Nominated as a Young Global Leader (under 40) by the World Economic Forum, economist Tarun Khanna has been teaching at Harvard Business School since 1993. His latest book ‘TRUST: Creating the Foundation for Entrepreneurship in Developing Countries’ focuses on entrepreneurs in developing countries and looks at how trust is an important factor within existing structures to succeed. Khanna gives examples from other countries on how entrepreneurs can be successful despite the confines of local culture and the restrictions they face. In this chat with Latha Srinivasan, Tarun Khanna talks about entrepreneurship in India and why people must be willing to take risks.
NewsX: India is one of the most important markets today. What do you see as the role of entrepreneurs here?
Tarun Khanna: Entrepreneurship is absolutely central to the progress of developing countries. For India, with its demographic changes, this is especially true. On the upside, we can capitalize on energized youth being willing to start new ventures. It can also mitigate the downside risk for the country, that without creative new venture creation, at scale, we will not find enough employment opportunities for our youth entering the workforce. In any event, not anyone has to be an entrepreneur, that would be an absurd proposition, but it would be nice if everyone appreciated what it takes to engage in creative risk-taking.
NewsX: What are some of the biggest challenges that Indian entrepreneurs face and how can they overcome them?
Tarun Khanna: For someone starting out, risk capital remains scarce. Of course, it’s scarce everywhere, but especially so in developing countries. This is where a better policy framework can help in our country. We’ve taken some early steps through StartUp India and through Niti Aayog’s Atal Innovation Mission, but we have miles to go.
For someone past the very early stages of venture creation, accessing talent is the key challenge. As yet, we don’t have enough young talent that has requisite skill sets, nor do we yet have enough folks who have exposure to a broad set of life experiences, either through diverse professional backgrounds, or through travel overseas, for example, or other ways. Of course, all these will come with time, but currently, it ’s real bottleneck to scaling a venture.
We should pay much attention to the better run incubators and accelerators coming up in India today. For example, look at some of the ecosystems popping up around the IITs in Mumbai, Delhi and Chennai, very exciting! Look at Axilor in Bangalore, where I am co-founder, that incubator is, we feel, the most scientifically run effort to build an ecosystem at scale, and has established its reputation over just a few years since inception. These well-run entities are realizing that capital and talent go hand-in-hand. They provide capital, but equally importantly, provide mentoring and hand holding.
NewsX: The start-up ecosystem is thriving in India today. What is your take on this?
Tarun Khanna: Indeed it is, and it’s exciting. It’s been showing signs of growth for a long time. Ten years ago, I wrote Billions of Entrepreneurs (Penguin in India), an account of my adventures in China and India. Now, Trust is my sequel book, again personal stories of how creative individuals, several of whom I’ve known and tracked and worked with over a decade, have overcome amazing odds to build enterprises at scale. The ‘scale’ part is important, it’s as hard to do as the creative part of conceiving a venture. I’m excited to learn from their efforts, and my own efforts, and share it through the book.
NewsX: How do you think NGOs can contribute to this ecosystem?
Tarun Khanna: For me, entrepreneurship is a ‘big tent.’ That is, by entrepreneurs, I refer to creative problem-solving in all sectors – of course, this includes hotshots out to make a buck, but also folks in civil society and in the government where there is plenty of creative problem-solving at scale. For example, in the book, I profile Abed bhai to some extent, Sir Fazle Hasan Abed, who has built the world’s largest NGO – again, note the emphasis in the book on ventures at scale – from a standing start in the early 1970s from Dhaka. BRAC now spans over a dozen developing countries and is financially self-sustaining not for profit effort. Absolutely amazing.
NewsX: Funding is one of the biggest challenges for many entrepreneurs. Do you think that scenario is set to change?
Tarun Khanna: Yes, I highlighted above that risk capital scarcity is one of the biggest issues for those starting out. It’s improving in that more and more wealth creators are becoming providers of capital, organizing incubators and accelerators, and networks of angel investors. But again it’s early days. It would help if the policy-making apparatus engaged in this even further, after their encouraging start in past years. Learn from Israel for instance, and from China. My book has some ideas on this in the chapters on how the state gets involved.
NewsX: What is your advice to young entrepreneurs in India?
Tarun Khanna: Go for it, if you find something you can be excited to work on, but not without being confident of a reasonable degree of financial and psychological security. The psychological security is important, there are lots of ups and downs, thrills and disappointments along the way, and having a robust support network of colleagues, friends and family is a must to prop you up!
NewsX: Entrepreneurship is not always a success story. What would you say to those who failed in their ventures?
Tarun Khanna: Best indicator of future success! Also, I think you’ll see, and we’re already seeing I believe, that attitudes to failure are changing. Failed ventures are a credible signal of guts and gumption if the failure was handled correctly, smoothly and ethically, and the concerned entrepreneur took it as a learning experience.