Why There Aren't More Software Startups In India

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Why There Aren't More Software Startups In India

 



These days, you can’t help but read about the economic growth that is going on in India.  Lots of people are talking about the huge emerging middle-class, the overall growth in their economy and the increasing likelihood that India will have a seat at the table when it comes to economic superpowers.   [Disclosure:  I was born in India and spent many of my formative years there, including high-school and a couple of years of undergrad].  

But, instead of looking at the macro-level trends in India (which are certainly mostly positive), I’d like to instead look at the entrepreneurial process there – and more specifically at software startups, which is my main area of interest.  Though we hear about lots of IT companies in India driven by  the big push towards outsourcing in the U.S. and elsewhere, most of these Indian companies we hear about (big and small) are fundamentally service companies, not product  companies.  Nothing wrong with service companies, but the kinds of startups I’m most interested in are those that are building software products.  I think the environment required to build a large pool of entrepreneurs starting software product companies is different from those starting service companies.

I’ve been doing a fair amount of reading on what is going on with startups in India and also had the opportunity to meet with a local entrepreneur there during my last visit (he is indeed working on a software product startup).  

So, here are some thoughts and ideas on why we haven’t yet seen a lot of software product companies come out of India – yet.  I’m sure these factors are changing for the positive even as I write this, so it’ll be interesting to watch the entrepreneurial community develop in India.

Why There Aren’t More Software Startups In India
 
  1. Service Companies Have Lower Risk:  Unlike product companies that usually require some R&D and investment before revenues and cash-flows can kick in, service companies can (and often are) profitable very quickly.  The business model for a software services company (commonly an outsourced development company) is fundamentally simple.  Hire labor from the large pool of local talent at a price that is market competitive for India.  “Rent” these resources out to clients at a higher price.  The clients get access to a less expensive pool of resources, the employees of these Indian companies generally get a decent salary and benefits and the company itself makes money.  Seems like a win-win-win for everyone.  Hence the large number of IT services companies, both small and large that have been established in India over the last 10-15 years.  As an entrepreneur in India, this is what defines your opportunity cost – or the risk/reward ratio you are trying to beat.  Sure, you could spend your life savings on building a product in the hopes that there will be a large payoff someday, but a services company is just much less riskier.

  1. Lack Of Significant Precedence:  One of the great things about the startup community here in the U.S. is that we have lots of great examples of software companies that have succeeded, with highly visible founders behind them.  Examples include Microsoft, Intuit, Siebel, Lotus, Oracle, Adobe and many others.  We’ve seen hundreds of successful software product companies started in the U.S.  Many of the software startups initiated today in the U.S. are done so by employees of other successful (or even unsuccessful) software startups.  India does not yet have this foundation of prior precedents that entrepreneurs can look to for inspiration.  This is going to take a while to change as India is just producing its first real generation of software entrepreneurs like we had in the U.S. decades ago.  

  1. Early-Stage Capital Is Even Harder Than In The U.S.Historically, it has been difficult for startup founders of product companies to get their ideas funded in India.  The reason is that investors, even private equity investors, have been reluctant to put high-risk capital to work and fund radically new ideas for software companies.  This is partly because there’s been a large supply of other opportunities that seem to present a much better risk/reward (like IT services).  However, this seems to be changing.  The volume of private equity investments in India in 2006 was at an all-time high and is growing at a torrid pace.  More and more U.S. venture funds are beginning to invest in Indian companies.  I think this is important because though many of us in the U.S. have access to sufficient personal/family funds to bootstrap companies, this may not be true for the a brilliant software engineer that has a great idea for a company in India.  One thing I’m worried about is that just like we have in the U.S. the venture investments will likely be concentrated in a few key geographic areas (like Bangalore and Mumbai).  Though it’s a start, it still doesn’t address the needs of the large numbers of exceptional entrepreneurs that are likely established in second-tier markets, like my home state of Gujarat.

  1. Recruiting Great Employees Is Challenging:  Lets assume for a minute that you are a software entrepreneur in India, living in one of the major markets and have a great idea for a startup.  Even more important than cash is the ability to find and recruit other members of the early team.  Your ability to do this will likely be one of the single largest factors in your future success.  As it turns out, building out this team is pretty hard to do – even here in the U.S.  In India, the challenge is that startups are competing with large brands that are experiencing tremendous growth.  With these large companies come great salaries, some financial stability, phenomenal “perks” (sort of like we see at Google) and the peace of mind that comes from being able to tell your friends and family that you’ve got a great job at company they’ve likely heard of.  It’s important to realize how important this last factor is.  The ability to demonstrate stability and prudence is an important cultural factor in India.  A startup’s potential employees are going to have a hard time rationalizing why they’d take a risk on a no-name startup when there are so many big companies looking to compete for their talent.  If you’re of marrying age in India, chances are that the societal pressure to increase your “market value” in the marital sense is often extreme. [Note To Self:  This might make an good article unto itself.]  Startups have to overcome all of this to try and recruit great talent.  From what I have seen, heard and experienced, this is non-trivial.

  1. Too Much Bureaucracy:  Here in the U.S., I can have a brilliant idea for a software startup and within about 72 hours have launched a “real” company.  By “real”, I mean it will be registered (LLC or S-Corp), have a Federal Tax ID, have a merchant account to accept payments, a bank account and a small business credit card.  I’m not sure how long the equivalent process takes in India, but I’m guessing at least weeks.  What’s more important than the elapsed time to start a company is the personality required to do so.  Folks like me (quiet, introverted and not particularly aggressive) that are looking to start companies in India are going to be at a disadvantage as they try to navigate the waters there.  This is one of the reasons I left India (India is not conducive to mild-mannered introverts).  So, if you’re like me, you have the added burden of trying to find someone else that is more aggressive, gregarious and generally can “get things done” in India.  In the U.S., it’s very different.  Even folks like me can actually start companies.  Much of what is needed to be done can be done online (you don’t even have to talk to people).

  1. Product Companies Are Hard:  At the risk of drawing stereotypes, I think Indians in general are a little impatient and like to see quicker “payback” periods on their investments.  There are a few number of them (than in the U.S.) that are willing to spend the 2+ years it might take to build a product, see how the market responds and “tweak” the business as necessary to get it to a successful state.  Product companies are also more “random” and difficult to control the outcome of.  They involve a large number of “creative” factors that will largely influence whether the product succeeds or not.  I’ve found Indians to be almost overly practical (in the short-term sense) and not passionate about some of the softer things (like user experience, marketing, branding and other things) which in today’s world are large contributors to future outcomes of software startups.  They’d much rather work on the “harder” stuff that they can better control and predict.  This is a bit of a “squishy” argument, but it’s a squishy issue.  I guess the evidence of progress I’d like to see is a cool software product coming out of an Indian startup along the lines of an Adobe Photoshop or even a 37signals Basecamp.


So, what do you think?  If you’re an Indian entrepreneur, have you faced any challenges in getting a product company kicked off?  Am I completely off-base here and are there hundreds of Indian software startups building cool products as we speak?  If so, why aren’t we hearing more about them?  Would love to hear your thoughts in the comments.

Posted by Dharmesh Shah on Mon, Jan 08, 2007

COMMENTS

Good article :)

I totally relate to these points first hand. I'm an entrepreneur based in Mumbai, India. Started a web services company at the age of 21 (9 years ago) and never looked back!

Along the way, I have learned 1000's of lessons and have also faced huge hurdles in the growth process.

The biggest complaint I have in starting a software / web 2.0 company here is the utter lack of respect for startups. I mean startups in the 'purest' form ... founders are freshers out of college, have no "industry" experience etc. Investors simply don't give you respect or time.

But if you've worked in a large software services firm for years and then start a company, getting funded is a tad easier.

Another problem I've faced as an Indian businessman targetting foreign clients is that they have pre-conceived notions that we will work DIRT- cheap :) I'm from India right? so why charge so much? They don't realise that office rental costs and overheads are still quite steep in cities like mumbai.

Anyway I can go on and on.. heheh. Good work on the article.

posted on Monday, January 08, 2007 at 9:19 AM by Amit Bhowmik


The bureaucracy isn't all that bad. Any kind limited liability setup could takes more time but an unlimited liability firm takes about an hour to setup (personal experience).

It's the employees part which is very, very tough. Basically all good employees are working for someone who gets paid high 'global' prices. As in every other product/service, when an economy exports something it basically imports global prices and that can be completely uneconomic for a startup.

posted on Monday, January 08, 2007 at 9:44 AM by Vivek Bhatia


In this list, bureaucracy would be the least important things, besides even if it is what you say it is, its just a one time thing - but the most frustrating thing is recruiting great employees and holding on to their passports :) Think about it, you would have made a great start up employee, but you flew out here. Why haven't you considered/listed this US network effect ? Taboo ? ( I know )

posted on Monday, January 08, 2007 at 10:00 AM by Senthil Gandhi


Good points regarding bureaucracy not being that large a factor. I'll accept that.

As for the U.S. effect, that's true. My primary reason for leaving was not that I wanted to launch a startup but that my personality wasn't the type that would have likely done well in India (at least not the part where I grew up). I'm not aggressive enough.

posted on Monday, January 08, 2007 at 10:10 AM by


Actually, India is abound with startups if we look at the traditional economy. Even now, my friends are quitting post tech jobs and going to their dad business/shops etc...

What you are talking about are tech startups.. Tech is not even as mature as the mobile market. We should compare apples and oranges here. I get the feeling that there will be a lot of innovation in the mobile that will start from India. It might have limited scope in the global market but will be good innovation considering the local market.

Also, language and culture is a big roadblock for tech startups. They have to keep in mind a lot of things that are almost not needed anywhere else in the world.

posted on Monday, January 08, 2007 at 10:30 AM by Srikanth Thunga


I think there are quite a few differences both cultural and economic at play.

I'd guess that in the U.S. the majority of people working at tech startups (both founders and early employees) came from middle to upper income families and therefore would not be so afraid of being out of a job if the startup failed.

Also, large U.S. companies have been increasingly cutthroat in terms of laying off workers. Companies such as Polaroid have left long-time workers with essentially nothing in retirement, etc.

So big-company jobs are not viewed as secure as they used to be.

U.S. culture also loves the entrepeneur. It is almost like they are our gods sometimes.

I think you will see Indian startups more from the next generation, kids who want to go beyond what their parents did.

posted on Monday, January 08, 2007 at 10:53 AM by markj


Why not many startups in India?
Answer: it will happpen when
1) $1 = Indian Rupee 1 (or atleast somewhere close to dollar values, at its current 45 times, dollar has lot more power to fetch good brains to serve Indian IT services industry than to make them work for statups where future is unpredictable

2) Indian educational institutions improve quality of research. Which would in turn require atleast 100 universities compare to facilities available at MITs, Carneige's and Harvards. Currently India has 6 only Six top IITs which offers quality bachelors progams...

According to my idea...the good startup idea would be to
1) have headquarters and high level teams in US, UK or european countries
2)Developement and support teams in India

posted on Monday, January 08, 2007 at 12:03 PM by anand mahajan


Very good. In a recent article, I read that 24% of tech startups are by minorities here in the U.S. Perhaps, in addition, availability of funding and other resources aren't as easily available, all while trying to survive on minimal income and working on a startup during your free time.

posted on Monday, January 08, 2007 at 12:24 PM by home


Few days back I tried to register co.in domain name.
Was surprised when I looked at Requirements & procedure (which needs lot of paper work & some registered private/public company ) , gave up the idea.
Said that I still feel proud of my country and will surely register few domain names someday :)

posted on Monday, January 08, 2007 at 12:50 PM by Nitin Mekhiya


I'm an American-born entrepreneur of Indian origin who came to Kolkata, India three years ago to start a company. Originally, we were strictly in services but are slowly becoming products-focused. We have not given up services as it has proven to be a solid way to bootstrap/fund our other products divisions.

One of the biggest challenges when it comes to innovative product development in India is finding people with real passion for what they are building. In *most* cases the passion "time" doesn't match with however long it may take to *develop* the product itself. So you are left with products that are being tossed from one developer to another developer re-engineering code based on specifications because it's what they are paid to do.

I do think that we will see more products oriented companies in the future but there are other issues that usually need to be addressed:

[1] Who's going to market the product? Would a buyer buy if the company is based in India? (This obviously depends on the nature of what's being offered.)

[2] Would the product be targeting India, the US or the world? I've heard arguments supporting a case that the Indian market is too "small" (and vice versa).

Overall, things will change as more individuals start separating themselves from the commoditized tech worker variety and it might happen sooner than later!

posted on Monday, January 08, 2007 at 12:55 PM by Indimingle


I would add "university experience" as a major reason. Though I graduated from a top college in India, I never had the industry collaboration that one gets in the US universities. That I believe makes a big difference.

Secondly, while people may think that India is flush with labor, getting great developers is getting increasingly hard. If they are any good, they are already abroad or work in niche companies that pay them to live like a king...

posted on Monday, January 08, 2007 at 1:11 PM by Prem


hi there,

nice post.

If colleges/universities have a program similar to that of stanford where you get some infrastructure with some mentoring and financial capital, Entrepreneurs(who are NOT thinking of marriage) will be able to start something.

I don't see why Bangalore cannot have a few product companies with many Rich Software professionals available for mentoring and investing.

NASSCOM : The IT industry in India should be generating a huge amount of Income Tax(a good 30% of it should be coming out of Bangalore) -- part of this money should be somehow channeled to some infrastructure where NEW college graduates can risk some of their years and ideas. NASSCOM can have an advisory group and I'm sure some of them will be guys who would like to help those work on their dreams.

Pune has a good culture of doing products(for the indian market but NOT a global market) and that would be another city where there are many global companies .

Another thing that parents can encourage is to take good risks.

BR,
~A

posted on Monday, January 08, 2007 at 1:32 PM by anjan bacchu


Hi

It is a good discussion topic, i am not sure how many of you are still in India though except a few who said straight that that they are based out of India.

Well i am from here and the bureaucracy is not any more that big an issue. In Hyderabad, the systems are in place to enable any entrepreneur to get going quite easily especially the software entrepreneurs.

Those quoting the lack of university facilties are way off the mark as it is the least of the issues. We really do not see all the MIT alumni become entrepreneurs, same goes for IIT alumni. Industry link is a plus but it is not the solve all.

My list would be,
1. Availability of seed stage funds is one of the key reasons.
2. There is no social pressure, a fresher out of college gets a good job with a equally good salary without much sweat. The society is still relishing this and it is would be sometime before people get tired of easy success would want to do something more leading to a rise in entrepreneurship
3. Lack of innovation and creativity focus in education
4. We are still not a capitalistic society, all social values encourage you to be a salaried class than an enterpreneur. It is even given lesser respect is some situations still
5. It is difficult to fire people, believe me this is one of the key reasons hindering entrepreneurship world over that it is taken as a measure of business friendly economy
6. Entrepreneur bodies such as TiE chapters are filled with bureaucratic flab and grey hair focused on dinners than encouraging and building young enterpreneurial talent.

You would not believe the rise in number of college freshers today seriously considering entrepreneurship in India. The time has come for the product development wave in our country. Hopefully the big sharks do not stamp down the budding startups.

BTW, i am on the verge of launching my MicroISV shortly ... This is my plan to raise my own seed fund for a bigger idea.

cheers!

posted on Monday, January 08, 2007 at 3:07 PM by Vignesh Swaminathan


The question is very interesting. "Why are there not so many tech startups in India?". The article provides some answers but in some respects it is not fair to the reality in India today. Maybe because the author has long left India and is using his earlier days in India and projecting that image to the present day correcting for changes with his sometime visit and other second hand accounts.

I agree that some of it is cultural. Right from parenting to schooling we are taught the virtues of stability and the assurance of having to be able to put food on the tables rather than chase our dreams. But I think it is changing rather fast, with exposure to other cultures and cross-pollination of people reverse-migrating. I just wish that our educators will learn some of this and stop turning out zombies.

Bureaucracy, I think is still tough but not a show stopper.

I think the clincher is a lack of market. I spent significant time working for a successful product startup based in India and I think if you are targeting the US market you cannot do it unless you have significant prior experience working with that market. If you are born, brought-up and based out of India and have an entrepreneurial bend of mind you have to struggle to make something that is relevant in the Indian market, because that is where your strength is. The Indian market is growing, bet on it. Look at all the lifestyle products that have taken of in India air-travel, tourism etc.

I think in the long run, we will still be the services backyard of the world, not because it our labor is cheap but because we can do it faster and better. The labor arbitrage will slowly melt away as our cost are rising, and everyone knows that it is just a question of time before it gets equalized.

But, during this period we will also develop a strong economy and market, that Indian entrepreneurs can target.

Having said that, saying that people looking for a "marriage-market-value" as an impediment to startups is stretching it too far. For one thing, it probably a long time since you stayed in India long enough to see the real changes. It has changed, the coolest thing in India today is to say that I work for a startup or even better "I run a startup". An secondly no self -respecting startup would want anything to do with someone who has a problem with "marriage-market-value". So pleeeeeease ......

posted on Monday, January 08, 2007 at 3:21 PM by kinger


Excellent points.

I saw some comments in here and on reddit using the word "desperate" and pointing towards the poverty of the masses as a countermotivator. I think another aspect of what these folks are trying to articulate is that *even though* there has been significant wealth creation as evinced by Infosys & co., even though the opportunity does exist for all these tens of thousands of IT employees to go beyond just maintaining software for someone else, they don't due to "animal out of the cage" syndrome. They are simply not used to thinking out of the box. Yet. I think it will take time for this newfound freedom to experiment with your life to take root in our culture, in the mind of the middle class. Till then, it will be the ones from traditional business families who will also take the step into IT entrepreneurship.

This is in line with your point about "Lack Of Significant Precedence" : the more the number of successful startups, the more startups they will encourage.

posted on Monday, January 08, 2007 at 8:13 PM by Vijay


I thuink it's a good idea for Indians to take a look at a country that has experienced exactly the same problem and take a long view of how to avoid it. That country is Taiwan, which despite great sucess in the hardware industry is still locked in an OEM mindset and has almost no global consumer electronic brands.

Note that Taiwan has always had good access to investment capital and although it has problems with corruption it is not overly bureaucratic. The main obstacles have been the cultural ones (which are very similar) and the perception of faster returns and lower risk in service oriented manufacturing.

In the long term, a lot of these companies began producing their own products during cyclical downturns. I suspect the same thing will happen in India, but it's crucial that these companies invest in building innovative products and brand identity instead of just cranking out 'no-name' software components. Without doing that, India will fall into the Taiwanese trap where the eventual narrowing of costs pulls away all the service jobs and slowly hollows out the entire industry, and eventually the broader economy.

posted on Tuesday, January 09, 2007 at 12:08 AM by Tony Pace


I agree with most of points, i am a pakistani national, working for a services based company from last two years, graduated two years back.
Right after my graduation, me and my friend took initiative to start a startup in pakistan. (IN pakistan there is no TREND of startups), but major hurdle we faced was that startups have no respect even in your own family where your parents have some expectations from their recentenly graduate son. but most important reason was that INVESTERS never put a single eye on our idea.

posted on Tuesday, January 09, 2007 at 12:11 AM by Usman


Very good article!!.
i personally think, biggest reason is future security. I am pretty sure, almost all kids are raised with notion that they will get nice job, hence easy life. They are never taught to take risks, or do something, which makes them stand different. Instead parents always pushing kids to get secure future. Obviously, when multi-national company offers you $10/hr job in india.. you are more than happy. We forget big picture.

Average indian has better aptitude, but we applied our energy in proving ourselves to clients.

Most of indians, who came here, they belong to middle-class families where constant in-flow of money is important.

Considering all these things, either we want to work and get quick money OR even we want to do business, we want quick returns.. (this explains all dunkin-donuts and motels, gas stations, UPS stores, taxi drivers)

posted on Tuesday, January 09, 2007 at 12:22 AM by Ashish Jain


Managing a product-startup right now in India, I would say that with the amount of liquidity scorching around India, financing isn't really an issue. The problem isn't financial capital as it is intellectual capital. As you write, recruiting great employees is hard, and doubly so if you are a product start-up. It is incredibly difficult to find someone with intelligence, business smarts and the ability to take risk here.

posted on Tuesday, January 09, 2007 at 12:25 AM by Tejus


I personally believe of the above points # 1,2 and 6 are one of the strongest reasons for not having too many software startups (product development) in India.

The moment a services company employee starts aspiring about having his own firm or business, he is confronted with the option of risk v/s returns. And having worked in a service company it is but natural to think in terms of services to reduce the risk. Something (services firm) is better than nothing (employee). Attempt for the low hanging fruits.

It makes a great difference if one can touch and feel a successful product development firm and get inspired and fired up for the same. We may have many services companies, but how many successfuly product development firms. I think this helps a great deal.

Lastly, with more and more grads joining the service industry, the skills needed for a product development might not be developed. Which leads to self doubts at the time of start-ups or failures at the time of building and launching a product.

posted on Tuesday, January 09, 2007 at 1:55 AM by Shabbir Husain


Okay I gave up with my comment's size and this is where it is now:
http://tropicalmanager.blogspot.com/2007/01/startup-hiccups-in-india.html

posted on Tuesday, January 09, 2007 at 5:02 AM by Deepak Shenoy


I am an American who is working in India, and I agree with many of your points.

I have worked with software engineers who say in their training they learned the art of 'Copy and pasting'

I also think there is a very large disconnect between the senior management (skilled business people) and their employees. I seen every day that one hand has no idea what the other one is doing.

I think these two factors make it hard for investors to take chances.

posted on Tuesday, January 09, 2007 at 6:18 AM by MrIndia


Hi Dharmesh, I'm in the process of starting a startup in Chennai. I'm also one of the organisers of Proto.in (http://www.proto.in/). Proto is an event in Chennai based on the DEMO conference where we get 30 product startups show a demo to an audience of VCs. The event is on Jan 20 & 21. It should uncover some good product based startups in India. Check it out if you're interested.

On things like hiring, risk appetite and so on, the climate is definately changing. I won't say its like Silicon Valley because its not, but its a lot better than ten years ago, and getting better.

posted on Tuesday, January 09, 2007 at 7:07 AM by Siddharta Govindaraj


Additionally, I believe it can be equally difficult finding like minded partners or co-founders, who are ready to take the plunge along with you.

posted on Tuesday, January 09, 2007 at 7:29 AM by Shabbir Husain


As they say in China: Timing of heavens, Convinience of Earth and Harmony of people all have to favouring you, in order to start a venture.

posted on Tuesday, January 09, 2007 at 7:36 AM by Shabbir Husain


Building a product starup myself, even though I would agree with almost all your posts, but I think typically such posts do not highlight some of the good things that are going for India - and also the fact that a lot of the problems that you mentioned above are an aritifact of the way things are done in India and if properly understood can actually be used to your advantage.

1. Regarding too much bureaucracy - its true that things are slow and painful but the right way to deal with them is to hire a person who knows the stuff - for example while registering my firm i did not even once have to run around a bureaucrat..everything was handled by my CA who couriered me all the documents and I just signed and couriered back. In fact he made me think about three different company names in advance and fill three different forms so that as soon as a bureaucrat rejects one name he will be ready with the next application. (there is another long story of choosing the company name in the first place).

2. I hire a cook for my startup and pay him like 60$/month (which includes cleaning and house keeping) and the food is realy amazing. Even though its not much but it does take that headache of you to manage your own food. Try to beat that sitting in the U.S.

3. Even though hiring people is real tough, but the pay cheques are still like half of that in the silicon valley. So if your statup is doing good stuff (read product based inoovation stuff) and is well funded you will have very little competition as far as hiring is concerned. The big problem that I have found here is an amazing lack of perspective regading a startups upside.

4. The home-office that we inhabit has a rent of around 200$/month. This includes working space for 4-5 engineers, plus 4 beds in two bedrooms, and another dining and a big hall. Again, beat that sitting in the U.S..

posted on Tuesday, January 09, 2007 at 1:13 PM by nishant


The head of a start up will be where the market is.

Please repeat along, Head of a start up will be where the market is.

No market = no start up.

Low internet penetration = Less startups.

Hence the proof :)

posted on Wednesday, January 10, 2007 at 2:20 AM by vishi gondi


Being an entrepreneur (with no family business background) in India, I can relate to every single point mentioned here.

One problem that is not mentioned here is that in India it is difficult for a startup owner to comprehensively know what licenses he requires to start his own business. You have to deal with multiple government entities each which has its own peculiar rules and licenses. Think VAT, Excise, Export, Electricity, Corporation, Company, Professional Tax etc.. By the time you learn that you need a license, you are usually in violation of the said law. In fact it is practically immpossible to run a business in India that obeys all rules and licenses 100%. Keep in mind the fact that most tax authorities look at you as guilty until proven innocent. Mistakes are hard to correct and need the necessary grease money.

The only advantage of the Indian Bureaucracy is that any issue can be corrected by either getting the right person involved or with the right amount of money. That... unfortunately, is the scenario even today.

posted on Wednesday, January 10, 2007 at 3:13 AM by Jayakrishnan


I agree with most of the points, but rest assured that us in Europe are facing very similar problems to those.

In addition, the bloated social system makes people complacent and everyone expects great benefits while putting in just average amount of work. On the other hand we don't have the level of poverty & income inequality of India.

posted on Thursday, January 11, 2007 at 5:18 AM by Kiddy


I'm a French citizen who just moved in to Cochin, India, with a start-up in mind. I thought it would be less risky thanks to the lower payroll. I still believe so but I'm kind of struggling to find the right people, and those are not so cheap either...

Never mind, India is booming and money is everywhere, so why bother. Many NRI who came back from the US to India 10 years ago with their software companies admitted to have made more money buying / sell land.

That ease of making money will backfire one day but a good thing is that everyone is telling me how fast the country has changed during those past 5 years. Even if it doens't look as something impressive to me, it's real innovation for the people here. So the change is there and people are innovating their way too, which lets me think start-up will soon flourish when money gets tougher to get.

posted on Saturday, January 13, 2007 at 11:44 AM by ericdes


HI,

I totally agree with the author of this post regarding the Marriage-market-value concept. I am going through a similar crunch of unable to get back to India to start my own e-commerce portal. This is because I work in a niche field in US and though there are jobs in India its just taking more time than I can wait. I cannot go back to India without a job in hand as I am a eligible bachelor and a e-commerce portal(in which I have full faith) is still a uncharted territory in the Indian waters.

posted on Monday, January 15, 2007 at 1:43 PM by Aditya Gupta


"PASSIONATE PEOPLE HAVE AN ABUNDANCE MENTALITY". We just do not understand what this means. Whether it be the customer or the employee, everyone is looking for a free ride.

posted on Thursday, January 18, 2007 at 4:58 AM by SM


A good read for sure. It seems that the lack of infrastructure and general technological awareness is a significant deterrent to starting something along the lines of a Web 2.0 startup. For example, starting a company that promotes Indian garage bands assumes (1) Indian musicians see a need to use the Internet to promote themselves (2) There is significant broadband penetration in Indian home that facilitates music downloads. Neither of this is the case, really. This is just one example and I am sure you can come up with a bunch of other examples as to why other "me too" ideas wont work in the Indian context.

posted on Thursday, January 18, 2007 at 12:33 PM by Bharath


I think anand mahajan is coorect ....we should have proper education system which will assure working for self.I think you all are from urban areas have you ever thiaught of RURAL area ...as per me talent is hiden in rural india...which need more exposure....!!!

posted on Tuesday, January 23, 2007 at 8:06 AM by Uday Kadam


Employment is to survive in life. Entrepreneurship is to succeed in life. This simple reality should be taught to students in India.

posted on Tuesday, January 23, 2007 at 10:43 AM by Known


Entrepreneurship is great but a more grassroots approach is for students to be taught to actually ENJOY what they are learning rather than to do so for their "career". THAT is a precursor to real entrepreneurship.

posted on Wednesday, January 24, 2007 at 4:40 PM by Indimingle



Thanks for such a nice article. I am also facing all of these problems. We are also a product company based in Meerut (U.P.).
Major problem we are facing is getting funding for our product because nobody trusts on our ideas.
I do not think any VC can think that a person in city like Meerut needs funding for their product.
Education is also a major problem if I was an IIT engg. I must have got funding, but if I am not from IIT does that mean….


posted on Friday, February 02, 2007 at 10:34 AM by Tariq Mumtaz


A nation is not made of land; a nation is made of its people. Since India ranks 126 in Human Development Index its a long way to go.

posted on Saturday, February 10, 2007 at 12:48 PM by Known


Dharmesh You might be interested in this article. basically, startups are about love for tech [first and then biz!], and Indians arent techie by choice, but by compulsion [get a job,lotsa $$!]... Let me know your thoughts Ashish

posted on Thursday, March 22, 2007 at 2:57 AM by Ashish



My 2 cents....

I think another important factor that the article missed out is the absence / presence of a local market for software products - which I think is the most important (I have seen very few successful examples of a software firm making it big by selling its products internationally, without doing so locally)

Correct me if I am wrong, but pretty much most of the consumer software out there is the Operating System, Office Suite and Intuit's suite of tax products. You can safely assume that no new product will come out of an Indian company to compete against the first 2 for the next many many years !

That means bulk of software products are enterprise related. All the growth in web startups is due to consumer spending. Its true that consumer spending will translate to corporate profits. But when a CFO sits down to budget corporate spending for the next 3 years, IT is perceived as a "cost center" (you cannot quantify revenue increase for every dollar of IT investment) and the attitude is "how do we minimise IT spending to get the same profits" (Financial Services business is an exception). So you see its an attitude shift that is required, as against an income shift that is required to drive consumer web sites. Of course this attitude shift will happen, but as we all know attitudes take a much longer time to change and hence the local software growth curve will take more time and wont be steep.

Botttomline is that the current Total Addressable Market (TAM) is too small - thats the root cause, which leads to all the other factors - no VC interest, no interested talent, not enough precedents etc etc.

posted on Wednesday, April 04, 2007 at 5:21 PM by Binny Mathews


I am tech graduate, chose to work in Business Development capacity for 3 yrs in 3 companies(all start ups or small Co.s) each were into very different products/service/technology, experienced great learning curves, learnt tough world of business from close quarters. Few months back i had a offer to work from US with neat pay. But I choose to start a company in India with high end R&D work. From the day i graduated all i wanted to do was start a company and at 26, we have our start up which is 6 months old now. Here are few of my opinions: 1) India has it's own challenges like any other country, we should always try to figure out a way and not go with whys, ifs, buts, etc. Stop whining! What is available is available.. (or do u wanna wait till......) 2) This forum should focus on ways to beat difficulties and NOT overtly highlight them(Excuses/fear) 3) we need to focus and encourage 'attitude needed for start ups' and not 'analysis-paralysis' factor. 4) iFlex is a role model and not sweat shops like Infy, Wipro or TCS (we are working on product initiatives and tying up with only s/w product companies) 5) FInally only person who is stopping you from staring a business is YOU, all other factors are less than 1% I would like to add I have invested almost everything I had and run the company from my own little money i have saved, I might be loosing money initially but I haven't lost out on my dreams.... I have never been more happy or slept more peacefully as I am now with my Start Up. With all due respect to you leading people, Stop analyzing and encourage new guys into venturing without fear. If you already did it's perfect, but if u want and u have not.. guys do something now there only split second diff b/w today and tomorrow , for that matter between 2007 and 2010. TAKE THAT SMALL(and No, it's not BIG) STEP TODAY. Or we can just keep talking, thinking, analyzing, mulling and finally cheating/lying to ourselves. As someone told Job is survival and Entrepreneurship is success/happiness. Cheers!

posted on Saturday, April 07, 2007 at 11:18 AM by Kumar


I am tech graduate, chose to work in Business Development capacity for 3 yrs in 3 companies(all start ups or small Co.s) each were into very different products/service/technology, experienced great learning curves, learnt tough world of business from close quarters. I constantly and consciously was heading towards my objective. Few months back i had a offer to work from US with neat pay. But I choose to start a company in India with high end R&D work. From the day i graduated all i wanted to do was start a company and at 26, we have our start up which is 6 months old now. Here are few of my opinions: 1) India has it's own challenges like any other country, we should always try to figure out a way and not go with whys, ifs, buts, etc. Stop whining! What is available is available.. (or do u wanna wait till......) 2) This forum should focus on ways to beat difficulties and NOT overtly highlight them(Excuses/fear) 3) we need to focus and encourage 'attitude needed for start ups' (Culture without self created fear or inhibitions) and not 'analysis-paralysis' factor. 4) iFlex is a role model and not sweat shops like Infy, Wipro or TCS (we are working on product initiatives and tying up with only s/w product companies) 5) FInally only person who is stopping you from staring a business is YOU, all other factors are less than 1% I would like to add I have invested almost everything I had and run the company from my own little money i have saved, I might be loosing money initially but I haven't lost out on my dreams.... I have never been more happy or slept more peacefully as I am now with my Start Up. With all due respect to you leading people, Stop analyzing and encourage new guys into venturing without fear. If one already did it's perfect, but if one wants and has not.. then guys should do something now there only split second diff b/w today and tomorrow , for that matter between 2007 and 2010. TAKE THAT SMALL(and No, it's not BIG) STEP TODAY. Or we can just keep talking, thinking, analyzing, mulling and finally cheating/lying to ourselves. As someone told Job is survival and Entrepreneurship is success/happiness & India is opportunity like any other. Cheers!

posted on Saturday, April 07, 2007 at 11:39 AM by Kumar


You made nice points there. We are reinventing ourselves from a web services company to a product comapny. Our first product http://www.foodistan.com was a non profit website. We are hoping to change that. We might have a real software product in some time.

posted on Tuesday, July 10, 2007 at 2:44 AM by Foodistan Team


a lot of 'insights' from real and vicarious product entrepreneurs!!! one major deterrent is the lack of understanding of the product model itself! A lot of applications are being touted as products because they merely have a name, which is mistaken for a brand. secondly, a product presupposes a requirement (either explicit or dormant) and a requirement that is common for a specified target audience. Which means some element of market research or understanding. Thirdly, you don't make great software products by making some incremental changes to an existing product which is to say that product ventures normally avoid treading a beaten path. Every 'product' guy worth his name has an accounting software or even an ERP (as if all other requirements and markets have been fully addressed). More later!

posted on Tuesday, September 18, 2007 at 2:57 PM by Badri


Great points you put forward.....
@ Early-Stage Capital Is Even Harder Than In The U.S....
...... I think this is one of the most difficult situations for any Entrepreneur or a startup venture. Having business idea or innovation in your pocket is not the only thing that can grab attention in India to start from scratch. Your innovation needs nourishment from Early Stage Capital, which is very rare in India as compared to the Developed nations. Now we do have some angel investor’s networks active in India, but many people are still not properly aware of such networks.
PITCHINDIA (http://www.pitchindia.com) is a good move to introduce a budding entrepreneur to an angel investor. PITCHINDIA also provides necessary assistance to startup a new venture in India. The queries regarding Patents, Copyrights, Trademarks and Intellectual Property Rights can be posted on the site. You can also submit your business plans to get reviewed, assessed and funded.

http://www.pitchindia.com informative and worth visiting.

posted on Friday, October 12, 2007 at 10:05 AM by Unmesh


Your article is excellent in analyzing the difference between service companies and product companies. I came to U.S. long time ago for graduate studies after completing chemical engineering in India.

I have been a keen reader and observer of financial arena of developed countruies and multinationl corporations. I am extremely happy to see how the development of software know-how has elevated the prestige of India and opened the world market for its products and services.

I like your article because it stresses on product company. I am confident that the speed of development will take India there sooner than we think.

Now,what India needs is a lot of small software companies some prviding services and some products.
The economic miracle will start happening when there are not only a few, or hundreds but thousands of companies start providing their services and products to local compnies and the world markets.

Software is unique industry, it generates efficiency, conservation, optmization and helps produce products at lower cost. Our observations and logic tell us that the demand for software services and product is ever expanding. And, it is the hope for better tomorrow.

I like to hear from some of you familiar with software start companies to explain to us how a young grduate in India can start a very small software company with a
limited resources but strong dermination to work hard. Thank you

Shams, LA, USA.

posted on Friday, November 30, 2007 at 12:14 AM by Shams


Folks,
each one of you has valid points here. Consider India where US was 30 years ago. The biggest economy, with very little automation and hardly any software companies. What happened next was the automation of US. India is at a stage where industries are being created... retail, real-estate, energy in the private sector.
there is a long road to go, but along this long road there will be tremendous pitt stops where numerous other supporting industries and companies will be created... Now think software will be the biggest of them.. Now you are dreaming..
Dream and dream big!!

posted on Thursday, February 07, 2008 at 5:48 PM by Vishal


Hi ,
A good doc. There are procedures also in india now , dont know how much time it takes to do a registeration of the companies on a name. But there is a well defined procedure now.
The challenges that i can see here is the lack of focus and time that a younster spends on the real cause.
Its rather about the complete mindset as mentioned by Vishal in his comments. Its about the lack of vision.
Let say today i want to start my own firm then , the major major challenge is to put in a lot of iniital time and patience to decide the approach. i am busy 90% of my daily time , on job and other things.
I feel this is THE MAJOR challenge to break free of this hurdle.
Next hurdle is Money . _ a question of sustainence , meaning that there is an issue that will bog me down , how do i sustain in the market. ? how long is the main question ?
third challenge - Contacts (lack of proper marketing contact points on whom i can rely upon) . how do i inrease my contact points to the customers. how can i sell . ?
Then comes recruiting more and more ppl and sustaining to the fast changing market?
- With best regards = Balvinder.

posted on Tuesday, March 11, 2008 at 2:12 PM by Singh


Well, I agree with all the above comments. There are product development companies in India, Iflex,sunguard,Sas Global etc....but most of the products are Industry specific like Banking/Manufacturing.
My belief as a product should be like microsoft windows,microsoft word/spreadsheet or even google. No Industry can survive without a Spreadsheet or MS word.
There is hardly any company in India that is developing a technical product.
Thanks for having such good posts...
-prakash
http://www.SimplyITJob.com
http://www.VisaNaukri.com

posted on Tuesday, March 18, 2008 at 4:14 PM by prakash


I did my bachelors in India and came to US for my Masters. I am really sad to see that the level of education in India lacks so much. There is hardly any research going on in universities leaving the IIT's aside.
I wish our country could do a bit more on the education front so that it gives the people more opportunity to understand and realize their real interest in whatever they are doing be it computers or any other field.
I just wonder how many problems can be solved by that.

posted on Saturday, May 17, 2008 at 4:49 PM by Anurag Jain


Lot of aggreable and reasonable comments.  
 
One comment was Indian market is small. When majority of the Indian people are fighting against social injustices just to even survive, these people cannot become good market for products. Having a vision for products considering Indian market will need to eradicate these social injustices in all forms and provide hope to discriminated people to thrive and not just survive. 
 
People who have gone to a certain level to think about products needs to contribute towards human service to create a market. when market is ready for these look-ahead products, things will happen.

posted on Wednesday, October 22, 2008 at 4:52 PM by Krishnan


Good point, Krishnan. 
 
For the past 10 years I was buying very tasty Dosas from a woman in my village.  
 
I was wondering why cannot she scale her business like McDonalds. 
 
Because she is a Dalit.  
 
Unless 85% of all registered marriages in India are Inter-Caste or Inter-Religious India will not prosper.  

posted on Thursday, October 23, 2008 at 2:21 AM by Dr. Known


Reading this article, I can draw a lot of parallels to what I think the situation in East Africa will end up being with the region getting connected to the outside world. I think there will be a very similar move to service vs. product companies for many of the same reasons. I recently wrote an article exploring this: http://www.scribd.com/doc/16043810/The-Making-of-a-Revolution 
 

posted on Wednesday, June 10, 2009 at 3:40 AM by Wilfred


Nice article, and of course great comments from readers. Though this articles has been written about 2 and half years ago things haven changed much in India. I would like to add one more factor for having only services based and not product based companies in India. Rather it is directly affecting the factor Risk
 
The social factors also include family where parents would like their kids joining bigger, better companies, than venturing into entrepreneurship by risking their careers as well as possibly their parents hard earned money.  
 
I don't think 90% of the parents in India would encourage their children to create new startups rather than getting a job and being settled in life (marriage, kids).  
 
I don't think things will change quickly in a country where people are toiling to get a Government Job.

posted on Thursday, July 23, 2009 at 12:48 AM by Shyam


Indians must learn to: 
 
* Save minimum cash in your bank account (http://tr.im/josi) 
* Spend minimum cash on exotic stuff (http://tr.im/qaPu) 
* INVEST maximum of your cash (http://tr.im/q6Q1) 
 
3 ways of making money in secondary markets in India for an Individual Investor. 
* Insider-Trading 
* Invest via IPOs 
* Mutual Funds (http://tr.im/tMI9) 

posted on Thursday, July 23, 2009 at 11:54 PM by New York


Its not easy "living" in India, let alone starting a tech company. I have been an entreprenuer with 10 years of s/w consulting in the US and The netherlands. I cam back in the mid 90-'s. started a services (of course) firm and managed to sell during the .com boom when greedy people wanted to collect a bunch of companies and list an IPO. 
 
The reason there are no "product" companies is simple: 
1. if you target the product for the indian market, forget it. The market is big, but the buyer is "indian" and that sucks! They have no value for s/w or any intellectual property. They will pay for stone that weighs 10 Kgs, but will not pay for more than Rs. 50 a s/w package (thats the cost of the media btw ) and that too, if the customer is buying a PC they will demand it for free. So, in short the indian customer is the lousiest of them all. Only the BIG vendor like the TCS and Wipros' may be able to sell - the big Govt contract are laden with a lot of 'kick backs' - so the general market is totally corrupt and full of "bully the small guy" mentality. That pisses me off! 
2. If you target the US market - where do you get the money from? Funding becomes a big issue. But yes, there is hope if your product is really good, there will be people who may fund it. this is the best chance. 
3. As indians, we are very risk averse (we want to start making money from day 1). and we have been trained by the Brits to "serve" and not "create". "Do as you are told and i will pay you salary". even infosys which really pioneered the IT services industry - did not get into any "real" product development inspite of sitting on a pile of cash! why bother when you are getting enough from services? no apetite! And they then ventured into the BPO business! again, 'i will serve you and help you make more money - but pay me monthly please!'!!!

posted on Tuesday, August 11, 2009 at 2:05 AM by Santosh


I'm in my late twenties and working for mid-level service based company. I was just trying to review the entrepreneurship as one of the future career options. 
So after googling for a while, the overall feeling is quite demotivating and depressing. There seems to be N no. of factors affecting the business with very little results. To add to it, I don't see any examples to be inspired from. 
 
The question that comes to my mind is, that there are lot of senior managers and CEO's working at different US based companies in India. They have enough exposure and experience to start their own company, but they aren't doing so. The problems mentioned above might be true for freshers or young people, but for 40+ resources they already know the business in and out. Then why arent' they coming out and start their own venture?

posted on Friday, September 11, 2009 at 3:00 AM by Aditya


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