By: Saras D. Sarasvathy and Gosia Glinska
Newswise — Not long ago, before Bangalore achieved acclaim as a global technology hub, entrepreneurship was not the chosen path for most college-educated Indians. “It was an option for those who couldn’t get jobs,” said Manjula Sridhar, a cybersecurity expert and tech entrepreneur in Bangalore. “It was for people who failed in life. You didn’t get a degree, you started a small business.”
Then came the breakout successes of Mu Sigma, InMobi, Flipkart, Quikr, Ola and Swiggy, members of the growing club of Indian unicorns — global startups valued at more than $1 billion. Their founders had all left comfortable jobs at Amazon, Google and Microsoft to become entrepreneurs. Today, they are touted as India’s ultimate success stories and continue to grab the headlines. Unsurprisingly, a growing number of Indians with degrees from top-tier schools are eager to take the entrepreneurial plunge. Their dream destination? Bangalore.
Startup Myths and Misconceptions
“Bangalore is an ecosystem where ‘tech startup’ are magic words,” said Sridhar. “People are bombarded with stories like ‘launch a startup and win big.’ They come here with all those wrong ideas about how it works.” Sridhar attributed that, in part, to the fact that the media focuses on the startup success, glossing over the harsh reality of what it takes to achieve it, which includes failures along the way. “They present anecdotes as actionable wisdom,” said Sridhar. “One belief they propagate is that if you have a product and a team, you’ll get funded. Another one is that you need to quit your day job to show that you’re committed before investors take you seriously.”
According to Professor Saras Sarasvathy, a renowned scholar of entrepreneurship at the UVA Darden School of Business, “an overarching media myth places so much importance on funding that the predominant objective of startups has become synonymous with obtaining funding rather than building the business itself.”
The Effectuation Boot Camp
To dispel those myths, Sridhar launched a boot camp called EPIC (Effectual Practitioners India Club). Three years ago, she and EPIC’s co-founder, Prasanna Krishnamoorthy — who runs Upekkha, an accelerator for SaaS (software-as-a-service) startups in Bangalore — began volunteering on weekends to teach effectuation — a model of entrepreneurial expertise developed by Darden’s Sarasvathy, based on her scientific study of seasoned founders.
In a nutshell, effectuation is a set of decision-making principles bound by an underlying logic, which assumes the future is largely unpredictable, but that it can be shaped by human action. It is especially useful for dealing with uncertainty, which is inherent in the early stages of venture creation. “In particular,” said Sarasvathy, “based on the actual lived experiences of expert entrepreneurs, effectuation doesn’t confuse building a business with obtaining funding or taking unwarranted risks.”
Learning by Doing
The boot camp attracts managers and executives from large corporations, who seriously explore what it would take to trade their high-paying jobs for a dream of startup success. To give them a taste of the reality of launching and building a new venture, Sridhar and Krishnamoorthy designed EPIC to be as action-oriented as possible.
Cohorts of 10 participants meet on weekends over four months. They learn Sarasvathy’s principles of effectuation — the Bird-in-Hand, the Affordable Loss and the Crazy Quilt, among others — and immediately put that knowledge into practice. Every week, they perform specific tasks, which are designed to develop deliberate practice of those principles. “Other tasks,” said Sridhar, “focus on coping with various emotional blocks, or how to develop specific emotional states, like empathy.” For example, to develop empathy, participants shadow a potential customer, or other stakeholders, for a day.
Understanding Affordable Loss
One of the persistent myths about entrepreneurs is that they are risk takers. According to Sarasvathy, expert entrepreneurs risk only what they can afford to lose, which typically entails doing things as cheaply as possible.
EPIC teaches The Affordable Loss Principle by asking participants to live for a week without things they enjoy while they have a steady paycheck. “Drop your lifestyle down two notches,” said Krishnamoorthy. “If you take a car to work, use public transport. If you eat out, take prepared meals. This forces people to re-evaluate the cost of their choices and helps them determine their affordable loss.”
Expert entrepreneurs build strategic partnerships with self-selecting stakeholders right from the start. By obtaining pre-commitments from them, they reduce uncertainty and risk in the early stages of venture creation. Sarasvathy dubbed this process The Crazy Quilt. EPIC teaches this principle through an exercise called the Treasure Hunt. Participants are required to take selfies with founders who are at different stages of their entrepreneurial journeys — from wannabes to those who have had successful exits. “Many participants just take the photo and leave,” said Sridhar. “Afterwards, we ask them why they didn’t explore The Crazy Quilt with the founders.” In other words, said Sarasvathy, “they had an opportunity to ask for something more substantial than a selfie that could have helped them launch their ventures.”
Making the Ask
According to Sarasvathy, one activity that’s intrinsic to the early stages of venture creation is asking. Expert entrepreneurs excel at it, and novices can learn how to “make the ask” through deliberate practice. At the boot camp, participants are required to ask someone they know — a co-worker or a neighbor — for 1,000 rupees (approximately $15). Most of them don’t take that task seriously and fail to complete it. Some think it’s too easy, while others are too embarrassed to ask.
The next task is to get INR 1,000 from a stranger. “It’s not about the amount,” said Sridhar. “It’s about facing rejection and dealing with it.” In India, where people are bombarded with solicitations, asking a stranger for anything is especially hard. “Some participants,” said Sridhar, “ask one person and immediately give up. We tell them, ‘Get at least a few rejections, and then explain what that failure did to you.’”
The following day, participants share their experiences with their peers. “That’s where the learning happens,” said Sridhar, “because those who succeeded explain how they did it.” And those who failed also bring important lessons to the table.
Gaining Entrepreneurial Knowledge
The exercises Sridhar and Krishnamoorthy designed mimic the hurdles entrepreneurs face in real life. “They are intentionally hard,” said Sridhar. “We wanted participants to suffer. Unless they experience the pain, the lessons won’t stick.”
The EPIC boot camp offers a counterpoint to the hype of entrepreneurship in Bangalore. But, most importantly, it exposes participants to the way expert entrepreneurs think and act, which will benefit them should they take the plunge. As Sridhar put it, “Knowing effectuation at step zero can make a world of difference.”
About the University of Virginia Darden School of Business
The University of Virginia Darden School of Business delivers the world’s best business education experience to prepare entrepreneurial, global and responsible leaders through its MBA, Ph.D. and Executive Education programs. Darden’s top-ranked faculty is renowned for teaching excellence and advances practical business knowledge through research. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.