D.N. Mukerjea 

     SOME TIMES, when dawn alights in myriad streamers of orange and ochre setting the heavens afire, Vikas Kedia, after a lonely vigil all night over his desktop in his 13 ft-by-13 ft room at the Indian Institute of Management, Bangalore, looks up at the flaming skies, wondering. Last spring, the 23-year-old MBA famously turned down a $100,000 (Rs 45 lakh) Mitchell Madison Group placement to pursue his start-up idea, now being incubated as an experiment by his B-school. Kedia is now busy scouting for funds, without which his outfit will be a no-show. "Sometimes I wonder whether I've done the right thing; but deep down, something tells me I have," says he. 
     Journalists, unlike historians, witness events real-time, in-your-face, and without the benefit of post facto analysis, at times deliver hurried, even incomplete, verdicts. But sometimes they get to view, up close and personal, events that are so far reaching, enormous and emblematic that the conclusions seem obvious. These are truly such times, the beginnings of the Age of Entrepreneurship, the stirrings of a socio-economic churn that has the potential to reconfigure everything that we have ever seen before. Sure, entrepreneurship has always existed, but it suddenly seems to have received a certain sense of vitality. 
     Revolution is never wrought by extraordinary men, but by ordinary men with extraordinary purpose. IIM Bangalore's Kedia is one of them. But there are many more, people like Raman Roy, Sanjeev Agarwal, Arjun Sawhny, and Vasant Nangia, men and women whose stories you'll see in the following pages. However disparate they may appear, there's one recurring theme that binds them all. Without exception they are first-time entrepreneurs -- successful executives who have chucked their jobs to embrace the chaos and uncertainty of start-ups, inspired by money, of course, but also the desire to create a new corporate order. 
     They are the new, Middle Class Entrepreneurs. 
     If you are looking for numbers to establish the case, there aren't any. Sure, there are some statistics, like the $1 billion of venture capital funds that have flowed into the country in the last one year, fertilising around 100 start-ups. Many more have been created by men who have staked their savings or borrowed from friends to chase their dreams. But even if you count all the professionals who have struck out on their own in the last couple of years, it'll still be a fraction of, say, the total number of executives employed by the top 100 companies in India. 
     Does that mean we are guilty of hyping what is in essence just a ripple in a very large ocean?
     Perhaps not. Social movements are not just about numbers; they are about new ideas that capture the imagination of a people. Imagine for a moment that you were an adult in India in the 1940s. Even if you were not a freedom fighter, the spirit of swadeshi dominated your life. Now, even if statistically a majority of Indians were not actively involved in the struggle, the first two quarters of the last century still remain The Age of India's Independence Movement.
     Entrepreneurship is becoming a bit like that. From the hotel lobbies of Mumbai, to the smoky pubs of Bangalore to the restaurants in Delhi, corporate India is obsessed with start-ups. Sure, the dotcom meltdown, both here and overseas, has diminished the euphoria, but it has far from killed it. (Besides, there's more to entrepreneurship than starting a dotcom.) Everybody in corporate India today knows at least one person who has started out and everybody has flirted -- however seriously or flippantly -- with the notion of quitting and doing the same. That wasn't the case even three years ago.
     Why?
     So far, there has been no academic research done on the Middle Class Entrepreneurs phenomenon, perhaps because it's so new. Explaining the phenomenon is exasperating at best, and impossible at worst. Ask yourself the simple question: why are India's middle class professionals, who have, as a class, traditionally shunned business, chucking well-paying jobs and attractive careers to start up new businesses, knowing fully well that the odds are stacked against them? 
     Economic history has some answers. Historians like Dwijendra Tripathi say that normally, there exists an equilibrium between man and his environment. When this equilibrium is disturbed, typically by an external force, it throws up pioneers who are willing to stake plenty to benefit from the discontinuity. (Some anthropologists in fact use the discontinuity principle to explain the origin of homo sapiens, how an intrepid bunch climbed down from the trees and evolved to be men, while the rest remained apes.) 
     The equilibrium was rocked around 1800, when European traders in great numbers arrived on Indian shores. Europe was then the hotbed of technological inovation -- remember, the industrial revolution was then already around 80 years old and Europe was fast moving from a pre-industrial state to an industrial state. The traders brought with them plenty of new ways of doing business. Seizing the opportunities that emerged, many Indians became entrepreneurs, whether it be Dwarkanath Tagore, who formed India's first joint venture with a foreigner, Carr Tagore and Company (1834), or Cowasjee Nanabhai Davar, who put up the country's first textile mill (1854). More important perhaps, this discontinuity converted, for the first time ever, commercial capitalism (read trading) into industrial capitalism (read manufacturing). 
     Almost two centuries later, there's yet another discontinuity that has shaken the equilibirium. And this time around, the causes of the upheaval are three interconnected trends. One, dramatic improvements in communication and information technology is now opening up new business possibilities -- interactive educational services over the Net, or delivering Indian television content to non-resident Indians abroad -- as also making it possible for newcomers to challenge incumbents by redefining existing businesses. Two, the same technologies are also making it feasible to 'unbundle' companies, creating vast new business opportunities. For example, companies today can outsource many of their administrative and technology-related functions -- often from countries like India -- while focusing on their own core areas of expertise. Three, the creation of a global venture capital infrastructure has made sure that there is enough money to back creative, new ideas. 
      Interestingly, however, while the emergence of technology as an all-powerful force can explain the variety of opportunities being thrown up, it doesn't explain the emergence of the Middle Class Entrepreneur. In fact, the term itself is a bit of an oxymoron, because the conventional connotation of the phrase 'middle class' is this: emphasis on education, a strong moral code, and a steady job. It is not associated with risk taking and being in business. What's in fact truly fascinating is that the rise of the Middle Class Entrepreneur flies in the face of the traditional explanations given for the rise of other entrepreneurial classes in India.
      For example, Max Weber, a European social scientist, drawing heavily on his treatise on the rise of entrepreneurship in Europe (The Protestant Ethic and the Spirit of Capitalism), famously argued that Indian business sects arose primarily because they were social pariahs. Other historians like Thomas Timberg concluded that one of the main reasons why the Marwaris emerged as an entrepreneurial community was that they were displaced. In fact, social scientists unanimously agree that immigrants typically turn to entrepreneurship because they have no other ways of earning a livelihood and present the US as the best example of the theory at work. 
     Yet, the Indian Middle Class Entrepreneur is neither an immigrant nor a refugee from the job market. So why start up at all?
     This can be explained by the interplay of two factors, one old, one new. First, the old. Some studies have shown that when an economic discontinuity happens, the first lot to figure out where the opportunities lie are predictably the educated. In Japan, the Meiji Restoration (1868) had a similar impact. Of the 50 firms that came up between the Restoration and the Sino-Japanese War (1894-95), 23 belonged to the upper-class samurai, while only 12 belonged to the traditional merchant class. The reason for the samurai dominance: with their higher levels of education, they could comprehend the emerging opportunities faster and gather the skills needed to exploit them. 
     Similarly, the early industrialists in India were the educated Parsees and not the Marwaris, who despite having the hunger of the displaced, came into the manufacturing sector only in the early 1900s. 
    But the ability to spot a good opportunity itself cannot explain the large number of people who are starting out. To figure that out, turn to the second factor, the new one, easy availability of capital through the venture capital network. Throw this into the mix of technology-driven discontinuity and the ability of the educated to spot an opportunity quicker than others, and you have a heady combination that explains the rise of the Middle Class Entrepreneur. 
     Says McKinsey & Company partner Marc Vollenweider, who recently quit to start out on his own: "Our studies have shown that there is a direct correlation between availability of VC funds and proliferation of start-ups."
     At a very fundamental level, it should be obvious that the easy availability of capital has de-risked entrepreneurship. But this is a very controversial and contentious issue, with VCs and entrepreneurs at times ranged on either sides of the debate. For example, Veer Sagar, the ex-CEO of DCM Data Products who now runs a Delhi-based medical transcription company Selectronic Equipment, says that in the era of VC-led entrepreneurship, there is no question of taking risks any more. "You work at somebody else's expense, and for that you also get a fat salary. If the project bombs, it's not your money that goes, but the other person's. So how are you taking any risk at all?", he asks. Sagar, incidentally, set up Selectronic with his own money. 
      Others like Sanjeev Agarwal, an ex-McKinsey consultant who set up a travel management company, ETravel India in April with VC funding, disagrees. "At the end of the day, I've traded a secure lifestyle for a completely uncertain one. Besides, if I fail, I'll carry the scar for life. So even if the money isn't mine, I'm taking a lot of risks," says he. Clearly, the bone of contention is whether financial risk and personal risk are equally important in a start-up.
     To be fair, they are. The personal risks are truly enormous. Arjun Sawhny, a KPMG partner who recently quit to set up e2e architects, an 'end-to-end' technology consulting outfit, puts it well: "In a start-up, the highs are higher and the lows are lower than anything you may have experienced ever in either your personal or your professional life." Besides, it's also possible to monetise the personal risks in terms of loss of seniority in case you return to the corporate fold after failing on your own, the salary cuts, etc. 
     Similarly, the VC on the horizon does de-risk entrepreneurship. For one, it's truly the VC's money and not so much the entrepreneur's. Then, as Ashish Dhawan of Chrysalis Capital, a VC fund, puts it, VCs also de-risk the venture from an operational viewpoint. By following a variation of the portfolio theory, VCs manage to rope in the best people in different functions (finance, technology, etc) for a start-up, thereby decreasing the chance of failure. 
     Saurabh Srivastava, founding member of VC fund Infinity Technology Investments who started his company IIS Infotech with his own money sums up the argument: "What we have done is perhaps encouraged many more to become entrepreneurs." 
     Management pundits like Sumantra Ghoshal of the London Business School point out to yet another trend which may be creating the Middle Class Entrepreneur -- corporate democracy. "We received our political democracy in 1947, but corporate democracy came only recently. Companies are increasingly turning away from the command and control style of management to a more open, democratic style of functioning. This, in turn, is adding filip to the entrepreneurial process," says he. As our accompanying article 'Seeds Of Enterprise' (page 44) shows, organisations that have spawned the most number of start-ups are often the most democratic in nature. Of course, the reverse could also be argued, that an oppressive company encourages start-ups simply because its managers wish to get away from there. 
     Yet, it would be wrong to attribute purely economic reasons to the rise of the Middle Class Entrepreneur. There are plenty of sociological reasons behind this phenomenon as well. For one, there is the increasing dominance of the American culture in our midst, at least in urban India -- the clothes, the food, the movies. Which leads to what Sriram Srinivasan, who along with a handful of others set up Indus League Clothing, an apparel company, a few years ago, calls chasing the American dream. "I think there's a huge dominance of the American culture in our midst and we are all chasing the American Dream, where doing something on your own is very prestigious." 
     Peek at some US numbers. In 1969, there were only 274,000 new corporations started per year; in 1995, the number had reached 770,000. More important, perhaps, what was once an American phenomenon has now become global, not because the Americans are going abroad with their new concepts, but because of different nationalities participating in the spirit of enterprise in the US itself. In fact, a third of the participants in the US entrepreneur community are from somewhere other than the US. This, in turn, is unleashing entrepreneurial forces back home, at least in the Indian context. People such as Vinod Khosla and Kanwal Rekhi who have participated in the entrepreneurial dream in Silicon Valley are folk heroes back home.
     Then, most of the Middle Class Entrepreneurs are fairly well-travelled, having interacted with people from different cultures and countries. "That creates a certain amount of openness of the mind and attitude, which are critical qualities for being an entrepreneur," explains Achal Bhagat, a practising psychologist and organisational behaviour expert in Delhi.
      Again, another reason commonly touted by many is that thanks to half a century of freedom, there is greater emphasis on individualism, which, according to Bhagat, manifests itself in an unwillingness to obey rules set by others and a need to create something of ones' own. Ghoshal argues that in politics, there is greater delegitimisation of institutions (read that as a necessary collolary to growing individualism) which is helping people to set their own agendas. "For example, sociologically, the roots of both greater entrepreneurship and more divorces in the middle class lie in the greater delegitimisation of institutions." 
      Others argue that with change having become a constant in today's world, where you take fewer and fewer things for granted, entrepreneurship is no more riskier than a job, where you could get sacked at a moment's notice.
      But, perhaps, one of the most important sociological factors that have contributed to the spirit of entrepreneurship is that there are now enough success stories and role models of enterpreneurship that middle class people can identify with. Some would call it the 'Narayana Murthy effect'. The Infosys Technologies story, almost a fairy tale of a bunch of middle class people putting together one of India's most successful companies, is inspiration to many today. 
     And, if Narayana Murthy has inspired people collectively, many entrepreneurs have been inspired individually by others. One of the interesting findings that emerged in the course of our research was that typically, one entrepreneur knew another one fairly well, creating a virtuous circle of sorts. For example, Manish Chandra, founder of net2travel (a dotcom that's recently been acquired by Indya.com) knew egurucool founder Vivek Agarwal quite well. Again, Indus League's Srinivasan and Oyzterbay (a jewellery chain) founder Vasant Nangia were batchmates at IIM Calcutta, class of 1979. Says McKinsey's Vollenweider: "One of the things that strike you here is how well Indians network." 
     Again, another reason why entrepreneurship is more easily accepted today is that it is no longer associated with corrupt practices and dirty manoeuvres. Most entrepreneurs see themselves as being different from 'businessmen' and say that thanks to liberalisation, it's today possible to start up without greasing palms. Says Raman Roy, ex-GE Capital International Services head and founder of Spectramind eServices, a teleworking outfit: "Many people ask me if I've had to bribe somebody to get something done. When I say no, never, I think that people start realising that setting up your own company isn't necessarily dirty anymore." 
      Besides, most Middle Class Entrepreneurs were born after 1947, and most of them either have completely missed the days of Nehruvian socialism or have no memories of it. In other words, to them money is not a bad word, neither is wealth. "We are more of a Deewar-and-after generation, rather than a Shree 420 generation," says one, describing their own socio-economic milieu. Hear MindTree consulting co-founder, Subroto Bagchi: "You cannot be a successful entrepreneur if you do not love wealth, but..."
     As 'buts' go, this one is very important. In the course of the research, many asked us how these Middle Class Entrepreneurs are any different from the thousands of small businessmen and traders who are also entrepreneurs, and why we were making such a big deal about these people. The answer lies in Bagchi's 'but'. 
     The small businessman or trader wishes to capture wealth already existing in society for himself, while, without exception, all the Middle Class Entrepreneurs wish to create wealth not only for themselves, but also for society. This manifests itself at many levels. For one, the very process of setting up a new company typically involves partnering usually a few others. Rarely does the Middle Class Entrepreneur start on a venture all alone. 
     Then, each of these new companies has employee stock option plans, which again, ends up creating wealth for others. VCs point out that most of these people are also far less hung-up about control and managing the company. "They're far more open to letting others do their jobs, if they can bring greater value to the table," points out Chrysalis' Dhawan. 
     In the final analysis, Middle Class Entrepreneurship is more about mindsets than about domains of business (read New Economy versus Old). In fact, many of the people we met were as Old Economy as you can get -- Clips' Arun Jain, who sells office stationery, Oyzterbay's Nangia (jewellery), Indus League's Srinivasan (apparel) or Trikaya Agriculture's Samar Gupta (agriculture). And each of them, along with the scores of others that Businessworld met, hoped that this wave of entrepreneurship would create a new work order in India and have a significant impact on the country's economy.
 Can it?
 Yes. The spirit of entrepreneurship essentially creates a virtuous cycle which then starts feeding on itself. This happens for a number of reasons. For one, the business model of start-ups is different from those of the big corporations, and they tend to rely more on external help. Oyzterbay, for example, outsources functions like IT, finance and logistics. Some of the companies which service Oyzterbay are also entrepreneurial. In other words, a start-up sets off a chain reaction that begets other start-ups. 
      Again, in Silicon Valley, for example, entrepreneurs who have become wealthy from their first start-ups have gone on to create more and more companies. Expect that here as well. MindTree's Bagchi, for example, says that his idea of celebrating success is not having a large house, but setting up a fund that will create many more entrepreneurs. Giri Devanur, founder of Bangalore-based start-up Ivega says he knows of around a hundred dollar millionaires in the city, all wealthy from stock options. "Imagine, if even a few were to decide to start up, the kind of impact it'll have." 
     Besides, the way the global economy is moving, the opportunities for entrepreneurship are growing manifold. The fastest-growing parts of the global economy today are knowledge-based services, where entry costs are probably lower. Then, even the big manufacturing corporations are unbundling and outsourcing plenty of their processes and functions in a bid to become nimbler. Opportunities once again. In fact, many forsee the creation of an extended community living via sharing resources.
      Sure, at a macro level, it's too early to make predictions in terms of the impact that these start-ups will have on the country's economy. But the US (who else?) illustrates some of the possibilities. For example, all Fortune 500 companies combined contribute to only 10% of the country's gross national product today, down from 20% as recently as 1970. And some economists and management thinkers predict that this meagre contribution will diminish further to around 5% early in the present century. 
     Incidentally, there too changes have been climactic -- between 1990 and now, there are 100 new companies in Fortune's top 500 rankings. Again, 50% (yes, pinch yourself) of US exports are created by companies with 19 or fewer employees while 7% come from companies with 500 or more employees.
     There are indications that India could be going the same way. In the last couple of years, IIM Bangalore has introduced three elective courses on entrepreneurship, which are all drawing full houses. "I'd say that of a graduating batch, at least 10% would like to start up on their own soon after graduating," says Mithileshwar Jha, professor of marketing and chairperson N.S. Raghavan Centre for Entrepreneurial Learning, IIM Bangalore. In fact, this centre itself came up thanks to a Rs 12.69-crore grant from Infosys joint managing director Raghavan, who wants to foster the spirit of entrepreneurship. Again, the accompanying article on the Indian Institutes of Technology (page 32) reaffirms how the concept has taken roots among students. 
      The potential of this is tremendous. In a recent study, BankBoston reported that as of 1994, the Massachusetts Institute of Technology graduates had founded about 4,000 companies employing over 1.1 million people and generating $232 billion in world sales.
      This movement is also expected to radically alter the way in which Indian corporates function. For example, the new entrepreneurs talk in terms of creating more transparent organisations. "You know, I was so greatly helped by others when I started out, I'll always be willing to share my mistakes, my learnings with others starting out," says Indus League's Srinivasan. In other words, expect more knowledge sharing.
     Besides, most of the entrepreneurs that Businessworld spoke to had a sense of creating history, which seems to stem from a pioneering attitude. 
     Many of them are also evangelistic. Spectramind's Roy, for example, says that whenever he meets young people, he plants seeds of entrepreneurship in their minds. Others like Ghoshal say that the larger Indian corporates, hit by many of their senior managers quitting, will turn far more democratic and will rehaul organisational structures radically to accommodate the entrepreneurial instincts of their managers. 
     "We are heading towards an era where all managers will be 'volunteer investors of human capital.' You stay with an organisation as long as you want, and then move on, either to some other place, or to start out on your own," says he.
    Already, many traditional Indian companies like Mahindra & Mahindra are encouraging the concept of 'Corporate Venture Capital', where the company incubates the idea of an employee, while others like Hindustan Lever have kicked off a process of dividing the company into many smaller business centres to provide overall responsibilities at an earlier age. 
     It is perhaps best to describe this time as the morning twilight of Indian entrepreneurship, the brief, fleeting moment between darkness and light. And, of course, there is only one way in which it can end -- in full bloom.