CHAPTER 3

CONCEPTUALIZATION OF THE STUDY

3.1 I

The e m "en ep ene " appea fo he fi ime in he e i en b Can illon (1755)

en i led "E ai la Na e d Come ce en G n al" (R e al. 2012). Since hen, man
die e e done o de c ibe he e m en ep ene and en e p i e. En ep ene hip pla an
impo an ole in he economic de elopmen and emplo men gene a ion in a co n . The
MSME ec o in India ha a g o h a e of 12 pe cen and con ib e a o nd 6.11 pe cen o
he G o Dome ic P od c (GDP) of India (CII, 2019). Con ide ing he con ib ion made b
en e p i e o a d job c ea ion, he Go e nmen of India ha aken n me o ep o a d
p omo ing en ep ene hip. Recen ini ia i e like Make in India, S a - p India - S and Up
India, e e la nched o en ice he o nge gene a ion o en ep ene hip. The ini ia i e b he
Cen al go e nmen ha pe cola ed o e e a e. Thi ha led o he c ea ion of a - p polic
b a e go e nmen . Till da e 27 a e in India ha ini ia ed i o n a - p polic . Ke ala i
one ch a e hich ha c ea ed a Technolog a - p polic in he ea 2014. Since hen, he
go e nmen ha in od ced man cheme and cond c ed e en o c ea e a a - p c l e in
he a e. A nodal agenc , Ke ala S a - p Mi ion (KSUM), a e p o coo dina e he
en ep ene hip de elopmen ac i i ie of he a e. I p o ide inc ba ion facili ie , f nding
ppo and men o hip ppo fo a - p en ep ene .
A o lined in a d b Nambia and Bala b amanian (2017), A a - p eco em i
c ea ed b indi id al , a - p in hei a io age and a io fo m of o gani a ion in a
loca ion, in e ac ing a a em o c ea e ne a - p fi m . The e o gani a ion can be f he
di ided in o ca ego ie ch a ni e i ie , f nding o gani a ion , ppo o gani a ion (like
inc ba o , accele a o , co- o king pace e c.), e ea ch o gani a ion , e ice p o ide
o gani a ion (like legal, financial e ice e c.) and la ge co po a ion . O gani a ion foc on
pecific elemen of he eco em f nc ion and a - p a hei pecific de elopmen age .
S a - p eco em a e gene all encompa ing he ne o k of in e ac ion among people,
o gani a ion , and hei en i onmen . An pecific a - p eco em i defined b i
collec ion of pecific ci ie o online comm ni ie . In addi ion, e o ce like ime, mone and
kill a e al o con ide ed e en ial componen of a a - p eco em. Re o ce flo ing
h o gh he eco em a e mainl gained f om he mee ing be een people and o gani a ion

42
ha a e a majo pa of ho e a - p eco em . The e mee ing help o c ea e ne po en ial
a - p and/o o eng hen he al ead e i ing one .
Fo an Indian a p hinking o go global, he co of e ing p an en e p i e co ld be
p ohibi i e. B collabo a ing he e en e p i e i h hei co n e pa ab oad, i co ld become
a in- in i a ion. Al o, i h ba ie of c l e becoming i ele an a - p ha e he
oppo ni o hi e f om a la ge alen pool.
A start-up ecosystem is an interconnected system which consists of business at their various
stages, local/state government, mentors, service providers, investors, support organizations,
global companies, universities and human resources all of them which has its own niche. These
elements interact among themselves to support and nurture budding enterprises. They play a
great role in nurturing prospective enterprises. These elements influence the growth of start-up
firms.

India is the third largest start up destination in the world. The NASSCOM report 2019 shows
there are around 9300 start-ups in India and the number is increasing at the rate of 12-15 per
cent per year. According to the report, there are in total 24 unicorns, 390+ institutional
investors, and 335 active incubators and accelerators in India as of 2019.

3.2 Influence of Ecosystem Elements on Start-ups

An ecosystem supports the launch of new companies. It helps in creating jobs in our community
and thereby fosters economic growth. The ecosystem elements influence start-ups in its
respective niches. Entrepreneurs are the Centre point of any start up. They develop new ideas
and take the first step in the creation of a start-up. Apart from the idea generator, there involves
a talent pool of human resources which involves the experienced hands in designing of the
product, marketing, selling etc. Universities now have an incubation centre which develops the
young talents in colleges by giving them management training and office space. It acts as a
catalyst for economic development. Also, universities now provide entrepreneurship courses
to create awareness among students. The entrepreneurs seek the help of mentors in shaping
their ideas. Mentors are often called serial entrepreneurs. They give advice and helps in
executing the project. Mentors introduce the entrepreneurs to their circle and help in creating
contacts. As the mentors are not omnipotent, the start-ups might need multiple mentoring.

Teaming with the right service providers can have a huge impact on a start- p abili o
succeed. Service providers include banking, legal and human resource service providers.
Lawyers make the entrepreneurs aware of the legal formalities to be complied. Start-ups often

43
find it difficult to recruit right person for the right job. The ecosystem provides them with such
benefits. An ecosystem helps in fostering good relationship with corporate. On one hand it
helps start-ups as the corporate have international contacts. On the other hand, corporate will
be benefitted as they can adopt an innovative model brought by start-ups. The corporate at this
stage might not be fast enough to react to the dynamic world and adopt changes with their
traditional inadequate models. Also, the contacts with the corporate help them in raising fund
which helps in creating a better financial climate.

3.3 Role of Start-ups in Economic Growth

From earlier research it is found that compared to big corporate, start-ups are creating more job
opportunities in any country. Usually they test and try the models used by the corporate and
then adopt the best technique. Also, they bring out innovative techniques. They try to maximize
profit through innovation. Starting an enterprise increases the demand for various ancillary
units and thereby fosters development of the whole area. Thus, it promotes forward and
backward linkages and strengthens the economy.

It can be observed from the research done in developed countries that the economy stands
healthy and dynamic with increased number of start-ups. Thus, start-up fosters economic
growth in any country. When recession hit United States, it was the start-ups that created jobs,
more employment and brought back the economy. When all the countries withdraw from doing
business with the war hit Afghanistan, the young entrepreneurs within the country and the
supporting institutions contributed to the revolution in Afghanistan. When Apple Company
was formed, it made 300 employees millionaires. The demands for jobs exceed 12 million a
year in India. The start-up India campaign by Prime Minister will definitely pave way for many
more start-ups in the country. According to the NASSCOM Start-up Report, 2019, start-ups in
India created 60,000 new direct jobs and 1.3- 1.8 new indirect jobs in the country. India can
thus become a super power if measures are taken to create a conducive environment for start-
ups.

Flipkart, Snapdeal, Ola, Paytm and Quikr are five largest start-ups in present day India. Angel
networks and corporate too has started showing interest in initial investment and mergers with
the start-ups. But newspaper reports show that companies that have shown market leadership
and scaled up well will continue to raise funding while those who have not delivered on growth
expectations will continue to face stress.

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The Infosys co-founder Narayana Moorthy opines that the opportunities start-ups receive are
huge as the ability to buy something on a click is irresistible. His own venture capital firm
Cataraman has invested in many start-ups in healthcare and education sector. India iche
man and chairman of Reliance Industries, Ambani has set up a Rs 5,000-crore Venture capital
fund Reliance Jio Digital India Start up Fund to boost entrepreneurship in the country
over a five-year period. The fund will be used to develop and fund new businesses across
sectors such as agriculture, education, health, rural livelihood, and e-commerce.

3.4 S a - -T I N E a

A a - p can ei he be an offline o online de elopmen of a ili fo a c ome hich can

be in demand, backed b en e capi ali and angel in e o . The e in e o can ea n a
hand ome amo n of e n on he c lmina ion of he e a - p . The idea of a - p ho ld
be 'o of he bo ' ha co ld a ac he capi ali , con ide ing he c h oa compe i ion in
hi e a of globali a ion. The d b Kho la, Sha ma, & Madaan (2016) fo nd ha he o al
f nding in India (2015) a mo e han he GDP of 7 a e . Appa en l , a - p a e oa ing.
P e en l he e a e mo e han 29000 a - p in India hich i hi d la ge ba e in he o ld.
B 2020 he e a - p o ld be emplo ing 250000 people. The di ec impac ill be on
emplo men . We ha e an ad an ageo demog aphic di idend, i.e. 65% of he pop la ion i
35 o nde . S a i ic ho India ha bo l f ll of oppo ni ie fo he people in e e ed in
becoming elf-emplo ed. Keeping p i h he e pec a ion , he go e nmen ha nlea hed a
f ll-fledged ac ion plan fo c ea ing elf-emplo men oppo ni ie . The d al o foc e on
he latest reforms and policies for start-ups in India. Start- ups are provided with the facility of
simplified registration through mobile app and portal, 80 per cent rebate on patent filling
applications, tax holidays for three years, and exemption from prior turnover / experience for
manufacturing concerns, and faster exits within a period of 90 days as per recently tabled
bankruptcy law.
The d on Promoting en ep ene hip in India done by Rao, & Rao (2013) looked at how
the next generation of Indians were different from what it was earlier. Seventy years of
independence has indeed created a kind of entrepreneurs and business magnets, but a
depressing point is that still there is a lack of enough change in terms of attitudes, business
cultures and professional mind-sets, they were just about the same as what it was earlier. This
article examined the different aspects of entrepreneurship in India, China and US. If we

45
compare U.S, India and China in certain aspects like job creation (employment), education,
urbanization and innovation one will get the clear picture about entrepreneurship in these
countries. Tracking job creation in the US economy between 1969 and 1976, the study
concluded that firms with 20 or fewer employees were responsible for 60% of the new jobs
generated in the U.S. In America, public policy makers and universities awakened to the need
to pay more attention to a sector that had long been taken for granted or considered unimportant
in the macro economy. Programs to foster entrepreneurs and small businesses were launched
with taxpayer dollars. While China has been getting a lot of foreign investment, job creation
has not been fast enough to cope with the retrenchment of state enterprises because of the
reform policy. The rise in unemployment also means that the rise in Chinese labour costs will
also be delayed, which will serve as an additional comparative advantage. It was observed that
the relationship between entrepreneurship and job creation in India, from 1989 to 2005, there
is a strong growth in employment, similar to that found across cities in the United States.
Various educational institutions in India like IITs, IIMs, NITs, and other premier institutions
provide right skills that promote entrepreneurship and also incubate start-ups. India is
successful in services but it is still unable to compete with China in certain sectors. Therefore,
it is understandable that many start-ups are facing many entrepreneurial challenges in respect
of management, research and development, purchasing, sales, marketing and finance.
The findings of Deo (2013) in hi d The Impac of Globali a ion on Small B ine
En e p i e ho ha , a ne chance e e coming o in hi d namic o ld; man mall
enterprises had faced problems in figuring out new possibilities and operating their businesses
for more profits. The pros and cons were springing up from both, the home and international
sources. At the same time as there are opportunities for survival and boom for the extra modern,
entrepreneurial, era and knowledge-based SBEs, there are troubles and concerns for those who
lacked resources, progressive, entrepreneurial and managerial abilities and other abilities
required to carry out effectively in a globalising environment. There are regular adjustments in
clien need , compliance nece i ie , market expectations, tiers of competition and
echnological modifica ion in he home and in o e ea economie . I fa emp ing o
conclude that globalisation has created more challenges than possibilities for plenty SBEs. But,
a large frame of effective research records considering many countries is needed to confirm
such a conclusion.

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3.5 Challenges Faced by Start-ups in India

Present day the entrepreneurship cognizance amongst college students are rising and the
students are not interested to depend on parents or teachers or anticipate possibilities. They
have a tendency to take initiative to look for new possibilities for themselves. The study by
Sharifi & Hossein (2015) pursuits to research the challenges of financing start-ups in India. It
was observed that credit rating of small enterprises was low in India. Banks are finding it
difficult to get the actual state of affairs of the corporate finance, which influences the decision
making and granting of bank loans. The potential to withstand risk of small and medium sized
enterprises is substantially weaker when compared with big corporates. The improvement
tempos of these businesses are slow because of their financing difficulties. They generally tend
to lack enough investment for companies to further make bigger production, improve research
and improve competency. Banks hesitate to grant loans to these enterprises due to confined
profits. The main objective of commercial banks is to make profits. Small businesses take loans
from banks for negligible amount. In a short timeframe, the management cost of such loans
will be comparatively high for banks. These factors make it troublesome for small businesses
to apply for a loan from banks.
Sharifi & Hossein (2015) in their study Understanding the financing challenges faced by
start- p in India ha defined he main p oblem conf on ed b start-ups in India. The
education system is one of the obstacles for start-ups. In college, students are typically educated
with superior strategies however they lack advertising, income and operational capacity and
leadership capabilities needed to develop their organisations. Further, traditional lifestyle is
another major hindrance for start-ups. Family members usually prefer jobs with consistent
salary instead of taking risk. Another major challenge is that there is severe shortage of start-
up support networks and entrepreneurial environment. In India, incubators, start-up
accelerators, and start-up competitions are slowly entering into the first-tier cities, but there are
not enough support networks available. This scarcity makes several start-ups to vanish at the
concept stage of their business itself. The dearth of those facilities makes it harder for
entrepreneurs to seek out investors. Also, the lender faces difficulties in finding entrepreneurs
as well. Another major challenge faced by Indian Start-ups are India does not have enough
en e capi ali o f el he e pan ion of he co n start-up ecosystem. Investors fear the
risk of failure in these investments. Compared to large mature enterprises, small start-ups find

47
it more difficult in hiring staff owing to the explanation that it cannot pay high income to its
personnel or offer any career development opportunities.

3.6 Influence of Environmental Factors on Entrepreneurial Success

Until 1985, research targeted greater on personality traits and characteristics as it was believed
ha p chological fac o , in in ic o h man , had an e en i e effec on he pe on choice
to turn out to be an entrepreneur. Data suggest environmental elements also played a
contributing factor in the decision-making process to set up new ventures. Suresh and Ramraj
(2012) cond c ed a d on he opic En ep ene ial Eco em: Ca e S d on he Infl ence
of En i onmen al Fac o on En ep ene ial S cce . An indi id al deci ion o choo e he
path of entrepreneurship were said to be influenced by eight factors - Moral, Financial, Market,
Social, Network, Technology, Government and Environmental Support. Moral support and
market support from clients and distributors were determined to be enormous from interview
feedbacks.
The anal i of he d The S a - p Inno a ion in India done b D . Kamal Ag a al Dilip
Kumar Mishra (2016) shows that online start-ups in India have come a long way since the
starting of Internet technology in India. However, its ride in the last decade has been bumpy
because of lack of support from Government, market, and blinded vision of the business aspect.
A crucial role in shaping the path for these start-ups was the entry of accelerators and
incubators. However, it still has a long way to go before it could catch up with its counterparts
in other countries. As of the present scenario, the market segment such as online payment
gateways, micro financing, voice recognition, mass reach and mobile ad networks are good for
start-ups. Before entering into any of these segments, it is important for the start-up to have a
realistic business plans along with customer validation. They defined several positive aspects
of Indian ecosystem. They consider market consolidation and client and technology acquisition
as the principle drivers for boom in Merger & Acquisition of Indian start-ups. The investors
are getting more exit opportunities with this boom. Start-ups undertake new approaches to
draw in and retain prime talent. There is a need for directional efforts to help increase
supportive government policies (tax incentives, availability of risk capital, ease of doing
business, etc.)
The study by Shinya Suzuki and Hiroyuki Okamuro (2015) identifies the causal factors of
orientation toward international business growth by educational start-ups, concentrating on

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geographical characteristics of their site, mechanical abilities, and research requirements of
their parent universities and availability of public assistance. Based on the data collected from
457 academic start-ups in Japan and by estimating an ordered logit model, it was concluded
that these start-ups are strongly oriented toward expanding its business globally if they are
technologically progressed, received assistance from the public, are set up in geographical
areas where there are excessive rate of exporting small companies, if they're underneath a
parent university with a wonderful level of research works.

More than that, with regard to the impact of public assistance, the researcher compared the
effect of various sorts of public assistance and determined that only financial and physical
support (provision of equipment etc. for business operations) reinforced the orientation of
academic start-ups to internationalize their business. Furthermore, sub-sample analyses
disclosed that the determinants of international orientation vary according to the types of
academic start-ups: Technological capability amplifies the orientation closer to overseas
expansion of more matured academic ventures, however not that of early-stage ventures. Study
additionally disclosed that public assistance could not enhance the orientation towards foreign
growth of the educational start-ups affiliated with private universities and regional public
universities.
Woman entrepreneurship can make a contribution to a better entrepreneurship by granting
diversity in all aspects. Elisabeth S.C. Berger, Andreas Kuckertz (2016), conducted a study on
Female en ep ene hip in a - p eco em o ld ide . The ool ed fo he d is
qualitative comparative analysis which identifies the different ecosystem traits that act as the
major supporting factors for female entrepreneurs in the twenty successful start-up ecosystems
globally. The findings suggest that the positive attributes are within the ecosystems, as opposed
to at the national level. The local government can take steps to improve the participation of
females, particularly in start-ups and thereby multiply the number of women entrepreneurs. In
ecosystems with a majority of female entrepreneurs developing gender-specific public
procedures will be more appropriate. The government can also support by increasing the
approval rates of ideas brought in by the women entrepreneurs. The findings also indicate that
greater gender equality in addition with a beneficial micro environment encourage women
entrepreneurship.
There are no hard and fast rules that entrepreneurs can use to swiftly internationalize their
business from formation. Tony Maltby (2012) in his article analyses how business tycoons use
social networks to quickly enter global markets from beginning. The research was done to

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analyse the way in which the entrepreneurs (of Dewak S.A., a Colombian start-up founded in
2008) expanded their business internationally. Dewak was the idea generation of 5 jobless
Colombians. It was established in the year 2008. 2 years later, international sales constitute
95 h of he o gani a ion o al ale . The onl ed online ocial media networks to market
their products. Dewak grew its overseas sales hastily by way of not following the conventional
pha ed app oach o in e na ionali a ion. De ak fo nde in e ac ed ih c ome and
partners in a social media discussion board wherein issues and answers had been brazenly
mentioned.
Social media may be an inexpensive channel to reach foreign markets for the technology start-
ups. Marketers can use social media networks to increase mutual dependencies with clients and
partners who in turn help them to enlarge their tacit know-how and rapidly adapt it into the
products which satisfy customer needs. Customers can pick out suppliers primarily based on
their ability to troubleshoot problems and answer complaints. Marketing and sales costs can be
reduced to some extent via providing answers to the issues discussed within the on-line forums
and blogs.

3.7 The Start-up Ecosystem in Kerala And Karnataka

A o lined in a d b Nambia and Bala b amanian (2017), Bengaluru is regarded as the

Silicon Valle of India. I ha an fo med f om a pen ione pa adi e o he ci of
entrepreneurs. Being the largest start-up hub of the country, the vision of the government is to
develop the state into a world class start-up ecosystem through policy initiatives attracting more
entrepreneurs to bring in innovative ideas. The objective of the state is to develop other cities
into start-up hubs and maintain the position of Bengaluru as the largest start-up hub of the
country. The state aims at building 20,000 technology-based start-ups by the year 2020 which
will help in the creation of both direct and indirect employment opportunities across the state.
For the purpose the government aims to mobilize Rs 2000 crore fund for investing in start-ups.

The start-up sector in Kerala has experienced a vast change in the past 5 years. The government
of Kerala has developed a comprehensive start-up policy with the aim of nurturing an
entrepreneurial culture in the state. Kerala Start-up Mission (KSUM) is the nodal agency for
strengthening and coordinating all the entrepreneurial development activities of the state. The
main aim of the state government is to foster an entrepreneurial culture among the youth and
reduce the brain drain from the state. The government has set aside 1 per cent of its annual
budget for the entrepreneurship development activities among the youth.

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3.7.1 Start-up
The initiatives of Karnataka start-up policy is applicable for only technology based start-ups
which have been incorporated in Karnataka, under the Karnataka Shops and Commercial
Establishment Act, 1961, and it must be opened less than four years ago. Such company should
employ 50 percent of its personnel in Karnataka. Such an entity should not be formed by
demerger or reconstitution of an existing firm, a holding company, a subsidiary or franchisee
of an existing firm, or sponsored by any industrial group in the state whose turnover exceeds
300 crores. There are more than 4000 start-ups registered in Bengaluru as on 2017. RedBus,
InMobi, Zipdial, Flipkart are some of the successful start-ups from Bengaluru. Flipkart, Ola
Cabs and Quikr are some of the early unicorns from Bengaluru.
The initiatives of Kerala government are aimed at improving student entrepreneurship. The
entrepreneurially oriented students are supported by providing incubation facilities. The aim is
to create technology-based start-ups across different sectors in the state. As of 2019, there were
more than 2200 start-ups registered under KSUM (Kerala Start-up Ecosystem Report, 2019).
Majority of the start-ups are focusing on sectors like hardware, software, Agri- based and
biotechnology. NavAlt Solar & Electric Boats, Sastra Robotics, Reelmonk.com, Flipmotion Inc,
RondsInnotech etc. are some of the successful start-ups from Kerala. Kerala is at present in
search of an elusive unicorn.

3.7.2 Entrepreneur
The average age of a start-up entrepreneur in Karnataka is 28.5 years which is the lowest in the
world (M H Bala Subrahmanya, 2017). All Government supported start-ups shall be mandated
to allocate minimum 10% seats for start-ups with women co-founders on preferential basis.
Literature review shows that average age of start-up entrepreneurs in Kerala is between 15
30 years. Around 8 per cent of the start-up founders in Kerala are females (N.K.Nikhil,
Varghese Joy, Dr.Santha S , 2015).

3.7.3 Entrepreneurship in Education

Karnataka government has implemented a New Age Incubation Networks in engineering colleges
and they are planning to expand the scheme into 50 professional colleges in tier 2 cities during the
policy period 2015- 2020. Under the scheme the educational institutions will be provided assistance
to activate an incubation centre. The incubators in these institutions will be linked to a central portal
to form a network which facilitates exchange of ideas, thoughts and knowledge to encourage

51
student projects. Financial assistance for an amount of Rs 3 lakh per project is provided annually
for the institution. It also provides training for students and faculty members. The facilities are
made available initially for a period of three years. The institutions are later graded and considering
the key performance indicators, efficient institutions will be supported for additional two years.

In Kerala, policy initiatives are implemented in three tiers- school level, college level and start-
up level. To promote student entrepreneurship in Kerala, the government has initiated a policy
whereby students will receive 20 per cent attendance relaxation and 4 per cent grace marks for
pursuing entrepreneurship. To impart knowledge about electronics and basic computer science,
schools in the state are supported to provide Raspberry Pi and Start-up boxes to students. Recently,
college professors are provided with a sabbatical scheme to move out and pursue entrepreneurship
and can join back on failure. Students are also provided with Gap year facilities which allow them
to take a break of one year to pursue entrepreneurship. An international start-up programme would
be set up for school and college students to get an early exposure to entrepreneurship. KSUM
conducts idea day every year which provide college students an opportunity to present their
innovative idea in front of an expert panel. Scalable business ideas are provided with idea grant
which helps the students to create an initial prototype of the product/ Service. The incubators are
given an operational grant based on the number of start-ups incubated in a year. To inculcate
entrepreneurial talent among youth, Human Capital Development Programmes may be conducted
by recognized incubators. 10 per cent of the total program cost will be met by the government as
Program implementation and monitoring fee. The stamp duty and registration fees incurred on the
sale or lease deeds will be reimbursed to the extent of 100 per cent. KSUM through Future
Technologies Lab introduce Future spark to create awareness about technological innovativeness
among students of age 13- 17 years. They organize seminars and workshops on artificial
intelligence, robotics, AR/VR, machine learning etc. to introduce emerging technologies to
students. Innovation and Entrepreneurship Development centres (IEDC) are set up in colleges to
enable students to create a prototype while studying. There are in total 230 IEDC in Kerala. It also
organizes workshops and seminars for students on entrepreneurship, preparing business plan,
product designing, programming languages like Java, Python etc. The IEDC certifies the ideas of
the students and provide mini incubation facilities. KSUM organizes Idea fest where students can
pitch their ideas in front of a jury. The selected ideas are provided with innovation grant, lab support
and mentorship for developing their ideas.

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3.7.4 Incentives and Concession

Patent filing cost will be reimbursed by the Karnataka government to incubated start-up up to
a limit of Rs2 lakh. The reimbursement will be done in two stages- 75 per cent after the patent
is filed and 25 per cent after the patent is granted. The government provides reimbursement for
30 per cent of the cost involved for international marketing. The government also provides an
incentive of Rs30,000 per month to entrepreneurs of all incubated start-ups under Karnataka
cell.
Co po a e ocial e pon ibili f nd of a e PSU a e emplo ed o gene a e co p f nd o be
maintained with incubators in order to nourish start-up ecosystem in Kerala. The cost of filing
patents will be reimbursed to the incubated start-ups up to a limit of Rs2 lakh for Indian patents
and Rs10 lakh for foreign patents. The incubated start-ups will be reimbursed 20 per cent of
their power charges from the date of incubation. This facility is available for service start-ups
for a period of 3 years and for a period of 5 years in the case of product start-ups.

3.7.5 Incubators and Accelerators

Incubators and accelerators act as catalyst for the success of start-ups. Incubation services
include providing co working space, office space and training for the entrepreneurs. Incubation
services are provided mainly during early stage for start-ups. They also provide infrastructural
services for the start-ups. After the incubation period, acceleration is provided for a period of
3-6 months. Accelerators provide mentorship programs to existing companies to evade issues
confronted by the start-ups along their way.
There are 47 innovation hubs, 6 centres of excellence, and 5 Technology Business Incubators
in Karnataka. There is a total of 15 incubators approved by National Science & Technology
Entrepreneurship Development Board (NSTEDB) in Karnataka. Tlabs and Microsoft ventures
are some of the prominent accelerator. They provide mentorship, $50,000 start-up funding, and
free infrastructural tools to create a massive impact on start-ups.
The facilities provided by incubators in Karnataka includes R&D labs, common centre for
prototyping, common testing/QA/QC labs, design studios and tool rooms, fab labs, biotech wet
labs, infrastructure support, legal and accounting services. Start-ups are provided with office
space and co working space in government approved incubation centers.

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There are in total 40+ incubators in Kerala out of which 8 incubators are approved by NSTEDB
in Kerala. Ernst & Young is the key accelerator in Kerala. The organization provides office
space for start-ups and creates a network for start-up ind leade and VC . Accele a ion
is provided for a period of 6 months which can be further extended to enhance the skill
development of start-up entrepreneurs.
Infrastructural facilities provided in Kerala are similar to that of Karnataka. In addition, the
facility provides physical incubators an Incubation Infrastructure Development Fund as a
Viability Gap Fund. It is a fund directed towards projects which are economically justified but
not financially viable.

Table 3.1 List of Incubators and Accelerators in Kerala

NIT TBI Start-ups Valley - Amal Jyothi NRI TBI
BIONEST (DBT approved) Maker Village (Meity approved) IIMK Live
CET TBI Technolodge Piravom InQ
MI ZONE Technolodge Thiruvananthapuram IISR
Central Institute of Fisheries Kerala Agriculture Value Product SCTIMST-TIMed
Technology Research & Development (DBT approved)
NASSCOM Start-up Kerala University Technology and Technolodge
Warehouse Business Start-up Centre (KU-TBSC) Kannur
Start-up Dreams IAMAI Mobile 10x GECBH TBI
CIITIC - CUSAT CTCRI Incubator CPCRI Incubator
BIC Kannur Women Business Incubator B-Hub
KSIDC BIC, Kochi Amrita TBI (DST approved) Care keralam
KSIDC BIC, Calicut Sahrdaya TBI CUSAT
ICAR - CIFT Technolodge Muvattupuzha Hatchspaces
KSUM Tvm KSUM Kochi KSUM Kozhikode
Hardware Accelerator K Accelerator Logistics Accelerator XR Accelerator

Source: Kerala Start-up Ecosystem Report, 2019

3.7.6 Ease of Doing Business

Karnataka government has set p a start-up cell fo an e ing he q e ie and o gi e
feedback for the aspirants. It allows self-certification by registered start-ups in environmental

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laws and other labor laws. The government has set up a start-up portal which facilitates
registration of start-ups much easier. The entrepreneurs can apply for incentives through this
portal. A start-up open house is conducted to resolve any issues and to interact with the
stakeholders.
Top five reforms implemented by the state of Kerala to improve the ease of doing business in
Kerala. The government through KSUM established a centralized help line number to facilitate
queries regarding the application and approval process. A single window was set up to clear
timelines for issuing all approvals and for addressing investor grievances. Information on land
banks for industrial use was made publicly available online. Building bye-laws included
accreditation programs and clear responsibilities and liabilities for professionals including
architects and engineers engaged in the construction process. Information on the procedure and
comprehensive lists of all documents that need to be provided are available on the web site.

3.7.7 Start-up Funding

Start-ups in Karnataka are equipped with early stage funding. As of 2019, there are 359 funded
start-ups and 39 are venture funded in Karnataka. Start-ups are funded through Idea to Proof
of Concept. An ignition fund is set up to assist start-ups in meeting cost on certification,
manufacturing pilot devices etc. the fund is release in the form of Grant- in- Aid up to an
amount of Rs50 lakh. The amount will be released in tranches based on the life cycle of the
business plan. A fund of funds will be allocated for investing in venture funds that invest in
start-ups in various sectors. A portion of the fund of funds shall be utilized for angel stage
funding. Ideas are also funded through grand challenges. The state calls innovative proposals
to solve any issue faced such as water scarcity, traffic congestion etc. The best ideas will be
funded through grand challenge calls.

The Government of Kerala contributes to SEBI approved Venture Capital funds to the limit of
25 per cent. Incubators managing the Seed Fund of Start-up India Scheme are provided with
matching seed fund to multiply the amount received for start-ups. Other incubators are given
Seed Fund on the same standards as the Central Government Schemes. KSUM provides Idea
grant, productization grant and scale up grant for start-ups in Kerala. Idea grant is limited to Rs
2 lakhs and are given to convert the prototype into Minimum Viable Product. Productization
grant limited to an amount of Rs 7 lakh is provided for converting the minimum viable product
into a product. As of 2019, 181 ideas are supported and Rs 5.51 Crore were sanctioned as Idea
and productization grant. Scale up grant is limited to an amount of Rs 12 lakh per idea and are
55
given for the revenue generating start-ups to scale up their operations. 65 ideas are supported
through scaleup grant and Rs7.3 Crore are sanctioned. Apart from this, Kerala government
provides seed funding support at the initial stage. Government organizations like Kerala
Financial Corporation, Kerala State Industrial Development Corporation also provides funding
support for start-ups. Kerala State Industrial Development Corporation (KSIDC) has set apart
Rs10 crore as Seed Fund to support early stage start-ups.

Table 3.2 Comparison Showing the Start-up Ecosystem in Karnataka and Kerala

FACTORS KARNATAKA KERALA

To become a world class start- To emerge as the No. 1 start-up

VISION up ecosystem with strategic destination in India and among
investment and policy the top 5 in the world
intervention

9744+ 2200+
START-UPS RedBus, InMobi, Zipdial, Flipmotion Inc,
Flipkart RondsInnotech, Reelmonk.com

Average Age: 28.5 years. Average Age: 15- 30 years.

ENTREPRENEURS Gender: Allocate 10% seats Gender: 5 % Female Founders
for start-ups with women co-
founders on preferential basis.

New Age Incubation Raspberry Pi and Start-up

ENTREPRENEURSHIP Networks boxes
IN EDUCATION Financial assistance: Rs3 lakh Sabbatical scheme: college
annually. Training for students professors
and faculty members Gap year facilities: Students

Reimburse Rs2 lakh of Indian Patents: reimburse Rs2 lakh of

patents and Rs10 lakh of Indian patents and Rs10 lakh of

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 INCENTIVES AND foreign patents and 30% of foreign patents; 20 patents
CONCESSION international marketing cost. facilitated.
Reimburse Power charges:20%
58 centre across Karnataka 40+ incubation centre.
INCUBATORS AND Accelerator: Tlabs and Accelerator: Ernst & Young
ACCELERATORS Microsoft ventures

Self-certification by registered Set up single window for

EASE OF DOING start-ups, set up start-up portal, approvals, centralized help line
BUSINESS start-up cell, start-up open number
house
Early stage funding, funded KSUM Idea grant,
START-UP FUNDING through Idea to Proof of productization grant and scale
Concept, fund of funds, grand up grant, KSIDC Seed fund,
challenges matching seed fund of Central
Govt.
1st state to announce multi 1% of the budget earmarked for
UNIQUE SELLING sector start-up policy entrepreneurship development
PROPOSITION
Source: Secondary Data

3.8 Entrepreneurship Development Initiatives of Kerala Start-up Mission

A men ioned ea lie in hi d , Incubation support given to start-ups in Kerala dates back
to 2002 when Technology Business Incubation Centre was set up under Technopark. It
provides incubation facilities for IT and ITeS start-ups. It was registered under the Travancore
Cochin literary, Scientific and charitable Societies Registration Act XII of 1955. Later, in 2005,
it was rebranded as Technopark Technology Business Incubator supported by the Government
of India and the Department of Science and Technology. In 2012, T-TBI was taken over by the
Government of Kerala. It became the nodal agency for entrepreneurship development activities
of the state. In 2015, T-TBI was rebranded as KSUM and started implementing the Kerala
Technology Start-up Policy, 2014 by means of 9 components such as Infrastructure, Incubators
and Accelerators, Human Capital Development, Funding, State Support, Governance, Public
Private Partnership, Scaling Existing and Establishing New Incubators and Start-up-Bootup-

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Scale up model for moving fast from ideas to IPO. Since then, KSUM coordinates the
entrepreneurial development activities of the state.

3.8.1 KSUM Initiatives at the Start-up Level

Apart from the funding support and incubation facility, KSUM provides other support services
for start-ups in Kerala. A brief review of the various services provided by KSUM is presented
here.

1. International Entrepreneurial Exchange Program: The start-ups are given an

oppo ni o ii o ld op eco em like Silicon Valle , London, Tel A i . The
cost involved are reimbursed up to an amount of Rs 1 Lakh per program. 112 start-ups
from Kerala were benefitted from this initiative.

2. Marketing Support: Start-ups are given opportunity to showcase their product in

national and international conferences. KSUM will pay a part of the stall rent incurred
to showcase their product. KSUM also provides support to the start-ups for product
launch campaigns. A major initiative taken by the government to support start-ups is
direct procurement of the software products to the government department. 28 start-ups
were supported through this initiative.

3. Events: KSUM conducts many events mainly aimed at creating a network for start-ups.
Huddle Kerala is one such program which provides a platform for investors, start-ups
and other interested parties to exchange their ideas. Workshops are also conducted as
part of the event. Seeding Kerala is another event organized by KSUM. Investors from
all over the country are invited to the event to showcase the promising start-ups in
Kerala. KSUM also conducts Meetup Cafe every month at different locations which act
as a platform for start-ups, investors and mentors to meet and share knowledge. KSUM
al o cond c in e o caf a Kochi e e mon h. In e o and VC a e in i ed o
attend the program. Start-ups looking for scaleup grant can pitch their ideas and raise
funds. 5-day Management Development Program at IIM Kozhikode helps start-up
entrepreneurs to face the challenges met while scaling up and fill the skill gap. The cost
involved in attending the program is completely borne by KSUM.

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4. Women entrepreneurship: According to the Start-up Ecosystem Report, 2019,
women entrepreneurs constitute only 5 per cent of the total start-up entrepreneurs in
Kerala. To bring more women to entrepreneurship, KSUM conducts many events
particularly for women. KSUM organized women start-up summit to create a platform
for enthusiastic potential woman entrepreneurs. The summit witnessed participation of
successful women entrepreneurs, policymakers and potential entrepreneurs. Sessions
and one to one discussion were part of the event. The winner of She loves Tech 2019
national grand challenge got an opportunity to attend high level bootcamp and
showcase their business on International Conference of She Loves Tech in China.
Apart from KSUM, government organizations like Kerala State Finance Co-operation
(KFC), Kerala Industry Trading Consultation Organization (KITCO), District
Industrial Centers (DIC), Small Industrial Service Institution (SISI) also assist women
entrepreneurs in developing project reports, training assistance and meeting the cost of
building and machinery incurred for starting a business (Prasanth A.P., 2018)

5. Industry Collaborations: KSUM signed MoU with OPPO, Future Group, Wadhwani
Foundations, BPCL, AIRBUS, Space park and Orbital Micro Systems to create
incubation and mentorship facilities and market support for start-ups. KSUM also
partners with NASSCOM, CDAC, FICCI, GTEC, ALTAIR, UNITY AND TEJUS
Networks. For branding and promoting start-ups, KSUM collaborates with Channel
I M.com, Media Con l an , CAT En e ainmen and Inc42. Fo f nd ai ing
workshops and training, KSUM collabora e i h Le Ven e, TiE Ke ala, In e
India, Kerala IT Mission and Singularity University. To provide training for start-ups,
KSUM collaborate with the Centre for Bits and Atoms MIT, IIM- Kozhikode, IIM-
Ahmedabad, ICT Academy Kerala, Copenhagen Institute of Interaction Design,
University of Illinois. The incubation partners of KSUM includes Maker Village,
KSIDC incubator, SCTIMST-TIMed, IIM Kozhikode and IAMAI 10X. Google Cloud,
Amazon web services and Digital Ocean provide cloud services for start-ups. Other
service providers include ZOHO, Razorpay, cleartax and Mathworks.

6. Tools and Equipment support: Start-ups are provided with Start-up Box which
includes computer, a smartphone, a hotspot device, and an ebook reader. In addition,
Future Technologies Lab provides start-ups infrastructure and equipment for R&D. this

59
 is done to remove entry barriers for start-ups in the digital era and fosters the
entrepreneurial spirit among youngsters.

3.9 Resource Based Theory

As explained in a study by Nambiar and Bala b amanian (2019), Many researchers have
contributed scholarly works in the area of venture performance. Identifying the factors
contributing to venture performance is a vital subset of entrepreneurship literatures (James A.
Wolff and Timothy L. Pett, 2006). In the recent decade, policymakers around the world have
initiated reform measures to promote entrepreneurship, considering the contribution made by
enterprises towards the economic development of a country. This has led to the introduction of
many start-up firms with innovative ideas. In this new era of tech, firms adopt artificial
intelligence, machine learning and information technology to bring innovation either in the
product or production process. We are now in the third wave of internet revolution, where the
development in information and telecommunication sector are brought to the real-world
industries like agriculture, healthcare and many more (Start-up Genome, 2018). Advanced
manufacturing and robotics, Agtech and new food, Blockchain, artificial intelligence, big data
and analytics are the top growing subsectors in the world (Start-up Genome, 2018). Apart from
the primary business activity, there are many internal and external factors contributing to the
success of a new venture. Kerala has witnessed the emergence of high-tech start-ups in the
recent decade. One of the major reasons for this can be the policy measures adopted by the
Government of Kerala to build a conducive environment for doing business in the state. In the
long run, this helps in job creation and solving the unemployment problem faced by the
country. The positive move by the government, to an extent, has led to the reverse migration
of serial entrepreneurs to their hometown.

Along with the external factors like government and institutional support, there are a host of
internal factors which affect the performance of a business. Resource based capability and the
competitive strategy adopted by the firm are two such factors contributing to the success of a
venture. The theory of resource-ba ed ie a coined b Edi h Pen o e in he la e 1950 b
which, the heterogeneity of the resources possessed by the firm contribute to its competitive
advantage (S. Rivard et al, 2006). The heterogeneity can be either in the tangible assets or in
the intangible assets like the capabilities of the management (Kazi Afaq Ahmed, 2017). The
quality of the entrepreneur and his decisions determines the success of an enterprise (I.C.

60
Macmillan et al, 1985). Several researchers have hypothesized and proved that the resource-
ba ed capabili ie and compe i i e a egie a e de e minan of fi m pe fo mance (M.
Kakati, 2003and G. N. Chandler and S. H. Hanks, 1994). Hence the purpose of this study is to
ascertain the resource-based capabilities and competitive strategy adopted by the high- tech
start-up entrepreneurs in Kerala.

Many researchers have adopted the resource-based view to measure its impact on firm
performance. This study has used the criteria used in the past studies of Kakati (2003) and G.
N. Chandler and S. H. Hanks (1994) to determine the resource-based capabilities and
competitive strategy of high-tech firms in Kerala.

The resource-based capability was analyzed using the variables managerial capability (problem
solving, decision making, employee retention), technical capability (technology, technical
expertise), marketing capability (expertise in customer service, adaptability to market
dynamics, marketing expertise, distribution logistic), and input sourcing capability (access to
low cost of capital, raw material, and skilled labor)
Competitive strategy was measured by looking into cost strategy (emphasis on cost reduction
in all facets of operations, process innovation to reduce cost, and improve productivity), quality
strategy (emphasis on producing error free product and offering superior products to customer),
innovation strategy (emphasis on product innovation, innovation in marketing techniques), and
customization strategy (emphasis on meeting unique customer requirement and tastes).
Measuring firm performance is difficult as the sample for the study are start-up firms. To
prevail over this issue many researchers has considered broad categories like business volume,
growth etc. (Chandler & Hanks, 1994). The present study considers profit making as a
benchmark for success in business. Growth in sales, financial position, growth potential of the
business and morale of the employees were also used in addition to analyze the performance
of the enterprise.

3.10 Start-up Ecosystem Model

A model serves as a roadmap to alert the entrepreneur on various stages of entrepreneurial

process. An ecosystem consists of different variables to support a start-up. A model identifies
the external and internal variables contributing to the venture creation and establish a

61
relationship among them. It suggests a better method of venture formation. The novelty
introduced at each variable distinguishes a venture from other.

3.10.1 Triple Helix Model

The triple helix model was coined by Etzkowitz & Leydesdorff in 90 . Since hen, man
researchers have studied about the inter connections between Government, Academia and
Industry. It involves the interaction of Government, academia and industry to foster regional
development, create a knowledge-based economy and to start incubation services in the
university context (Leydesdorff, 2012). The interaction of the elements of triple helix, upgrades
the performance of each element and create an environment for innovation.

Source: Etzkowitz & Leydesdorff (2000)

Figure 3.1 Triple Helix Model

In a ai egime , he go e nmen pla a majo ole in d i ing he ind and the university
a in he ca e of China. In a laissez-fai e egime he a e ha le in e en ion in he
innovation process, where, industry is the driving force for economic development and
universities are the supplier of skilled human resources. In a triple helix system, the university
also plays a major role in partnership with the state and the industry in transition of an economy
into knowledge-based economy. The tri- lateral network creates an environment for innovation
and each component plays more than one role when any component is underperforming. The
R&D department and the university labs will be used for industrial research purpose. The
government agencies and the industry provide funding support to universities for conducting

62
research. The university provides incubation support for entrepreneurially oriented students. It
facilitates knowledge transfer from university to industry. The intersection space of all the three
components create an environment for innovation (Ranga & Etzkowitz, 2013).
Bengaluru is the start-up hub in India and is home to the greatest number of unicorns from
India. The initial foundation of triple helix model lead to the creation of an ecosystem in
Bengaluru. Same is the case of emerging ecosystems in Hyderabad and Kerala where both the
states have adopted a triple helix model. As explained earlier, the government of Kerala has
taken many initiatives like introduction of Innovation and Entrepreneurship Development Cells
(IEDC) in colleges to bring universities to actively take part in the creation of an entrepreneurial
ecosystem in the state.

3.10.2 Kerala Model Start-up Ecosystem

Fig: 3.2 Kerala Start-up Ecosystem Model

The initiatives to support the start-ups in Kerala commenced when the government created the
Kerala Start-up Policy in the year 2014. Till then the activities to support entrepreneurship was
scattered and undertaken by different organizations. After the creation of Start-up Policy, the
government rebranded the Technopark- Technology Business Incubator (T- TBI) as Kerala
Start-up Mission (KSUM). KSUM was created as a nodal agency to unite the entrepreneurship
development activities of the state. KSUM implements the policies initiated by the government.
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The organization conducts various workshops and events to support the start-up community. It
creates Memorandum of Understanding (MoU) with organizations, inside and outside India,
which could help the start-ups either by way of funding or business. There are three incubators
under KSUM- at Trivandrum, Cochin and Calicut. Other than the incubators operated by
KSUM, there are many other incubators operated by universities and other organizations in
Kerala. The start-ups set up their office spaces in the incubators. These incubators provide
mentorship support to the start-ups registered under the incubator. They also provide business
support and seed funding assistance to the start-ups. In return for the services provided by the
incubators, the companies registered in the incubator pay a monthly rent. The start-ups in
Kerala are funded directly by the incubators, by KSUM or by other government institutions
like KSIDC. The government creates business for the start-up by providing government
projects to the start-up. There are many start-ups in Kerala which provides a solution to any
social issue prevailing in the state. When the state was affected by flood in the year 2018, many
start-ups worked for the government to help the state in facing the calamity. In the long run,
these start-ups will create employment opportunities and contribute to the economic
development of the region.

3.11 Concluding Remarks

This chapter discussed the present scenario of the Start-up Ecosystem in Kerala. According to
the Global Start-up Ecosystem Ranking done by Start-up Genome, Bangalore, in Karnataka, is
the 18th best start-up destination in the World. No other city from India has made it to the global
rankings. Availability of finance, suitable labour and cultural difference towards
entrepreneurship can be the reasons for the success of Bangalore. The section compares the
start-up ecosystem in Kerala with Bangalore. The government schemes available for start-ups
in both the region were found to be similar to an extent. The chapter also discusses about the
Triple Helix model coined by Etzkowitz and Leydesdorff (2000) and the Kerala Model Start-
up Ecosystem.

References:

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Websites:

1. https://www.entrepreneur.com/article/283391
2. https://www.financialexpress.com/opinion/india-needs-triple-helix-model-of-innovation-
in-universities/1706953/

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