Following the leader

Mumbai, Aug. 27: Picture this: Life Insurance Corporation of India and government pension funds could well become the future incubators of next generation companies in India that could take on Microsoft and Sun Microsystems.

Ajit Balakrishnan, chairman and CEO of Rediff.com, rued the fact that the country doesn?t have enough angel investors and mentors to take the first shot at nurturing first generation entrepreneurs. He said LIC and government pension funds here should take a leaf out of the California School Teachers pension fund, which spawned several Silicon Valley enterprises that later became a big hit.

Balakrishnan feels the insurance companies should apportion 1-2 per cent of their corpus to fund such ventures.

Stanford, an Ivy league university in Boston, USA, today held a discussion in the city on ?India gears up towards Silicon Valley creation?.

?We are talking to the government on this,? said Balakrishnan. Rediff.com is the only Indian portal listed on the Nasdaq.

Private equity funds and banks have their own problems in that they don?t have the ability to hang on to investments for the long term. Only pension funds and insurance companies have the ability to wait out for a longer duration to see the businesses mature.

The discussion saw a surprise visitor when Kokilaben Ambani, the Ambani matriarch, walked in just in time for the discussion in which Akhil Gupta, chairman and managing director of Blakstone Advisors India, participated.

Gupta, a family friend of the Ambanis, has worked in RIL and has recently taken up a challenging position with Blackstone, a global private capital firm that has earmarked $1 billion for investment in India.

Gupta?s chum and Standford batchmate, Mukesh Ambani, was missing but it was more than made up by Nayantara Kothari, his niece who was one of the seminar organisers. Hital Meswani, RIL director and Ambani cousin, also came for a brief while to listen to the discussion.

Pravin Gandhi of Infinity Ventures said the people (band of angels) were burnt so badly due to the excesses of 1999-2000 and that he apprehended a similar bubble to happen in the private equity space.

Balakrishnan said the only venture capital funding that?s taking place is business process outsourcing (BPOs). ?We are pushed to labour arbitrage, whereas we have to look outside that space now as other countries try to vie for it,? he added.

Suresh Rao of SP Jain Institute of Management, who heads the centre for entrepreneurship, said many Indian students ?believe that entrepreneurship is not for us?.

?They even think it belongs to certain communities. Hopefully the Narayana Murthy brand may have opened up some minds,? he said.

Gupta, on the other hand, said: ?I think Silicon Valley is a state of mind.? He recounted what his Stanford classmate Steve Ballmer, CEO of Microsoft in Stanford, told him recently. Gupta had tried to dissuade Ballmer in their young days from joining Microsoft, a start-up, and egged him on to continue in the consulting firm. When he met a few years ago, Ballmer recounted that piece of sage advice and said: ?I am glad that I didn?t listen to you. Otherwise, I would be six billion dollars poorer.?

Taking the story further, Gupta spoke of a truism in US University campuses: ?A Grade students become professors, C grade students become entrepreneurs and B grade students become their employees.?

For a nation of over one billion people, the number of start-ups is woefully low. Balakrishnan said there are only about 35 doctoral scientists that pass out of universities in India annually.

It?s a Catch-22 situation. To create entrepreneurs, one needs mentors and to create mentors one needs a generation of entrepreneurs. There?s still a long way to go.