Why Indians Are Choosing Foreign Markets For Setting Up Shop
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India has been rated as one of the best startup destinations in the world, with increased investment efforts from global corporate giants and investors. Yet the country was placed at 130th position among the 190 countries in the recently released World Bank’s ease of doing business index for the year 2017.
While the ranking takes into consideration all businesses, when it comes to startups in particular, there are a number of entrepreneurs who have chosen to ground their base in a foreign country, even though they may have a growing presence in India. Starting a business may have certainly eased up compared to a few years back, there are still hurdles that are forcing these breed of entrepreneurs to base their companies outside the country.
One of the biggest problems faced by companies, especially those in manufacturing, or logistically heavy businesses, is the lack of adequate infrastructure to facilitate and foster the growth of these entities. It’s even tougher for startups, who have limited resources and don’t have government infrastructure to depend on.
“Sectors like defence and aerospace are machinery and capital heavy. Unlike software and machine learning startups, new ventures in these sectors need an ecosystem to thrive in. As of now that’s lacking in India, but we are trying to change that and hopefully in future, will be able to foster industrially intensive startups as well, “ said Siddharth Balachandran, India Head of Airbus Bizlabs.
Need For De-regulations in Certain Sectors
SatSure a geospatial newspace company decided to set up their head office in London, despite the place being more expensive to operate in. When asked what prompted them to take such a move, co-founder Prateep Basu said it was more to do with the lack of sectoral policies in the sector, even though much of their business is in India.
“For newspace players like us, firstly the government policy is unclear. Secondly, most of the space-tech market is still reserved with the government, unlike the west where private players are getting to play a much bigger role,” he said.
The concern stands for all such sectors where government policies are still restrictive, not allowing ventures to foster as well as they would in a relatively free market.
Ease of Finance
Although the easy of obtaining finance for a business has improved, it still stands as a big roadblock when setting up a new venture. With the concept of VCs being fairly new and selective, the expectancy of success can more than often pose to be a roadblock for entrepreneurs seeking funding.Things are however, changing believes Shanmugam Nagarajan, co-founder of 7, the Sequoia Capital-backed third-party services provider which is headquartered in the US, despite having a sizeable presence in India, apart from nine other markets.
"Funding is no more a problem here and is as good as any other place in the world right now," he says. "But yes the ease of doing business, closeness to the market and better exit opportunities could be reasons for setting up abroad," he added.
Market Potential Mismatched With Beauracracy
Despite having set up their base abroad, these Indian entrepreneurs are not only bulish on the Indian market's potential, but also feel that as beuracracy and regulations ease, it will become far easier to operate headquarters out of the country. One such entrepreneurial-duo are Vineeth Narasimhan and Asheesh Chanda, whose firm Kristal AI uses artificial intelligence to asses wealth management for high net worth individuals (HNI).
“We set up base in Singapore because definitely the ease of operating a new venture is far easier here. But that does not mean we don’t think of India as a lucrative market," said Chanda."It’s just that it was easier to start the business here due to more relaxed norms and the ease of doing business. Despite this, India is one our focus markets, as the number of HNIs in the country is only growing by the day, " he added.