India’s Innovation Problem: Why Aren’t there Enough Hard Core Technology Startups [Interview]
Why don’t we have a large number of hard core intellectual property driven startups in India? Why do we compare so low alongside tiny Israel on innovation?
The nation needs to know. India must answer these questions to jumpstart its innovation engine and become a true high growth economy.
We got talking to Deepam Mishra, CEO, i2india Ventures, the Indian arm of Imperial Innovations PLC, to see what could be possibly wrong. Mishra spent more than 13 years at the Stanford Research International in the US, before he quit the lab to commercialize his research and went on to become a serial entrepreneur.
After setting up i2india Ventures, Mishra and his team spent the first two years looking for technology from research labs to commercialize. Many long hours and painful effort, came to naught as they realized that there is very little market ready Intellectual Property in India and gave up on the original business model. i2india now creates companies based on market research from scratch, incubates them, funds them and takes them to a point where they become self sustainable. In an interview, Mishra shared his insights on why India isn’t producing enough hard core technology companies. “ Its like Lakshmi and Saraswati can’t be in the same house…The cultural change is happening, but only one funeral at a time,” he says.
What gaps in the startup ecosystem are you trying to address?
We take products all the way to the market from scratch. We build startups, fund them, incubate them and try to take them to the point where they can be self sufficient. We are a small group of venture managers, investors and incubators. Without these three things, you can’t have an ecosystem for a technology startup. There is hardly any IP driven products from india. There is lot of startup activity and money but very little money in early stage, seed stage and almost nothing in IP driven seed stage.
Why are there very little IP driven startups in India?
India is in early stage of maturity of this space. Its a natural growth cycle. But there are some details.
To create IP driven businesses, you have to have IP. We have very little of that in the country. Most IP is created by either research institutions or offshoots of research institutions. IP is research driven and it requires a lot of work. A big part of that is missing. Most of our academic work is just academic and there is no connect to the real world. Even in big companies, the amount of real research is very little. Most of it is applied research or tweaking things which also requires effort. But to come up with a core technology that defines a cell phone, that kind of work doesn’t happen. There is no IP ready to be exploited. There are ideas but not near market.
Investment which goes into early stages is very low. Most early stage investors are small and they invest because they understand the risks. Since you don’t have a series of companies which have become successful and entrepreneurs who have made money doing IP investment, very few investors have the knowledge or the risk appetite to invest in an IP driven company. They think the risk is too high. It might take two years to develop a product and then find that its a complete disaster. IP companies are very different from standard software companies. The risk profile is different, the type of people who pursue it are very different.
What are the main reasons for not having IP that can be commercialized?
I don’t want to make it look like a negative remark because I now understand their perspective. Yet, from a business point of view: Priority of commercial exploitation in research labs has never been there. Over 80% of India’s research is publicly funded. The nation needs to know.Whatever funding was done, it was to help the industry and not to create new technologies. These labs were subsidized R&D labs for industries because we were trying to do import substitution for the first few years. Last 10 years, the world has turned upside down. Now everyone is talking about IPR and patents. These scientists who have never heard of patents in their growing life are now being asked to make commercial patents. They have never looked at licensing. The whole idea of commercialization of IP is very new in research.
Academics will still argue that its a bad thing to do. Unfortunately, the reality is that no one benefits from that. Its the mindset that Lakshmi and Saraswati won’t live together.
Incentive structures are completely broken. Most of our scientists efforts have been given for free to industries. So they feel that industry is this bad boy who never even congratulates them for their efforts. Industry is treated with suspicion. You don’t get promotions based on commercialization. The government has been trying to change this but its a 60 year conditioning which can’t be undone in 5 years. Cultural changes will happen, one funeral at a time.
Thirdly, academics don’t have market knowledge. They are all solving academic problems. Their source of market knowledge is from peers who are from outside the country. So they are often solving challenges that don’t even apply to India. You can’t expect them to be entrepreneurs. This is all structural and can change. That’s why I’m positive about all this.
What kind of technologies do you look at?
We look at it at a very deep level. The technologies we look at are hardcore. For example, water purification, energy, medical devices. Software and IT is already crowded. Lack of energy, drinking water etc are becoming crisis proportion problems. The innovation in these sectors happens in the context of the problem. We don’t start from the technology out. We look at focus areas, like off grid energy, off grid water, non hospital medical devices & healthcare devices and such. We have a large network of technology inventors who work with us. We start with the need in mind. We also help companies from abroad to explore the Indian market.
Wannapreneurs often complain that investors don’t back just ideas. Why is that?
Those investors are standard investors. That means they need more proof to know if the idea will work or not. They don’t have time, interest or the knowledge to roll up their sleeves and figure out. That’s fine. That’s their business. We often come up with our own ideas and get entrepreneurs to come to us.
What entrepreneurs say is partly true. But some entrepreneurs are also fairly naive. I won’t blame them. They don’t want to start unless some money has been put in. But investors say: We won’t put any money in it unless you show some skin in the game. Most of the time 80-90% of people who want to be entrepreneurs will never be entrepreneurs. Because they are waiting for money. You have to have that screw it I’m going to do it kind of passion.