Siddarth Pai reveals what it means to be a young Indian entrepreneur
“Political transformation and business transformation are the keys to the success of India” – Siddarth
Pai reveals what it means to be a young Indian entrepreneur
Name: Siddarth Pai
Company: 3One4 Capital
Featured Quote: “Entrepreneurship is a rebellion against regulatory cholesterol”
How did 3One4 Capital happen?
The idea of creating something like 3One4 Capital had begun almost a decade when my brother (Pranav)
and I wanted new asset creation through startups. The success of a startup creates economic development and with our expertise we could help startups in any sector. Supporting entrepreneurs is the key. Indian entrepreneurs are very good with the specific roles that they actually do. They are great engineers and can rally good teams. But, there are several steps to building a startup business. You have to build the product, follow compliance and market the product. They need an ecosystem that can help them scale. Things have changed so much today nobody really wants to do a nine-to-five job anymore. Risk taking is considered normal for this generation.
Our initial years were influenced by the growth of Infosys, Wipro and TCS which inspired to set ourselves on this path of investing in early stage companies. We started off from zero where we literally had to build that expertise from scratch. We started tracking India’s growth from Aarin Capital, which is a fund of Dr Ranjan Pai and Mohandas Pai. We saw how Byju pivoted his business and we learnt on the job where we observed so many investment professionals. With this learning and a bunch of fresh ideas we started 3One4Capital to support early stage idea where people are just testing a hypothesis.
Our fund was always about founder first and capital is an accelerator to capture a large market. You
have seen its success.
What does transformation mean to you?
If you are tracking the Indian business and economic system, we were growing at only 2 percent per annum. There weren’t any change in laws after the British left, in 1947, and we still have those laws even today. The IT industry grew because there wasn’t any government involvement. In 2016 the late finance minister Arun Jaitley actually said that businesses need a wider playing field and lessen government interference. Everyone wants an equitable society where there is no one taking undue advantage of the system and there is a larger positive benefit that accrues to society. However our laws and rules are old and India suffers from “compliance cholesterol”, there is too much compliance. Entrepreneurship is a rebellion against such a system, people want to take risks and change things. Entrepreneurship in India is very different to China, technology actually serves people at the bottom of the pyramid. Every single startup in India is democratizing access. See how Zomato has disrupted the delivery business and has gone through a successful IPO. Technology is the democratizing agent, see how the UPI has democratized payments.
You have been a very creative person, but, the system we are in makes it very difficult to beat, your thoughts on having creating an accountable system that can inspire generations?
I learn a lot of things while writing poetry, there are different structures and elements. What we have to do is within the constraints we have to make things work. Entrepreneurship has similar challenges too which can drive on path to give up. Indians create too many structures to optimize things rather than making it easier to discover and deliver. Even our exams were filled with quantity than quality. There are too many constraints from the day you enter school. Just after liberalization even getting phone connections for businesses was difficult. It was absurd. Constraints bring about creativity and you saw what happened with Infosys. If we need many more success like this then we must be startup friendly. Our ESOP policy is not very good at all. There were only cosmetic changes and they have not addressed the issue of taxes where an employee should be taxed when there is a payout. You cannot create wealth in the process. Let us take Zomato’s example again; the only portion of the IPO that was hideously undersubscribed was the ESOP portion because the rules were regressive. With all this innovation has gone ahead and we have had great examples of success in India. Law is never the leader when it comes to innovation and India it is always the case. That’s why people go to Singapore and the USA.
Out of the 55 or more Unicorns in the country, 30 of them are registered outside the country. Indian startups go there because of the ease of regulations. Let me also tell you that there are many Indians who stay back and want Indian to prosper. But, unfortunately there will be another brain drain if we do not correct this. India is the only country in the world to validate things. It has extremes, it has the best AI scientists and it has people who struggle for two meals a day. I believe that business and political transformation are linked. A large number of laws are not going to make any transformation. The Companies Act needs to be amended because the law criminalizes bad paperwork in a startup for an investor. Today all the IP goes to the USA because entrepreneurs are burdened with regulations here. There has to be flexibility in operations for an entrepreneur to operate in their own country. Contracts come from the first principle of trust. In essence a contract is about agreeing on something and this has been around for thousands of years. Enforcement mechanisms came about in the process. If you look at the blockchain, it is an immutable contract which cannot be undone.