Mass exodus Tech startups may shift overseas as young ventures face regulatory hurdles in India

Post on: 16 Март, 2015 No Comment

Mass exodus Tech startups may shift overseas as young ventures face regulatory hurdles in India

(Nine of the top 30 businessto-business software)

BENGALURU: A mass exodus of tech startups is expected this year as an increasing number of young ventures shifts overseas in search of investors and a better regulatory environment and facilities unless the government takes steps to reverse the trend.

A software product industry think tank estimates that as many as 75% of new technology startup firms, ranging from data analytics, mobility and security to cloud that intend to raise seed or venture capital will be domiciled outside the country.

If we also raise next round of funding, we would also be pushed to move base to Singapore, Shivakumar Ganesan, co-founder of cloud telephony startup Exotel, said at an event in Bengaluru. Competitor Knowlarity has already moved to Singapore.

Considering we are in India, selling and building in India, I don’t see why I should be breaking my head to move to Singapore, Hong Kong or other such places, said Ganesan.

Ganesan will be part of a wave of entrepreneurs looking to relocate their tech startups in countries such as Singapore, the UK and the US as the regulatory environment in India makes it difficult for raising funds, mergers & acquisitions and tax-related issues. Yes, there is an exodus taking place. In 2015, it is projected that three of four new technology startups that focus on the global market and plan to raise seed or venture capital will be domiciled outside India, said Sharad Sharma, co-founder of iSPIRT (Indian Software Product Industry Roundtable), a think tank. This is like the 18th century East India Company invasion. The enormous value that is being created in tech industry is leaving our shores.

Nine of the top 30 businessto-business software product companies by market capitalisation have already relocated to the US, Singapore and the UK, according to iSPIRT’s first Software Product index (iSPIx), which tracks the growth of the industry. These 30 companies are worth about $6.2 billion (Rs 39,137 crore), employing almost 18,000 people, according to the index-

Top Indian companies such as online retailer Flipkart and mobile advertising firm InMobi have re-domiciled to Singapore. Hungry for intellectual property, the government and investors in these countries are welcoming Indian tech companies with a red carpet.

A Singapore-based investor even offered $100 million ( Rs 632.7 crore) in funding and infrastructure costs for 10 years to InMobi on condition that it increases its decision sciences team from 25 to 200 in the island nation, according to a person with direct knowledge of the talks.

Mass exodus Tech startups may shift overseas as young ventures face regulatory hurdles in India

Jalandhar-based customer support software maker Kayako shifted to the UK after finding it difficult to work in the Indian regulatory environment.

London made natural sense for Kayako because of the UK’s regulatory environment that includes friendly and pro-active tax regime and benefits such as R&D credits and capital gains tax credits for entrepreneurs.

The UK government was totally on the ball. We were approached in person by directors of UK Trade and Investment and other highlevel officials with personal visits to our offices, said Varun Shoor, 30, founder of Kayako, which has over 30,000 clients including US space agency NASA, Japanese gaming firm Sega and Europe’s second-biggest carmaker Peugeot.

They also arranged for a Tier 1 Entrepreneur visa within a record time of 20 days. It has been an amazing experience, said Shoor, who had to face tax-related regulatory hurdles in India.

Experts such as TV Mohandas Pai, a top angel investor and chairman of Manipal Global Education Services, said startups are finding it difficult to do business in the country.Every sale is becoming a nightmare for startups in India because of the regulations, said Pai, a former Infosys director. Here they have to face harassment and corruption in the tax system.Pai is putting lot of energy as an iSPIRT adviser and curator to highlight these issues to the government at various forums. The situation is worse at the early stage. Among technology companies that raised Series A investments last year, 54% have already moved out of India, according to iSPIRT. Among them is Bengaluru-based mobile technology startup Deck, which relocated to Singapore entirely due to the funds raised. The investor was more comfortable investing in a Singapore company rather than in an Indian one, said Sumanth Raghavendra, 40, founder of Deck, which enables users to make smart PowerPoint presentations through their mobile devices.

Mobile point-of-sale provider Ezetap, which provides its technology to banks such as State Bank of India and HDFC, had to re-domicile to Singapore to raise funds as investors didn’t want to go through the hassles in India.

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