Challenges to startups in India – M. P. Vijay Kumar, Chief Financial Officer, Sify Technologies Ltd
A rank holder in chartered accountancy, a popular teacher of CA subjects, and a prominent professional speaker on International Financial Reporting Standards (IFRS), M. P. Vijay Kumar, Chief Financial Officer, Sify Technologies Ltd, has been a key member of the company’s transformation into becoming a leading enterprise IT infra and services player. During a brief interaction with YourStory, Vijay Kumar shares his views about the challenges facing startups in India.Entrepreneurship
India is one of those countries where entrepreneurship is native. It is almost inside everybody. Indian entrepreneurship does not require an organised environment to succeed. History is full of examples where entrepreneurship is so much there inside every Indian. Predominantly being an agri-economy, and the way it has grown, everybody has it in him to be successful as an entrepreneur. Ideas are plenty. Ability to handle chaos and still make it successful, and the passion to succeed are all very high. There are some of the very positive things I see.
When it comes to startups, we need to understand that there are severe limitations in terms of the ecosystem, an encouraging ecosystem which supports somebody to stand through the period where he can have the perseverance to succeed.
And, for that, what is important is the number of success stories we generate. If you look at the IT industry, there is so much of noise, so much of hype around that. Look at the IT companies that came in the 90s. They rode the wave of the dot-com, and the wave of Y2K, and they built a huge space for themselves largely through manpower sourcing. If you leave those companies that came in the 80s and 90s and benefited by Y2K and the period around that, you don’t find companies beyond them that have been successful in the IT space in India. Even today, the number of IT companies that are product-oriented IT companies, you can count.
Even for a large company like Infosys, what constitutes success for them in the products is hardly 4 per cent. You can count, you can literally count. So, you have these gigantic companies such as TCS, Cognizant, and Wipro, all of them 20, 30 years old and they have all got the breakthrough; let’s not forget Y2K. If you exclude those companies, and focus on companies that have come in the last 10 years, last 7-8 years, you have hardly anyone. In such a huge gap, a small entrepreneur who has a brilliant idea, one who does start up, he doesn’t have the next level where he can look for success. Or somebody who can absorb him and who in turn goes and becomes a part of larger company. I think that gap is missing.
And I am not seeing much happening either from the industry. The larger companies are happy to take care of their interest. I don’t think anybody is willing to go and support acquisition of smaller startups in India. Everybody is looking at going and acquiring a 10,000-people organisation, 5000-people organisation, an outfit in the US, an outfit in Europe, and making it part of them. I am not seeing them come forward and say, here is a startup which is a 30-people company with a niche technology; let me absorb and incubate it. I am not seeing that. May be, there are exceptions, I am not saying there is none. But those are far and few.
Similarly, from the government side, there is hardly anything. Look at the way STPI was handled. Infrastructure is such a critical element. And for startups, there is the state-sponsored infrastructure like Tidel, in Chennai, Coimbatore, but you have rental to be paid as Rs 50 a square foot, Rs 60 a square foot. I can’t go and put up in a tier 2, tier 3 city where you don’t have access to talent. It’s easy to say, go and put up a facility in Trichy, but where do I get ten bright people who can be part of me. So if it has to be in the city, pay a rental of Rs 60 a square foot, and the minimum size you take is at least 10,000 square feet. For a startup, why do I require that kind of space? So where is that support available for me to do that startup? It’s a commercial rate, Rs 60 a square foot, from a government-sponsored organisation. All the IT infrastructure is commercial space, it’s not a support available. Similarly the smaller company, whatever the revenues they get, the money which is stuck up in the form of TDS, where is the support available from government for all these things.
Unless we are very realistic about these needs, and somebody champions their causes, and addresses them, we can keep speaking about startups, you can say we will support, say there is talent, but we will not see the success. We will not see the success with these people having confidence to put their career at risk and try out their idea for five years. Career at risk, you will not get that. I sincerely wish people start addressing the truth, the ground realities, and I am sure India will have success as big as what we have seen in the Bay Area. It’s just matter of time.