Excerpts from the speech of President.
National Policy for Skills Development and Entrepreneurship in 2015
Vision:- “create an ecosystem of empowerment by skilling on a large scale, at speed with high standards, and to promote a culture of innovation based entrepreneurship, which can generate wealth and employment, so as to ensure sustainable livelihoods for all citizens in the country”
In India, we have a large eco-system of 4,500 start-ups – the third largest in the world. Even then, it is not easy to start a new venture in India. Access to funding and mentorship remains a hurdle. In key parameters such as ease of doing business and R&D investment, there is scope for much improvement.
To achieve centre-stage in innovation, we need to work relentlessly in aspects such as creation of a favourable business atmosphere; improving the quality of education and skills training; and expanding the IT infrastructure including high speed internet connectivity.
Our policies like Start-up India and Atal Innovation Mission are geared to support the start-up environment. The public and private sectors both have to play a catalytic role in further developing such an eco-system.
The investor community – the angel investors and venture capitalists – has a crucial role to play in the transformation of innovative ideas into successful business models. Every start-up may not turn successful.
Studies have indicated that ninety percent of new ventures that don’t attract investors fail within three years.
Investors prefer a proven business model before investing and scaling it up. Innovation-based projects have uncertain outcomes. Their returns are often skewed as they have to confront the “valley of death”.
It is that early phase comprising the ‘seed’ and ‘start-up’ stages in which: (i) a novel idea or a concept is developed; (ii) its technical feasibility, market potential and economic viability are determined; (iii) a product prototype is designed; and (iv) a formal business organization is established. These early stage activities involve sunk costs resulting in negative cash flows for the new firm.
Investors are often shy to fund innovation start-ups as they are not sure of their success. But one must understand that even though nine out of ten ventures that an investor may fund, may fail; still, the one venture that will succeed, will make good the loss incurred on the rest.
Such are the rules of the game. Our investors must have an eye for sifting the good ideas from the ordinary ones. They must have the risk taking ability and appetite to nurture innovative ideas into successful products and services.
Remember these words of the famous management guru Late Peter Drucker:
“In every success story, you will find someone who has made a courageous decision” .
Death Valley Curve
It refer to the period of time from when a startup firm receives an initial capital contribution to when it begins generating revenues. During the death valley curve, additional financing is usually scarce, leaving the firm vulnerable to cash flow requirements.
The name “death valley” refers to the high probability that a startup firm will die off before a steady stream of revenues is established. After a firm receives its first round of financing, it incurs a lot of initial costs. Offices are usually built, staff is hired and operating costs are incurred; meanwhile, the firm is not earning significant income. Unless a firm can effectively manage itself through the death valley curve, it will fall victim to negative cash flows.