Recommendations for Maharashtra State Innovation and Startup Policy

Maharashtra Govt recently came out with a draft policy for supporting innovation and startups in the state. Govt invited a few experts to comment on the policy and it was my privilege to be one of them. The recommendations drew upon my experience of being a witness to and a participant in the Indian Innovation ecosystem for the past 15+ years. I spoke very frankly and without any agenda. Therefore, it was a surprise to receive compliments from govt officials. Most of the points that I made apply to govt policy in other states as well and therefore bear repeating.

Workshop on Maharashtra State Innovation and Startup Policy

I made three recommendations to the Maharashtra government.

Focus

The first thing I requested the government was to cut down the size of the draft to half. It is trying to do too many things and at too many levels and all at the same time. It is the surest recipe to fail. History has shown that focusing forces on one or two areas has been the hallmark of winning strategies. There are hardly any instances of someone winning fights on multiple fronts. This holds true in military, business and government domains. So, Govt must focus if they want to have any chance of success.

Focus won’t be easy to do. Govt is beset by multiple stakeholders asking to resolve all kinds of their problems. It is also natural as govt has a massive size and power. Also, it has a public duty. But in order to focus, Govt must say “No” to 9 out 10 requests that they receive. A simple gauge of focus is to measure how many No were given and how many parts of the draft policy were cut out.

There is a recipe in focusing too. The focus has to be build further upon strengths. Maharashtra is the leading state in terms of economic muscle. Some industries such as financial services, automotive, agriculture etc are national leaders. Govt should build upon these strengths and promote innovation to take these areas to global levels. For e.g., why shouldn’t we focus on making Pune the hub of electric vehicle innovation globally and leave out every other industry? A thriving global hub through its secondary effects will spawn more business, increase its own competitive advantage and create far more employment than 10 fledgling me-too innovation centers. A large national market and the existing lead of Pune can create a base for such a focus.

Historical evidence also supports this. Silicon Valley is called silicon valley because it was a hub of semiconductor innovation to begin with. Biotech innovation had its home in Boston. Israel started out in security and network technologies.

Evangelize

The biggest impact of Govt Policy is not on areas that it chooses to spend on. A bigger impact is on the area that it chooses to talk about. The biggest impact so far of Prime Minister Modi’s Startup India thrust is not because of the investments it has made. The biggest impact has been that the PM has chosen to talk about startups and talk about it so much. It was sexy to do startups in small pockets until then. After Startup India, doing a startup is the thing to do across the country.

There is a lesson for policy makers in this – you can bring a change in how the entire state thinks about innovation and start ups. And that change will have a bigger impact because many many more people will put in efforts in alignment with their beliefs.

A great place to attack is on how innovation is done. Innovation is done by making things, figuring out what worked and what didn’t and then making another prototype. This is learning by doing. Sadly, we don’t have a culture of it. We are content with a theoretical understanding of concepts. We talk a lot more about innovation than actually doing it. This needs to change dramatically if India is to stand a chance in the global sweepstakes of the innovation game.

My second recommendation is to hold Grand Challenges. Announce a prize money of Rs 5 Cr (could be a bit less or more as well) for the winner of the grand challenge. Preliminary stage could be at district level leading to a state level competition. Only working prototypes should be allowed at any stage. Judging should be on the basis of objective performance parameters. For e.g.; maximize the area irrigated by 1,000 liters of water.

The design of the challenge is very important. For this, please get the globally best innovators and researchers in the focus area you have chosen. Ask them to set the challenge. Get them and practitioners in that area to judge the applicants. It is important that people of such caliber and background do this work. It sets the benchmark for success. A challenge set by politicians and bureaucrats will give us winners who have a higher chance of winning at politics and bureaucracy than at innovation! It would be difficult to get such innovators to put in their time into such an activity as the best people are focused and are always short of time. This is where being Govt increases the odds of success of such an endeavor.

The crux of Grand Challenge is to celebrate the process and the winners. Getting ministers to award prizes at District level and getting the Chief Minister to award the prize at the state level would draw attention. An exhibition of all state level participants will draw in crowds. The state government inviting competitors over FM channels and bringing out front page advertisements to publish pictures of winners would have a massive impact on how innovation is done by everyone.

Fund

A big part of the policy is regarding funding of startups. It is important to understand the background of startup funding before we get to the policy.

Startups are of two types. The first one is defined by the statement startup = Growth. These startups operate in large markets and look to grow fast. These startups have funding options in form of angel funds and VC funds. My own startup SwitchMe falls in this category. Govt must not fund such startups as there is no problem for the govt to solve.

One problem that the Govt could look to solve in this area is a problem that VC funds in India face. VC funds operate on a 7 – 8 year cycle within which they promise to get returns for their investors. This cycle is too short in India as there are bottlenecks in our economy that slow down businesses. The cycle time for India is probably around 10 years. Govt can invest in VC funds as a patient investor and become the anchor around which VCs can get other investors to join in for the 10 year cycle. Govt could also cap its own returns and thereby allow other investors to earn a higher return in spite of a longer investment horizon.

The other kind of startup is a startup which has innovative products but is not operating in a large market or in a market structure where fast growth is not possible. This startup struggles to get attention from VCs.

One example of such a startup is one being supported by NSRCEL at IIM Bangalore where I serve as a mentor. This startup is working on a platform for buying supplies for bio/pharma research. By bringing transparency into this small niche, this startup is speeding up the research process. Until now, procurement of supplies would take longer than the actual research. The platform is shortening the procurement cycle. It is too small to get VC attention but must be supported for the impact it is creating for a fairly large industry and for the innovation ecosystem.

Still, Govt has only a limited role to play here. It is limited because of two reasons. First, no amount of funds provided by Govt can quench the entire thirst for funds in this category. Second, if the Govt decides to select only a few, it will distort market forces without understanding how market is operating in the business where the investment is being made. This can have disastrous consequences for that industry.

There is a sub-category of startups in this category that must get Govt support. This is a startup that removes or reduces capacity blockages. Capacity blockages are like traffic chokes points. They slow down everything and waste time. They lead to situations like VC returns taking 10 years instead of 7 years in other parts of the world. Removing them makes our economy grow faster. Some of these are huge ones like Octroi which got removed by GST. Many others are small ones that Govt isn’t even aware of. Innovators and startups see them and look to remove them. Such startups should be supported by Govt in public interest.

My third recommendation is that the govt should fund startups in this category of startup not equal to growth. The funds should be provided via incubators which are better positioned to select who gets funded and who doesn’t. To ensure that the right kind of startups are getting funded, govt should provide grants only if there are matching grants from industry.

To summarize, Govt initiatives to support startups and innovation are welcome and much needed. But, steps must be taken to ensure that money is spent in a focused manner and for the right kind of goals.

Review: Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future
Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future by Ashlee Vance

 

 

I cringed many times as I read through this book – there are parts which are more of a hagiography than a biography. It was expected as some of the reviews pointed out that book is written by a fan boy. However, by the end of the book, I came to a different conclusion. Vance is playing to the galleries. Elon Musk is an awe inspiring figure for many. Vance is looking to sell his book to the same crowd. So, he paints the picture that his audience wants – with some warts.

However, there is sufficient information in the book that can allow a reader to draw her own conclusions. I particularly love the appendices. Vance needs to be credited for leaving Musk’s statements as they were.

This book does a good job of painting a picture of how Musk is – Driven, analytical, hard working, brusque etc. It also does a good job of unearthing details of his childhood which had a bearing on how he came to be.

However, it does a poor job of telling us how he made SpaceX and Tesla to their current positions. There are hints throughout: hard work and hard drive, working from basic physics up, setting up clear targets, focus on what to do with setbacks rather than allocating blame, hiring and retaining great talent etc. But that is not the main narrative. The narrative is that of the person rather than his amazing work. In that, this book is a bit disappointing. It still doesn’t explain well enough why Musk succeeded where others failed. It doesn’t come anywhere near explaining how he did it two times – simultaneously!

Announcing a blog series – GTM for startups

I spoke yesterday at Startup Saturday Pune on Go to market (GTM) for Hitech products. Sandeep and Vishwa are two fantastic people who run this forum. Sandeep is a passionate and articulate entrepreneur who runs Acton Biotech while Vishwa is the quiet and meticulous entrepreneur who runs eventNu.com. Both of them keep coming up with ideas that I find exciting. This time, they started off several weeks ahead of the event by creating a question bank on an email thread and then on eventnu.com. Thus, all the speakers knew exactly what was needed from us and we came prepared. In the end, Vishwa did a rapidfire section where he asked some of the questions that we had not covered. Thus, it was a session where specific problems were addressed. However, given the format and time constraint, I think we didn’t cover as much ground as we could have.

In the blog posts to follow, I’ll attempt to answer some of the questions from the question bank. The idea is to expand on what I said at the event and also to reach a larger audience. I’ll post these to the Headstart Blog as well and will also invite other folks to answer these questions. The questions I’m looking to answer in the next few posts are:

  1. I am a technical person and CTO of my startup. I have no experience in sales and marketing. Where should I begin from ?
  2. How do I get contacts for selling software? I know that in the beginning, I have to go and sell my product, but how do I get contacts? Cold calls?
  3. When shall I decide to go for PR? How much spend is optimal on PR?
  4. My services are not very differentiated (I am typical web services company). How do I get mindshare from my potential customers?
  5. I am a six (twelve?) month old startup and I have been doing mostly been doing things pro bono for large companies/clients. How do I ask them to write a cheque?
  6. Building a client list through personal contacts / references is fine. But this is not a scalable model. This would require your personal expertise all the time. How do you build a sales team then?
  7. Sales Tactics
  • How do you get past the receptionist / gatekeeper?
  • How do you find out who is the decision maker in the target company?
  • You found a contact and wrote a mail to the individual. He/she does not respond back. What do you do?
  • You give them a call. They respond by saying that they are busy this week. Please call after a week/month. What do you do in this case?

Look forward to comments, views and more questions.

Lessons from Honda’s recall

Honda recalled its Ciy sedans in India last week. From all I could make out, hardly any City owners had felt any problems. In fact, the first thing that Honda’s actions did was to make people aware of a problem that they were oblivious of. And all this at a significant cost to Honda.

Let us for a moment try to step into the shoes of the person who made the decision. On one hand is a defect that could probably lead to issues for some of the customers and on the other hand is a sure cost across the entire customer base. On one side is is the customer and on the other is the shareholder. One option is to do nothing for now and to prepare for a situation where the probable problem does become real. Do a recall at that time and be ready with a media offensive to contain any possible PR fallout. Thus the choice is postponed and exercised only if there is a problem. The other option is to do the recall right away and bear the enormous cost. Also minimise the PR battle. In any cash flow based analysis that B-Schools teach, option 1 is likely to win out. Yet option 2 was chosen. Why?

The difference lies in ordering of priorities. B-school education is full of tools appropriate for optimisation of profits which is what shareholders want. This is is usually right for most situations that MBA grads encounter – large running business. Most choices are for shareholder. But any person who has started any business knows well – optimisation for the customer comes first. If there is no customer, there is no business. A B-school education usually assumes that optimisation is already achieved for the customer and the task at hand is to optimise for the shareholder.  In the Honda situation, this assumption doesn’t hold true. Hence, there really is only option 2.

I think that truly stellar companies and leaders never forget that customer comes first and this is what distinguishes them from the good ones. Honda has demonstrated that it still stands committed to the customers. Kudos Honda!

Difference between sales at a Startup vs Largeco

Mark Suster has written an absolute gem of a post which highlights the differences between sales at a startup and a large company. Many startups try to “scale up” sales too quickly by making some of the mistakes that Mark points out.

The post reminded me of another gem of a book which talks a lot of the same things through the story of invention of the wheel and selling it.

While the approach to the customer changes as the product and the startup evolves, what does not change is the purchase process and the organisation at the customer’s end. Understanding these can mean the difference between success and failure. More on that in later post.