tech world has been driven by providing back-office services. That work puts a premium on skills such as engineering management and coding. Someone else–somewhere else–writes the specifications for the projects. Again, someone else, somewhere else does the market studies analyzing the potential of a new product.

Indian managers have had scarce opportunities to learn the nuances of how global technology markets work. That means that local entrepreneurs can try to position products, but they do so without detailed and disciplined marketing knowhow.

Capital does not just sit idly though, and in 2007 much of this $1 billion got ferreted into the retail and commercial internet space. While these sectors have significant potential, they do not have the same transformative power that a true technology company can have on a society’s progress. Finding such entrepreneurs has proven to be difficult.

Made conspicuous by its absence in the above discussion is traditional technology venture investing–the game Silicon Valley VCs know best. And I’d argue that it’s almost absent from the technology firmament of India.