Business India ×
  Magazine:
Column

Published on: Nov. 30, 2020, 8:18 a.m.
The churn within the realm of business
  • 4G defined: according to Serious Men, the fourth generation relaxes and enjoys the fruits of hard work of the previous generation

By Bhaskar Majumdar. The author is a venture capitalist and Managing Partner at Unicorn India Ventures

In the dark comedy ‘Serious Men’, on Netflix, the principal proponent Nawazuddin Siddiqui explains the concept of 4G in business thus: “The first generation emerges and is uneducated; he educates the second generation through school but the second generation barely scrapes through; the third generation receives proper education and he is the fighter to change his family fortunes and the fourth generation relaxes and enjoys the fruits of hard work of the previous generation.”It’s the same in the business world of today. India is passing from the third generation to the fourth generation.

Since time immemorial, Indians have been known throughout the world for their entrepreneurial pursuits. Wherever any Indian set shore, they set up their small enterprise. Be it the corner shops in the UK, the Patel Motels in the US or the retail business in East Africa, the entrepreneurial spirit of the Indians has always been admired globally.

The same pattern held sway within the country as well. India was a land of entrepreneurs and the average Indian would start their small businesses and then would slowly grow the same. The businesses were varied – from running small shops, to being stockists of large companies, to becoming vendors to the government, to start-ups, to SME businesses in manufacturing – but this was the growth driver of the country in the early years, post-independence too.

And entrepreneurs always needed money to grow their business. India didn’t have access to private capital; and, so, the main funding source for small enterprises used to be bank funding, while the larger enterprises used the capital markets. That was, in essence, the Indian business DNA for decades till 2010. But, during the last decade, a remarkably interesting phenomenonhas appeared in the Indian psyche and the business world. 

Let us take the life of an average successful entrepreneur in India’s Tier II/Tier III cities. The entrepreneurs of the hinterland worked hard to be suppliers to the government or ran their small manufacturing businesses. They built their business brick by brick. They rarely understood the value of equity and were driven by cash flows. Given the backdrop of the ‘sarkaari interference’, they would cosy up to the local government machinery, would keep two account books and would work hard to pay as little tax as possible.

While they lived in personal comfort, they rarely ensured growth of their business and would mostly starve their businesses out of cash flows. But they had strong aspirations for their children. They worked hard and send the next generation overseas – to the US, the UK, Canada or Australia – for their higher education. Once these children came from abroad with their new-fangled knowledge in business, they would try their newer ideas to make changes in their generational business. But alas, in most cases, they couldn’t make any changes.

The factory manager of his father’s business may have been there for 30 years and had loyalty running in his veins, but he would loathe any change. The main accountant was the family munim, who knew what to show in the business and what not to, knew all books of accounts and knew the entire history. The patriarch trusted him more than his children. In most cases, these new 4G foreign returned business experts could make no difference in the business and this frustrated them and they became disinterested in their family businesses.

Also, having seen the world, they loathed to see their parents work so hard, hated the dingy work environment and did not want tobe at the beck and call of the local political dadas and developed a dislike for the grime in the business. They wanted a more corporate role which they could not see coming their way. Indian entrepreneurs built their businesses for their children and their families. The thought that their children were not interested in their business filled the patriarchs with sheer disgust and a sense of despondency, which invariably led them to sell their businesses over time.

In India today, there are a number of buy-out firms and private equity players and, in some cases international players, who are seizing these opportunities to buy profitable and well-established old family businesses. These families are exiting the businesses and leaving the growth to their newer owners. And while this is happening, the 4Gs are turning investors.

This represents a shift in the country and we are living through it. The country is becoming a land of investors, who would be looking at investing in newer generation businesses led by professionals and notmultigenerational family businesses. This has happened to Mittelstand in Germany, which got acquired and sold to the larger corporates in 1990s and 2000s. This is being replicated in India.

Investors in the new age start-ups begin as angels or investors in various VC firms. They rationalise with their fathers that this hands-off approach and making money work will make better sense for the family. While the patriarchscannot fathom this, they concede to this thinking. This is evident from the fact that India is the fastest growing market in the world in terms of creation of private wealth and multi-family office businesses. Will these new 4G business families be happier as investors, than their earlier generations? Only time can tell.

Don't miss this

Cover Feature

In control of its growth momentum

JK Tyre readies itself for an exceptional growth spell

Special Report

Ready to roll

NCRTC could be the mascot of changes the government has planned for the railways

Focus

Pegasus affair rocks the nation

Unless cleaned up, it will only bring down India’s global image

Corporate Report

GHFL consolidates its leadership

Garware High Tech Films dominates the market with its differentiated portfolio

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
Exceptional Growth Ahead
Can we do another 1991?
Amazing turnaround
FROM THIS ISSUE

Corporate Report

Corporate Report

MSMEs

Corporate Report

Feature

Corporate Report

Social Responsibility

Healthcare

Goodyear India partners Americares India Foundation

Published on Feb. 2, 2021, 9:21 p.m.

The partnership will support COVID-19 healthcare facilities in Faridabad and Aurangabad

Environment

Tata Motors launches a 'Go Green' initiative

Published on Dec. 23, 2020, 10:34 a.m.

The company will plant a sapling for the sale of every new commercial vehicle

Women Empowerment

Tata Starbucks ties up with Educate Girls to empower women

Published on Dec. 2, 2020, 3:10 p.m.

The partnership aims to provide volunteering and educational support to those who have relocated to urban cities from villages

Environment

Indian Oil has a social initiative for a clean and green world

Published on Nov. 25, 2020, 2:53 a.m.

The public sector company is planting a tree for every retail customer visit during its TreeCheers campaign period

Climate Change

Entrepreneursip

Two Indian organisations win UNDP prize

Published on July 21, 2021, 2:55 p.m.

The Equator Prize recognises local and indigenous communities from around the world

Environment

Largest man-made forest to come up in Chhattisgarh

Published on July 21, 2021, 12:35 p.m.

In one of the country's largest ecological restorations, 2,500 acres of barren land will be converted into a natural habitat

Entrepreneursip

Veerappa Moily’s son to launch ClimateTech VC fund

Published on July 21, 2021, 12:09 p.m.

The fund will concentrate on four sectors: green buildings, energy storage, sustainable agriculture, and alternative energy

Environment

One-fifth of forests at risk due to climate change: government

Published on July 21, 2021, 10:40 a.m.

The dominant tree species in central Indian forests, Teak and Sal are expected to be sensitive to change in temperature than rainfall

Stay ahead of the times.
Register with The Climate Change Weekly for free!