Financial Daily from THE HINDU group of publications
Monday, Mar 21, 2005
`I want to be... '
Dr Madhu Mehta
THIS offer seems like it'll let you have the cake and eat it too. If you are a passionate entrepreneur with the proverbial fire in the belly, that is.
The cake on offer, from Dr Madhu Mehta, is the opportunity for an individual to be groomed as an entrepreneur for about six months and then be given seed funding if he is found good.
Nirma Labs, funded by Nirma Education and Research Foundation, wants to nurture potential entrepreneurs in its bid to encourage "large-scale wealth generation for stakeholders and society."
It even has a structured course that candidates, who get through the admission process, must go through before they get to present their business plan to a panel of judges.
eWorld was intrigued and met up with Dr Madhu Mehta. After all, isn't entrepreneurship supposed to be intuitive? Aren't entrepreneurs those who take the first chance to offer a product or service and then make incremental changes to their offering? So much so that even if the offering does not look one bit similar to what the entrepreneur started off with, it does not matter, since it is finally what the customer wants. In effect, isn't entrepreneurship all about serendipity? So where is the question of structure learning for an entrepreneur?
Dr Mehta, an entrepreneur himself and a PhD to boot, spent time with us to clear the picture.
He says, "There are four things that would help entrepreneurs hit the ground running: ability to identify missing elements and thus design a product or offering; money; network of people (to help get clients); and guidance."
Dr Mehta wants to create what he calls the Silicon Valley ecosystem so that wannabe-entrepreneurs start thinking like entrepreneurs. "It is easy to find folks offering to help entrepreneurs with business plans. But, the focus of our structured programme is individuals themselves."
Dr Mehta says the programme helps create attitudes for the long-term. "One of the reasons for success is an entrepreneur's ability to say `me last'."
He classifies entrepreneurs into three types: the grocery store owner; one who prefers to operate on a small scale instead of having to remain an employee; and a third type who has high aspirations wanting to create wealth for country and self. "We want to choose people belonging to the third category."
Now, what do these candidates, who gain admission to the course, go through at the Nirma Labs campus in Ahmedabad?
They go through three phases. The first helps `groom' these individuals. In this phase, they go through 30 weeks of course study that includes: high-tech entrepreneurship, creating entrepreneurial organisations, designing breakthrough products, high-tech marketing, high growth strategies, emerging technology and trends in ICT, legal and ethical aspects of global business and managing with a global mindset. After the first nine weeks, the individual or team of individuals starts working on a business plan that they will have to present at the end of the course.
Once that plan is chosen by a panel of judges, comprising entrepreneurs, the teams enter the incubating phase. At this stage, Nirma Labs invests seed capital to the tune of Rs 20 lakh to fund the enterprise. Further, each individual would get a stipend of Rs 8,000 per month for a certain period.
Says Dr Mehta, "We will facilitate interaction and networking opportunity with torchbearers whom we have identified, as well as with venture capitalists. In addition to mentors from Nirma Labs, each team will have access to a pool of expert advisors to help in legal, financial and regulatory matters.
Then comes the final phase when the project turns into a start-up company and is ready for growth. At this stage, the project is spun off into a company. The project team gets 80 per cent stake while Nirma Labs gets 10 per cent. The remaining is split between the mentor assigned to the team and a pool company.
The concept of the pool company is interesting. Each company that comes out of the Nirma Labs stable gets equity in the pool company. Each company also gives 5 per cent stake of itself to the pool company. So, even if a handful of companies of this stable succeed, the pool company, and hence other companies from the stable, would also benefit.
Then came the obvious question: how many successful start-up companies has Nirma Labs incubated till now? Dr Mehta explains, "We have only finished one batch. That began in June 2004. This year onwards, we want to do two batches a year." He adds, "Typically, from candidate selection through grooming to forming a start-up company could take between 26 and 32 months."
Nine people were admitted to the first batch and at the end of their course, formed four teams and made presentations. Of these, three were chosen. One project was in the area of automation of jewellery manufacturing, the other was to develop low-cost applications and the third was in the area of home automation. The candidates forming these teams had work experience that ranged from zero to four years.
How does Nirma Labs choose these people, in the first place? Says Dr Mehta, "We don't want to create an academic programme out of this. We look at people with interests in IT, bio-technology and bio-sciences. We conduct reference checks, conduct tests that evaluate them on intelligence quotient, emotional quotient, technical skills and even their adversity quotient."
He estimates that Nirma Labs should soon be able to take in about 25 people every term, with two terms in a year. "If we can incubate 10-15 projects every year, then over four years or so, we would have between 40 and 50 companies up and running. We would have made a contribution."
Sure, this is certainly one way to ensure that entrepreneurs get the right learning and atmosphere in which to bloom. But isn't this also an opportunity for individuals who may or may not form part of the mentoring or judging group, to access a clutch of business plans, for possible funding?
Explains Dr Mehta, "Ours is a not-for-profit organisation. We have got a grant of Rs 5 crore from Nirma Corporation and Rs 2.45 crore from the Government's Department of Science and Technology. These sums will help fund projects. When any of them turns viable and venture capitalists pay us for our exit, the money then will come back to Nirma Labs and not the parent company or an individual. It will find its way into investments in other projects that we incubate."
The set of people behind Nirma Labs includes Karasanbhai Patel, chairman, Nirma Ltd, Chetan Parikh, CEO, Ashima Texcellence and Nimesh Kampani, CMD, JM Morgan Stanley.
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