In this paper researcher has discussed aspects of entrepreneur ecosystem and how they are collaborate with each other to generate employment. Different models regarding entrepreneurship ecosystem are suggested by eminent economist focuses on the entrepreneurial personality, the entrepreneurial process, and the entrepreneurial development of a region. Government policies, finance, culture, support, human capital and market are the key contributors to the entrepreneurship ecosystem. In India, public sector and large private sector organizations failed to generate adequate number of jobs. Hence India has geared up to adopt the culture of startups with 4200 startups till 2014. Indian government also supports this ecosystem by providing funds, technology and necessary infrastructure. With business friendly environment India can replicate the success story of IT and ITES sector which contributes 9 percent to Indian GDP

Sathe, P. V.

English

International Research Journal of Multidisciplinary Studies (IRJMS)

1.1 INTERNATIONAL RESEARCH JOURNAL OF MULTIDISCIPLINARY 
STUDIES  
 
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ENTREPRENEUR ECOSYSTEM: THE INDIAN PERSPECTIVE 
 
Dr. P.V. Sathe 
Asso. Professor, 
 Brihan Maharashtra College of Commerce, pune 
Abstract: In this paper researcher has discussed aspects of entrepreneur ecosystem and how they are 
collaborate with each other to generate employment. Different models regarding entrepreneurship 
ecosystem are suggested by eminent economist focuses on the entrepreneurial personality, the 
entrepreneurial process, and the entrepreneurial development of a region. Government policies, 
finance, culture, support, human capital and market are the key contributors to the entrepreneurship 
ecosystem. In India, public sector and large private sector organizations failed to generate adequate 
number of jobs. Hence India has geared up to adopt the culture of startups with 4200 startups till 
2014. Indian government also supports this ecosystem by providing funds, technology and necessary 
infrastructure. With business friendly environment India can replicate the success story of IT and 
ITES sector which contributes 9 percent to Indian GDP. 
 
Keywords: Startup, Entrepreneur Ecosystem, Angle Investor, Capital Venture Funds. 
 
1 INTRODUCTION 
India needs to create 10 to 15 million jobs per year for the next decade. Accelerating 
entrepreneurship and business creation is crucial for such large-scale employment generation. Indian 
public and private sector businesses failed to generate ample employment in the past few decades. 
Public sector and Government employment has declined in the last few years. Large private sector 
firms have also been slow in generating employment, due to increasing automation, digitization, and 
productivity gains. For example, the banking sector in India has recorded almost no employment 
growth in the last two decades despite multifold growth in its revenue and assets. India has the 
potential to build 10000 scalable start-ups in the next 05 years which are capable of generating 
revenues of Rs 10 lakh crore and creation of employment at the same scale as projected for IT and 
ITES industry.  
However, there are significant roadblocks that hold back and dampen entrepreneurial activity in 
India. The country ranks low on comparative ratings across entrepreneurship, innovation and ease of 
doing business. The ecosystem for starting and running new ventures has many gaps. Regulations 
and procedures are restrictive and time-consuming and add significant cost for an emerging venture. 
Banks and financial institutions are wary of lending to first-generation entrepreneurs. Educational 
institutions are yet to actively promote entrepreneurship over careerism. Lack of collaboration 
between all stakeholders leads to further roadblocks. 
2 OBJECTIVE 
This paper is intended to study the different aspects of entrepreneur ecosystem and how they are 
collaborating with each other to generate employment and overall growth of the economy. It also 
focuses on Indian startup scenario and suggests measures to be taken to improve the situation of 
startup culture in country.  
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3 WORKING DEFINITIONS 
Startup:  
Startup is a newly created company based on innovation/new technology, having replicable and 
scalable business model. It requires lower upfront and operational costs. It involves more risk and 
with higher return on investment from the point of the investor.  
Entrepreneur Ecosystem: 
Set of individual elements such as leadership, culture, financial and human capital, which are 
intertwined in a complex manner. Each of these elements is relevant for a region´s entrepreneurial 
activity, but without the other elements it is not sufficient for a sustainable entrepreneurial 
ecosystem. 
Angel Investor:  
Angels are generally high net worth individuals (HNWIs), successful serial entrepreneurs or senior 
professionals. They not only provide capital but also act as great scouts of emerging ideas. 
4 CONCEPT OF THE ENTREPRENEURIAL ECOSYSTEMS  
It is now worldwide accepted that young and innovative companies are essential for a healthy 
economic climate. Due to their flexibility and innovative power they can react to a changing 
environment faster and are therefore less prone to crises. In addition, young companies also 
contribute considerably to the employment rate of a region.  
4.1 Entrepreneurial Ecosystem: 
The term “Entrepreneurial Ecosystem“, was explicitly mentioned in 1988 by Jude Valdez in order to 
explain the phenomenon of start-ups. According to Valdez, start-ups can be defined as the result of 
the relations of potential entrepreneurs, their immediate environment and current market 
circumstances. A potential entrepreneur is a complex personality who has a certain educational 
background, a certain attitude towards risk, an alertness with regard to opportunities, financial 
resources etc. at his disposal. The entrepreneurial environment comprises many several 
circumstances and influences the entrepreneurial decision of the potential entrepreneur. 
Another interesting perspective on the entrepreneurial ecosystem is presented by Gnyawali and 
Fogel(1994). Here the authors develop a theoretical framework which categorizes the environmental 
factors in five dimensions and links them with the five core elements of the start-up process, which 
comprise entrepreneurial opportunity, ability to enterprise and propensity to enterprise 
Isenberg (2010) defines an “Entrepreneurial Ecosystem” as a set of individual elements such as 
leadership, culture, financial and human capital, which are intertwined in a complex manner. 
Resources that are required for entrepreneurial activities (customers, workers, funding, suitable 
buildings etc.) are concentrated locally and attract each other. A sustainable entrepreneurship 
requires an ecosystem and an ecosystem in turn requires the resources which then can take effect 
together. 
 
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Fig. 1 : Isenberg’s(2011) Model of Entrepreneurial Ecosystem 
4.2 The entrepreneurial journey  
The entrepreneurial lifecycle begins with an idea which needs start-up capital. Early sources of 
capital typically include:  
 
Figure 2: The early entrepreneurial journey & the role of capital providers 
A. Friends and family: This is the first source of funds for an entrepreneur with limited funds of his/ 
her own. In India, with a culture strongly rooted in communities, family has been the most important 
source of capital.  
B. Incubators: Incubators usually provide hard infrastructure and services such as mentoring, 
advisory, access to technology experts and potentially seed funding. Incubators could be run by 
government, private sector and educational institutions. 
C. Angel investors: Angels are generally high net worth individuals (HNWIs), successful serial 
entrepreneurs or senior professionals. They not only provide capital but they also act as great scouts 
of emerging ideas, helping them scale at a stage where institutional seed and venture funds would 
typically not invest.  
Entrepreneurship 
Development
Policy
Finance
Culture
Support
Human 
Capital
Markets
Entrepreneurial 
idea
Friends and 
Family
Angel 
investments
Venture 
capital 
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D. Venture capital and seed funds: These are institutional investors which invest capital in firms 
with a proven business model and need capital to scale the business up. Such investors typically 
follow incubation or angel investments.  
E. Corporate investments: Large businesses can play an active part in investing in emerging 
ventures, especially in ones that are strategically important for them. Such ventures could be their 
vendors. A good example is the automotive industry where large OEM’s often invest in developing 
vendors that supply them components. 
F. Debt: Entrepreneurs, like any established business, need debt to finance working capital. Banks 
and financial institutions along with specialized vehicles which focus on new ventures are the best 
sources of such debt capital. 
 
Beyond sources of finance, there are multiple elements of the entrepreneurial ecosystem. 
A. Policy and regulatory environment: Government and regulators play the most critical role in 
catalyzing entrepreneurship. Successful countries have created a framework of policies and 
procedures that makes it easy for entrepreneurs to create and operate new ventures, take risks, raise 
financing. Moreover, the government can itself play a key role as a provider of funds through grants, 
seed funds and other schemes 
B. End consumers: Entrepreneurship become successful when consumers market friendly and open 
to innovative products, services or even innovative delivery options for existing products. At the 
same time, it is important for entrepreneurs to design business models that are aligned to the market 
they serve. 
C. Hard infrastructure: Easy to use hard infrastructure – real estate, transportation and logistics, 
utilities, communication, economic zones ect. be available for proper development of 
Entrepreneurship. 
D. Culture: Entrepreneurs be celebrated above corporate executives, professionals or government 
employees. Such a culture not only encourages greater entrepreneurial activity but it also enables 
entrepreneurial ventures to access quality talent. 
E. Academia and educational institutions: They can design appropriate curricula, encourage 
research and experimentation, create incubators and create strong links with business and 
entrepreneurial eco systems 
5 CURRENT STATUS OF ENTREPRENEURSHIP IN INDIA 
India has witnessed unparalleled growth in startups in the last five years, following the success 
stories of technology based companies like MakeMyTrip.com and Naukri.com a decade ago. The 
focus on startups in India has, therefore, come to primarily centre on innovative, small companies 
leveraging technology to solve consumer problems. According to a recent study by NASSCOM, 
India has been ranked third in world with around 4200 startups that employ close to 85,000 
employees. The ecosystem for both technology and traditional startups has been expanding at a 
quick pace. However, most of the startups as well as their backers and financiers are located in 
Delhi, Bangalore, and Mumbai. Furthermore, their focus tends to be on information technology 
enabled products and services including e-commerce, aggregators, analytics, Internet of Things, 
health-tech, and online payments. 
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According to a NASSCOM report total funding in technology startups were USD 2.2 billion in 2014 
and it is expected to reach USD 4.9 9 billion in 2015. However, while there is clearly a great deal of 
capital flowing into the startup ecosystem, only a very small amount reaches startups. Key issue is 
the lack of early stage funding – angel and seed funding. Angel investments is emerging but still 
very limited in India, making up only 7% of early-stage investment compared to 75% in the US. 
Venture Capital funds in India generally invest in firms that are already generating revenues, 
therefore investing relatively late in the startup cycle. The total value of VC and PE deals in 2014 
was $15.2 billion, with the largest investments in consumer, technologies, real estate and banking/ 
financial services/insurance. Likewise, India-based investors prefer to make a few relatively large 
investments of around Rs. 3 crores to Rs. 5 crores rather than spreading smaller investments across a 
large number of firms. Startups looking for funding of less than Rs. 50 lakh therefore often struggle 
to access investors. In fact, startups in India spend five times the amount of effort to raise funds as 
compared to US startups. Furthermore, the majority of investments are made in NCR, Mumbai and 
Bangalore, with the three cities accounting for 93% of total tech. startup investments, and 69% of 
angel investments. 
Technical and vocational training institutes and courses are not currently geared towards a startup 
economy. The private sector notes that the current training of offer is generally outdated and out of 
touch with the needs of startups as well as modern industry. Likewise, schooling in India today does 
not foster skills for startup and entrepreneurship based economies given the emphasis on route 
learning and old-fashioned curricula that does not equip students with skills for a modern knowledge 
economy. 
6 GOVERNMENT’S INITIATIVE TO IMPROVE STARTUP ECOSYSTEM 
Government of India has understood the importance of Entrepreneurship Ecosystem in India. On 
15th August 2015 Hon. Prime Minister of India has mentioned the “Startup India Stand up India” 
program. Since then India has come up with initiatives to facilitate start up culture like: 
 India Aspiration Fund(IAF) with initial corpus of Rs. 2000 Cr. to finance micro small and 
medium enterprises. 
 SETU program- Establishment of Techno-Financial/ Incubation program to support start ups 
and provision of Rs. 1000 Cr. in 2015 union budget. 
 TBI- Technological Business Incubator scheme by Department of Science and Technology to 
facilitate knowledge driven enterprises. 
 Atal Innovation Mission-  Platform to promote culture of innovation and R&D with 
provision of Rs. 150 Cr in 2015 union budget 
 Ebiz portal for reducing approvals required to start a business. 
 Tax registration to be completed in 2 days. 
 SEBI is planning to setup an alternative trading platform for startups. 
 Easy import facilities and duty benefits. 
 Minimize Excise and central sales tax 
 Subsidized rates on purchasing land. 
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Recently on 16th January Hon. Prime Minister of India has launched new startup policy’ which 
provides income tax holiday for three years. Government is going to establish incubators in different 
states. 
7 CONCLUSION 
India has got the advantage of demographic dividend. It is necessary to employ these youths 
properly. As there are limitations of public and large private sector organizations to provide jobs we 
need another drive like IT and ITES to generate employment in the country. With the advantage of 
technology we can proceed with the entrepreneurship development which has capacity to generate 
employment in remote areas also. Though India with 4200 startups is ranked 3rd in globally, we are 
way behind of USA which leading with 45000. This underlines the need of comprehensive policy to 
boost the startup ecosystem in India. Fortunately, Indian government is come up with various 
innovative policies related to funding, operations and technology to boost startup culture in our 
country. But it is not enough. Government should work on comprehensive policy to promote overall 
startup growth and foster an environment of entrepreneurship. Basic infrastructure, connectivity and 
transportation be provided for swift growth. Regulatory norms be relaxed for ease of doing business. 
Initiative be taken to improve the Angle funding alongwith subsidies and tax incentives. Smooth exit 
options should be be made available to entrepreneurs by making changes in Lay off rules. 
 
REFERENCES 
1. Business Today, November 2011 and Bain Research 
2. Creating a vibrant entrepreneurial ecosystem in india, Planning Commission, GOI,2012 
3. Cross Border Virtual Incubator , Optimising the entrepreneurship ecosystem, Jan 2013 
4. Ernst & Young - EDGE 2011 report 
5. Gnyawali, D.R. & Fogel, D. S. (1994): Environments for Entrepreneurship Development: Key 
Dimensions and Research Implications. In: Entrepreneurship: Theory & Practice 18 (4), S. 43-62. 
6. Info Edge Annual Report 2010-11 
7. Isenberg, D. J. (2010). How to start an entrepreneurial revolution, Harvard Business Review (88:6), 
June 2010, pp. 40-50. 
8. Isenberg, D. J. (2011): The Entrepreneurship Ecosystem Strategy as a New Paradigm for Economic 
Policy. Principles for Cultivating Entrepreneurship. The Babson Entrepreneurship Ecosystem 
Project.  
9. NASSCOM Strategic Review 2012 
10. RBI Statistics 
11. NASSCOM, Startup India- Momentous Rise of the Indian Start-up Ecosystem, 2015 
12. Valdez, J. (1988): The entrepreneurial ecosystem: Toward a theory of new firm formation. Working 
Paper. 


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