Key Elements of an Ideal Business Ecosystem

Business Ecosystem

The importance of entrepreneurship in building a vibrant economy is not a recent revelation. It is the creation of new businesses, however small they are, which will give a new momentum to growth and employment generation not only in developing countries but in developed nations as well. Policy makers also need to reorient their key priorities. While current account deficit, public debt, GDP and the regular economic ratios are all very important, focus should also be given to creating avenues of self-employment and encouraging citizens to embrace entrepreneurship as a viable career option. Entrepreneurs are the main engines of growth of any healthy economy. They act as important catalysts of change and growth by seeding innovation and creating new business models and industries. They also generate jobs, support local communities and build prosperous societies.

It is meaningless to say that countries are becoming stronger economically and deficits are starting to come down when millions of people around the world remain locked out of job market making true sustainable economic recovery a distant dream. However, the general view of society towards failed entrepreneurs has changed a lot in recent years. Entrepreneurs are now being increasingly acknowledged as value creators and, more importantly, job creators. Creating a suitable business ecosystem has become very crucial. Governments across the world have actively embarked on policies in this regard. While these policies may vary depending on the peculiar condition of each country, there are certain common factors which could be applicable to every country or society. The following is a framework which will be useful in devising localised policies.

Access to Finance

The traditional financial infrastructure of many countries finds it difficult to allocate funds to a new entrepreneur. The regular process of seeking collateral and giving securitised loans may not be the right mode here. While a mature ecosystem will have angels, venture capital investors and more established private equity players, new ecosystems need to have government-run institutions and government-funded programmes to encourage startup entrepreneurs. Some interesting initiatives in this regard are:

  • Encouraging startup funding by providing government-guaranteed loans to VCs
  • Creating a strong network of accelerators and incubators to support high-potential young entrepreneurs
  • Collaborating with the private sector to support online crowd-funding and creating new initiatives in a competitive environment, including equity crowd-funding

Access to Markets

While finances remain a top concern for many, access to markets is yet another core need. New entrepreneurs seldom have market or sector connect. The best link is sector-specific industry bodies, which can be incentivised for ‘introducing’ new businesses and creating a roadmap for synergising them with existing players. Another measure is the support offered for evaluating business’ export readiness and assessing infrastructure capability footprint. Offering advice on customer linkages and supply chain efficiencies can really help the entrepreneur. Some interesting measures are

  • Driving a government procurement scheme which includes youth entrepreneurs as targeted suppliers
  • Facilitating collaboration and procurement opportunities, between high-growth young entrepreneurial firms and leading corporates
  • Promoting access to export markets, including through export financing initiatives

Education and Mentoring

Capital and other support without mentorship is a lost effort. It is essential to provide financial literacy to prospective entrepreneurs along with mentorship and funding support. Fund mentoring programmes and/or invest in mentoring programmes through technology-focused or skills-focused government departments. There is need to link startup funding to mentoring by requiring young entrepreneurs to have a mentor at the early stages of their business. Some ideas to ponder here are:

  • Start early. Influencing the discussion among young people while they are still in school and university
  • Promoting organizations and environments that will positively influence public perception about entrepreneurship
  • Bringing together established entrepreneurs and industry bodies to leverage their experience

Regulatory Ease

Focused and clear tax and business incentives are very important in supporting entrepreneurs to scale up their businesses. These policies and measures need to be widely publicised and the government institutions which deal with this need to be adequately trained on how to disseminate this information in a simple and proper manner.

Some interesting measures in this regard are:

  • Developing effective instruments to measure administrative and compliance burdens
  • Simplifying tax rules and administration to ease burden
  • Improving support and guidance available to entrepreneurs

Industry Support

In order to have a sustainable impact, young entrepreneurs need to work as part of a regional ecosystem that fosters and attracts a critical mass of talent, capital and, most importantly, entrepreneurial leaders. The role of industry bodies and entrepreneurship fostering organisations like TiE Global is paramount here. They have the right framework to

  • Educate the unemployed youth about the opportunities entrepreneurship can provide them
  • Publicly celebrate young entrepreneurs’ success and international promotion of domestic startups and entrepreneurial firms
  • Integrate media/cultural campaigns with a broader national strategy that promotes the link between job creation and entrepreneurship

Enabling policy frameworks and funding are needed to stimulate and build the foundational components of a regional entrepreneurial ecosystem. Even if the policy principles and ecosystem components are in place, it can’t really be called an ecosystem until there is a network and a “culture” of interaction and collaboration.

Ultimately, the key metrics is the density of interactions and collaboration among a critical mass of leaders and actors that are dynamic, self-regulating and which foster achievement of entrepreneurs’ goals. Government plays a key role in bringing together stakeholders to initiate dialogue about entrepreneurship and building coalitions of stakeholders.

For India, it is an interesting phase and more so for Kerala. We hope that, in India, in the ensuing years, entrepreneurship will definitely trigger one of the biggest nation-building exercises in the history of mankind.

(The author is Executive Director-Markets, Kerala & Tamil Nadu, EY)