India Rising

India is seeing an amassment of locally grown high-tech companies take root and prosper, and the world is taking notice. With the fourth largest economy in the world and a GDP of $4.04 trillion¹ as measured by purchasing power parity, India could become a force in the global economy, but only if it can equip the next generation to do so. The Indian government and private industry both at home and abroad are creating opportunities through entrepreneurship and education to lead the way.

Entrepreneurship in India was slow to take off for many reasons, one of them being lack of funding. Traditionally, startup money has been obtained through personal contacts.

"In India typical financing is either by friends or family, by organic growth, or through banks and commercial lenders," says Anu Shukla, serial entrepreneur and founder of Rubric Inc.

In the past, the Indian government kept tight control over the private sector, which made success or even existence for small businesses very difficult. Through economic reforms starting in the early 1990s, India has opened up commerce and made getting grants and permissions to start a business easier.

"I believe the economic liberty, relatively stable coalition government providing a favorable investment environment, and opening up of the market with eased entry forms is attracting investors," says Rakesh Roshan of Sharp Labs of Europe (Oxford, UK). "The government's policies are now relatively simple, transparent, and aim at promoting domestic and foreign private investment."

However, many complain government policies are still too complicated and that there is not enough money to go around.

For many years, prevailing attitudes were also a significant challenge. Entrepreneurship was seen as risky in India, and it was considered safer, and therefore better, to get a job with the government or an established company.

"Businesses tended to be dominated by big families that started the business a while ago, and then there's multinationals and their ability to provide high paying employment," says Shukla. With low funding and few employees, that left little opportunity for potential businesses.

Venture capitalists (VCs) changed all that. Once unheard of in India, Americans and non-resident-Indians (NRIs) began to invest in promising startups in the late 1990s when the first technology boom occurred. Even with a downturn a few years later, Indians saw an opportunity?that technology entrepreneurship as a profession was not only possible, but could be very profitable. Indians began starting up more companies, and foreign investment expanded. Private equity funds in India grew from US$20 million in 1996 to $1.75 billion in 2004, and were estimated to exceed $2 billion in 2006, according to a report by Ernst & Young (London, UK).² Now many U.S. VC firms have offices in India to oversee investments and pick up on hot technology companies or trends.

"There's opportunity for entrepreneurship, there's funding available and business available, so it's really being encouraged and entrepreneurship is alive in India," says Shukla.

This opening up of the Indian business world was also greatly influenced by the success of individual NRI entrepreneurs, especially in computer and information technology in Silicon Valley, who would then bring their skills and companies back to India.

A report by the Indian National Association of Software and Service Companies (NASSCOM) estimated more than 35,000 expatriates returned to set up shop between 2001 and 2003 in Bangalore, India's equivalent to Silicon Valley.³ Multinational companies like General Electric, Hewlett-Packard, IBM, Intel, Oracle, Texas Instruments, and Sun Microsystems soon followed and now fill the Bangalore skyline, standing next to native Indian IT giants like Infosys and Tata Consultancy Services.

Successful NRI entrepreneurs all over the world have also organized and created networks and societies to support and mentor new entrepreneurs (see sidebar).

Most of the original entrepreneurial focus in India was on developing or supporting information technologies, which caused a boom in fiber optics R&D in India, and an upsurge in many other technologies such as semiconductors and wireless technology, that could be devoted to making Internet connections faster, cell phones smaller, and computers cheaper. The biotechnology and optics manufacturing industries have also benefited from the rush of interest.

In contrast, however, it has left a void of funding and energy for most other types of optics and photonics R&D. India invested US$3.7 billion overall in science R&D in 2002-2003, compared with $15.5 billion spent by China, $124 billion spent by Japan, and $227 billion spent in the U.S.⁴

And India is certainly still looking to IT as a leading sector of the economy. Prime Minister Manmohan Singh commented in February that the NASSCOM electronics and IT sector export target of US$60 billion by 2010 is not ambitious enough, saying "this target should be met by 2008 and by 2010, we should be looking at a target of US$80 billion."

"The possibilities for optics and photonics in India for young people is limited," says Khyati Mohanty, 2006 recipient of the SPIE Scholarship in Optical Science and Engineering. After graduating from the Maharaja Sayjirao University of Baroda, Mohanty decided to move to the United States to study biomedical optics, since she didn't see enough opportunity in the field in India.

With almost 60% of its 1.1 billion population under 25, India knows it will need to create more internal business and industry.⁵ In fact, it will need about 15 million new jobs every year to keep up with population demands.⁶ Government jobs and multinational companies alone will not be enough to support this need, leaving it up to entrepreneurs to create these new jobs.

So where will all these entrepreneurs come from?

The government and university systems are looking to that under-25 population as their pool of future entrepreneurs and job providers. This group of Indians is very tech-savvy and aware of global trends. According to a survey conducted by the Indian national newspaper The Hindu, 36% of the nation's urban youth own cell phones, and 39% nationwide believe there is nothing wrong with being ambitious and successful, a view that would not have been shared as broadly by their parents. And 65% are very anxious about employment and their career.⁷

The government also realizes that in order to become entrepreneurs, this group needs training and support. Less than 15% of India's school-aged population makes it to high school, and only 8% of those go on to attend college.⁸

Along with increasing funding, the government and universities are founding programs and passing initiatives in order to educate and prepare these students to start their own businesses, with the largest focus on science and technology industries.

Last year finance minister of India Palaniappan Chidambaram announced a grant of US$22.5 million to the best science and technology university for 2005-2006?the Indian Institute of Science, Bangalore?and plans to increase investment in science to $21.5 billion in five years.The 2006 India National Budget report included US$2.2 million allocated to upgrade universities as part of a skills development initiative. This past year the Indian Department of Science and Technology approved the establishment of an entrepreneurship development cell at the University of Kerala designed for science students and mid-career professionals.

Entrepreneurship-cell (E-cell) at the India Institute of Technology Bombay (IIT-Bombay) is a school-established program educating students on important and emerging technologies and helping them start their own companies in these fields. Comprised of many mini-programs, one of the most hands-on programs under the E-cell umbrella is the Summer Founder's Program, a business incubation summer course inaugurated in 2006 for students interested in entrepreneurship and running their own businesses. The 2006 class enrolled 40 students, and while the students gave up their traditional summer jobs, they were able to work on startup ideas within the safety of a university setting. So far the E-cell program has led to more than a dozen successful startups.

Many other schools have developed their own programs, but are focused more on placing students in jobs and graduate programs that will provide them with the skills and experience they need to one day create their own businesses.

The training and placement cell at International School of Photonics (ISP), Cochin University of Science and Technology, is very pro-active about exposing undergraduates to the real world.

"The cell brings out the career profile of aspiring graduates to attract the necessary attention from industries and higher education institutions," says Thomas Jony, student at ISP. "In India, photonics is a rapidly growing field. More students are interested in this field as the coming years have more opportunities."

In October 2006 Judge Business School (University of Cambridge, UK) and the Indian School of Business (ISB; University of Hyderabad, India) agreed to a three-year international student exchange program. The program will enroll selected students from ISB as full-time MBA students for one semester at Cambridge, while students from Judge Business School will visit ISB.

India Institute of Management Bangalore launched their Management Programme for Entrepreneurs and Family Businesses in December 2006, and Advanced Management Programme in January 2007.

Traditionally universities and colleges were fully financed by the government, but now multinational companies are donating money and setting up cooperatives at colleges and universities.

Intel India, already planning to invest a quarter of a billion dollars into a venture capital fund devoted exclusively to Indian-based technology startups over the next five years, teamed with University of California, Berkeley, in 2006 to implement a nationwide Technology Entrepreneur curriculum for college students. Qualcomm has established a Qualcomm Chair at IIT Madras as part of a US$175,000 grant to the university.

This interest from multinationals has raised concerns for some, while others welcome the influx of funds into the cash-strapped higher learning institutions.

But in the end, education and training cannot do it alone. India also has socio-economic issues to overcome like poor infrastructure and continuing inequality.

"I think the real investment is in things that affect the consumer a lot more, and again optical engineering and photonics probably play a role in this, which is the infrastructure of the country," says Shukla. "What are the things you need to really build a good highway system, water, energy, auto, food distribution? I think that's going to represent 85% of the opportunity."

"Enterprises have to be encouraged to face up to the social responsibility, e.g. sharing of their skills with the underprivileged sector, training and development of such people, as well as encouraging employees to become entrepreneurs. The focus must be on small and medium enterprises," says Roshan.

Indians overall are optimistic and confident about their future economic place in the world, and considering the investments venture capitalists and universities are making, the world agrees.

1. CIA World Factbook www.cia.gov/cia/publications/factbook.

2. Transition, 4th annual Ernst & Young Venture Capital Insight Report, May 2006.

3. Managing Attrition, Nasscom Market Intelligence Service, issue 41, 10 July 2003.

4. T. Ramasami, secretary of the Department of Science and Technology, press briefing, 25 August 2006.

5. Dyson, T., R. Cassen, and L. Visaria, eds. Twenty-first Century India: Population, Economy, Human Development, and the Environment, Oxford University Press (2004).

6. India: The Growth Imperative, McKinsey & Co. report, October 2001.

7. Yadav, Yogendra, and Sanjay Kumar, "The youth: their thoughts and aspirations," The Hindu, 16 August 2006.

8. Census of India 2001, Educational Level by Age and Sex for Population Age 7 and above.

A variety of optics- and photonics-based technologies are taking off in India, bringing billions of dollars annually into the country.

Much of the increased emphasis on these or related fields has been fueled by in-country demand. Fiber optics has long been the dominate technology in India, and now has a large local clientele.

Fiber-to-the-home technology, aiming at providing services such as Internet and telephones via optical fiber, have already created demands for optics engineers, says Rakesh Roshan of Sharp Labs of Europe (Oxford, UK). India has an approximate 50 million Internet users, with that number expected to grow dramatically in the next few years.

Comparatively, there are more than 100 million cell phone users in India, adding fuel to the semiconductor industrys fire. According to a Frost & Sullivan report, by 2015 semiconductors are expected to generate direct and indirect revenue for India totaling US$33.59 billion, with Indians themselves predicted to be contributing 6.5% of that revenue. This growth is also expected to contribute 2.96 million new jobs.

The biotechnology industry is just getting up and running in India, but it is already making a financial mark. The industry neared US$1.5 billion in revenues for the 2005-06 fiscal year, and is set to bring in US$5 billion by 2010. There are almost 200 companies with centers devoted to biotechnology R&D, and it is predicted to gain a share of 10% of the global industry over the next five years.

There are an increasing number of ways to get support as an entrepreneur in India, and not just financial help. Societies and groups the world over are providing mentoring, support, and information to would-be entrepreneurs.

"There are many organizations such as entrepreneur-based organizations here in [Silicon] Valley," says Anu Shukla, Rubric Inc. founder. "There's an organization called TiE?The Indus Entrepreneurs."

Founded in 1992, TiE is a non-profit business group made up of a combination of successful entrepreneurs who hope to pass their knowledge and skills on to the next generation of entrepreneurs eager to learn and grow. Its members now total more than 8000, with chapters all over the world, but concentrated mostly in the U.S. and south Asia. The group puts on seminars and workshops to help promote entrepreneurship, encourage startup business owners, and possibly provide venture capital.

Visit their website, www.tie.org, for chapter locations and more information.