Entrepreneurship, Internet, New Startups, Running a startup, Startup

Why India is not a “Ideal Place” for Tech / IT startups

bangaloreThough Bangalore is proving that it is by far and away India’s startup capital, aided in the assumption of this title by the software companies which first put the city on the global map. A strong community of engineers with global work experience, savvy customers and growing pools of early-stage capital, are transforming the city into a global startup hub, much like the Silicon Valley in the United States.

A number of Indian enterprise technology companies are now shifting base out of the country to grow faster. Lack of sufficient risk capital, not enough profitable exits for investors and fewer customers willing to experiment with technology are making hordes of entrepreneurs take this decision.

Many of the firms are moving to Silicon Valley, California, known for its startup-friendly ecosystem that nurtured iconic companies like Apple, Google, Salesforce and Twitter.


What are the problems for Tech / IT Startup ventures in India?


1) Traction

The fundamental problem that enterprise technology companies are facing is that there are no early customers in India.

2) Unwillingness to pay

Lack of capital, exits, early customer adoption and unwillingness to pay for the products are compelling hordes of entrepreneurs to focus on or migrate to mature markets like the United States.

3) No concept of win-win approach

Many entrepreneurs who had to move to the US feel that there is no concept of win-win approach among large enterprise customers in India. Their focus is more on the profit margin of the startup.

4) Lack of respect

Many entrepreneurs who moved to the US feel that large enterprises in India -mainly big family-run businesses—do not view young ventures with respect. ”

They have an unprofessional approach towards startups,” says Siva Sivakumar, 42, CEO of Nimble Wireless who co-founded the company in 2007. After seeing a decline in revenues in India, the company is now targeting mature markets like the US and Europe.

5) Red tapism

Poor infrastructure, bureaucracy, red tapism are other major challenges. It took Sivakumar of Nimble Wireless at least six months to incorporate the firm in India and then another eight to get a loan approved from a government bank.

6) Lack of Funding

There is also not enough funding for young technology ventures in India, while in US many funds are focused on this sector.

“The US venture capital firms are increasingly recognising the quality of products being built by Indian entrepreneurs, and are rapidly looking to fund these teams,” says Anirudh Suri, founding partner of India Internet Group, a venture capital fund which is also assisting several of its portfolio companies to explore expansion in the US.

7) Not having enough exits

Not having enough exits have also triggered investors to push their portfolio companies to establish presence in the US.

Investors who do not have enough exits from investments in India-focused firms are also pushing their portfolio companies to establish presence in the US. Seed fund and startup accelerator 500 Startups invested in at least ten Indian companies and many of these firms such as gazeMetrix, Instamojo, WalletKit and TradeBriefs have already moved to the US.

8) Finding the right talent

For many young companies hiring the right talent is also a challenge in India. ScaleArc received 2,000 applications in India, of which it interviewed 200 and was only able to hire five.

“People in the Valley understand small firms better, want to create value and are not necessarily looking for high salaries,” says Sanjay Nadimpalli of technology startup Tuebora.

9) US allows being at centre of the action

Young technology firms from India too are finding that being at the centre of the action helps grow business better. Cloud storage company Gluster headquartered in Sunnyvale, California was acquired by technology major Red Hat for about Rs 667 crore ($136 million) in an all-cash deal last year.

Is Bangalore India’s best city for Startups?

Despite the potholed roads, patchy power supply and a mostly apathetic government, entrepreneurs flocking to Karnataka’s capital say they are drawn by a unique culture of mentorship and networking that pervades the city. There are mentors in Bangalore who are willing to meet entrepreneurs on a Sunday evening and brainstorm until midnight.


We would like to know your experience with starting up your venture from the ground up in any Indian city.

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