Coincidence is an amazing thing, isn't it? Here I am, thinking about how it's been a while since I fisked anyone and almost immediately the folks at DesiPundit are kind enough to supply me with the perfect fodder - yet another nitwit blithering on about how the IIMs have got it wrong and what they should really be doing to make his invertebrate little life easier.
Mr. Gaitonde's post starts by criticising the new IIMA policy of allowing students to take a year off after they graduate to pursue their own ventures while retaining the option to come back for placements next year. Having criticised the policy (and I'll come to his argument there in a minute, well, maybe five minutes depending on how fast you read) he goes on to list three things the IIMs could do for budding entrepreneurs, which are - provide them with low-cost financing, help them in dealing with regulation and provide office space, and make industry databases and reports available to them .
Let's start with these three initiatives. Why, exactly, I wonder, should the IIMs do this? The last time I checked, they were educational institutions, not angel investors - their primary purpose being to provide quality business education, not to provide succour to wannabe start-ups. Of course, to the extent that they want to promote entrepreneurship among their students, they may make a few minor modifications to their placement rules. That's very different from playing an active role as an incubator for start-ups. I'm not sure that the IIMs want to be doing the latter. And I'm not sure that they should.
(It's not clear to me, incidentally, whether Mr. Gaitonde actually wants the IIMs to become angel investors / incubators, or simply to do all the work of these entities without sharing in the upside. The general idea in his post seems to be that the IIMs should provide all this assistance out of the goodness of their heart, or for some kind of unspecified 'fee' - presumably one lower than the market rate - without any discussion of how they might share in the profits of the enterprise.)
I'm not sure that the IIMs should do more to help start-ups because I see no reason to believe that they have any special competence / ability to do so. Mr. Gaitonde himself states that "Academicians do not understand managers. Managers do not understand entrepreneurs" (of course, this says nothing about whether academicians understand entrepreneurs - logical consistency is clearly not our budding entrepreneurs strong suit). Why then do we believe that the IIMs are well-positioned to provide assistance in working through regulatory issues? Or providing support / advice to young entrepreneurs more generally ? And all this talk about low-cost capital and office space. Do the IIMs have access to lower-cost funds from the market, that they should be passing on, without a risk premium, to entrepreneurs? Do they have even the basic ability to manage a debt portfolio or investments in new ventures, let alone a superior capability to do so? Why should the IIMs price funds they provide to entrepreneurs lower than the market? If venture capitalists, banks and angel investors won't invest in a project, why should the IIMs? Sure, they have government funding, and everyone knows that you don't need to earn a return on government funds, you can just hand it out in sops and let the taxpayer bear the cost. But is that kind of profligacy really what we want the IIMs to be encouraging? A similar argument holds for office space.
The point is - there's a market for ideas out there. Venture capitalists, angel investors and incubators exist, and IIM graduates have, if anything, better access to them than anyone else. Sure, these opportunities are limited and it's really, really hard to get the kind of support you need, but that's a reflection of the probability of eventual success. If a start-up isn't able to access what it needs, or finds the market price for those services / facilities too high, then there's no reason for the IIMs to second-guess the market and subsidise ventures that the market has found unviable. And even if you believe that the entrepreneurship market is underserved and there's an opportunity for additional incubators / angel investors, that need is best served by specialised players with experience and / or ability in meeting the needs of entrepreneurs, not by the IIMs stepping in to play a role that they weren't designed for, and are unlikely to be good at. This is especially true when you consider adverse selection - since the IIMs are clearly not the best place to turn for advice / support in starting a new venture, start-ups that can get backing from more specialised / expert sources will end up going elsewhere, leaving only the projects that can't get support from anyone else still knocking at the IIMs door.
Finally, let's say that you do believe that the IIMs have the ability / competence to provide superior guidance to young entrepreneurs (why you might believe this is beyond me, but let's say for a minute you do). Why should this guidance be available only to former students? If the IIMs are going to run an incubator, one would hope that they would choose from the full set of available projects, not only from the handful of ideas that their students come up with. It's not as though selection into the IIMs is based on entrepreneurial ability. A large proportion of students have no work experience, and even those who do have been out of industry for two years by the time they graduate, so they're unlikely to be the most clued-in people around. There's really no reason to believe that in any given year the projects IIM students come up with are likely to be the best new ventures out there. So even if the IIMs do set up an incubator, it would make sense to delink it totally from the business school and invite ventures from a more general pool.
What we really have here, then, is not a sensible call for policy reform, but the wish-list of a whiny adolescent who wants to be handed his opportunities on a silver platter. Wouldn't it be great if someone gave you money at less than the market rate so you could it invest it your own two-bit schemes? Wouldn't it be wonderful if someone else sorted out all your regulatory issues for you, leaving you to sit around in your free office space and play entrepreneur? Wouldn't it be marvelous if you didn't actually have to ferret about for information but had someone make it available to you? The only way these policies 'help' is by protecting entrepreneurs coming out of IIMs from market realities, at the cost of the IIMs. That's not support, it's patrimony. And not only is that bad policy for the IIMs, it's also potentially harmful for the entrepreneurs themselves - protectionism, after all, breeds incompetence.
But what about the reform the IIMs have introduced - the change in placement policy? Mr. Gaitonde claims that this policy will hamper innovation, basing his argument on the fact that successful innovations often take more than a year to become profitable.
Two things. First, successful start-ups may take years to become profitable, but there are often ways to gauge whether the idea seems to be working or not. Any half-way decent business plan will have short-term milestones, and checking achieved performance against those milestones will usually provide at least a tentative sense for whether the project is likely to turn out to be viable. And while it may be too early to say whether the project is going to succeed, it may not be too early to see that it is definitely going to fail. I can think of several people I know who've started something and realised it was going to work out within an year. So having an easy exit route back to placement even one year in may still be useful, at least for a subset of those who take the plunge.
Second, even if the new policy isn't likely to be too useful, given the short-time horizon, how does it make things worse than they are? Before the reform, students interested in starting up their own ventures straight out of an IIM could only do so by foregoing the placement process entirely. This meant giving up on an incredible valuable opportunity (placement) in order to pursue something that was little more than a pipe dream on paper. As someone who toyed with the idea of starting a venture of his own coming out of WIMWI and gave up on it because he didn't have the nerve (in hindsight an extremely wise decision, looking back I can see that I just didn't have the experience / capability at the time to pull it off), I can attest to how well nigh impossible that choice was to make. Now, students have the option of taking a year off, testing the waters, getting some additional information (however imperfect) on whether their idea is likely to work or not, and then making a choice on whether they want to pursue it further or want to fall back on placements. Sure, some students will take the safer route and give up on ventures that don't seem to be doing too well in favor of placements. But is it likely that, under the old regime, these students would have tried to launch their venture at all? If the uncertainty of the venture proves too much for them one year in, wouldn't that uncertainty have been even greater when they were graduating, and wouldn't they almost certainly have caved in at that point if the option of taking a year off weren't available to them? I personally think having that year to explore the option with minimal downside is really valuable and will encourage at least a few more students to take the plunge, but even if that's not true, it's hard to see how greater flexibility is going to harm innovation.
The one sensible issue that Mr. Gaitonde raises is the unfairness of the policy to graduating students - it's certainly true that these students will face additional competition from the returning job candidates (though in part, this effect may be offset by the lowering of competition among the current batch, as greater numbers of the graduating cohort opt out of placements to pursue start-ups). That's reason for the current students to complain about the policy (though I'd like to think that they won't be so petty). But it doesn't in any way mean that the policy is bad for encouraging entrepreneurs.
On the whole, I'd say the new policy is a small, but useful gesture towards encouraging more IIM students to pursue entrepreneurship. Does it solve all the problems that these entrepreneurs are likely to face? Certainly not. But it's not the IIMs' role to do that. What it does do is provide a little additional flexibility, making it a little easier for IIM students looking to start their own ventures by giving them a valuable option. I'd be surprised if you see more than a handful of students using that option - and so the effect of the change on entrepreneurship overall is likely to be marginal - but it will still be a positive change.
 Notice that I'm explicitly stating that I'm in the mood to fisk someone and this post just happened to fall into my lap. So spare me the 'but he's just a hapless little boy with a good heart and doesn't deserve to be treated so brutally' comments.
 I'm not sure what reports or databases the author is talking about, but in my experience most databases made available to educational institutions are specifically earmarked for academic use only and are not meant to be used for commercial purposes. Those are the terms under which the providers of this information usually charge these institutions an academic rate. Often, this information is available to commercial subscribers as well, at a suitably higher rate. So I'm not sure that making them available to ex-students is even feasible.
 Don't get me wrong. I'm very fond of some of my old profs. They're wonderful, intelligent people and they taught me a lot. But I'd trust them to mentor a start-up they way I'd trust Cuthbert Calculus to babysit.