A Look at Founders Institute in Indian context

In less than 3 years, Founder Institute (FI) has launched around 415 startups through its chapters present in 26 cities throughout the globe, thereby claiming itself to be the largest idea stage startup incubator in the world. If external VC funding is considered as one of the success criteria, 40% of these startups have been able to secure the same.

The incubator is different from its peers in many ways:

- Participants pay tuition fee and give away a stake of 3.5% to be divided among FI, peer graduates and mentors. No funding whatsoever is provided.

- Sessions are held at weekend, so participants don’t have to quit their jobs.

- FI boasts of a massive global network of 750+ mentors.

- Startups which don’t show progress are made to leave the program and invited to join future programs. Success rate is less than 50%.

- If a startup receives financing of $50,000 or more from third parties, it pays a one-time tuition of $4,500 to FI and many more….

In short, FI provides a fast paced course for budding/ideating entrepreneurs to assist them create startups in just 4 months while significantly reducing their risks!! This makes one wonder, how relevant can be FI’s franchise based model in India. image

Almost virtual nature of the program would mean participants won’t have to quit their 9-5 jobs to attend the course. This would enable the program to reach out huge and untouched segment of budding entrepreneurs with low risk propensity (Quad 3).

Categorization of people based on propensity to pursue entrepreneurship can be done using a simple framework as follows,

Quad 1: Happy with their day job, may think about entrepreneurship at some point if it looks like an ‘easy’ option

Quad 3: Are enthusiastic about entrepreneurship but risk aversive due to various reasons

Quad 2: Very easy for them to pursue entrepreneurship, generally strong financial backing may pursue entrepreneurship along with a Quad 3/ Quad 4 guy

Quad 4: Born to be entrepreneurs!

1. All Pervasive Growth: Being a franchise based model, it can be scaled up to many cities in India, with each franchise invariably focusing on developing entrepreneurial ecosystem in specific region, as majority of the participation would be local. Also the nominal initial and running investment would ensure a low entry barrier and easy scalability.

2. Being an academics driven program, it would provide necessary hand-holding and motivation to participants, which may prove to be panaceas. Founders will be liable to do necessary homework and start a company by the end of the course or they would be chucked out.

3. Indian mindset is driven by ‘exclusiveness’. Current entrepreneurship programs are not huge successes as they tend to be percept as something for the “losers”. Low selection and success rate would not only create a buzz about the program among people (especially the youth) but also a perception of being something one would feel proud to be associated with. This would also excite parents and family members (who happen to be the decision makers in many cases).

4. Peer/Mentor networking: Peer to peer networking, especially, among budding entrepreneurs/entrepreneurs is missing big time in India primarily because there neither a focused platform nor a compelling incentive for them. Since all the peers and mentors would have a stake in the company, they would be more than motivated to help others.

Let us assume a hypothetical scenario wherein a FI like organization with a charter to foster entrepreneurship is constituted in India but through public-private partnership. Majority of the funds are pooled-in by the government and managed by professional fund managers and investors. As a pilot, Bangalore chapter is opened with initial intake of 10 startups (or 20 budding entrepreneurs). Subsequently, chapters in other metropolitan cities are opened. Timeline would look something like this,

The number of startups graduating by 2020 adds-up to a decent 3212. Assuming a 75-80% conversion rate, number startups churned out by 2020 would be somewhere around 2500. Further assuming a 40% success rate, 60% of startups would shut their shop by 2020 leaving 1000 functional startups. Now, the 1000 startups which are running their operations generate $1m of revenues on an average, their cumulative revenue adds to $1b. A direct impact of $1b on national GDP!! Not to mention the employment opportunities created. This would create a vicious circle in itself by creating more demand (more number of budding entrepreneurs) and in turn creating more supply (more incubators, more Angels/VCs, more investments), thereby further pushing scale of the program.

As an article on Techcrunch mentions, Founder institute is looking for expanding to many global locations including Bangalore but I don’t know when exactly would that happen. If Indian government, along with the private stakeholders can come up with a scalable plan for incubating idea stage startups, it can really accelerate the growth of Indian startup ecosystem. What are your thoughts about it, do share.

[Guest article contributed by Ashutosh Garg (@gargashu0)]