It is not just the overseas investors wanting their funded Indian startups to house intellectual property rights (IPR) overseas but there are several other reasons for the latter to move out of India, said investors and others.
Recently, Union Finance Minister Nirmala Sitharaman said the government can talk to the Indian startups and address their concerns so that they can stay in the country rather than moving out.
There is a trend of Indian startups after their initial growth period move out to the US, Singapore and even the United Arab Emirates (UAE), industry officials said.
“Many investors/private equity (PE) funds are based in the US and other places. They also exert pressure on the Indian startup entrepreneurs to move out of India and house their IPRs overseas,” an entrepreneur told IANS preferring anonymity.
Interestingly, many investors agreed to that view and also added other reasons for the entrepreneurs to move out after attaining a certain size.
“Technology companies, primarily B2B, software as a service (SaaS) players and deep tech businesses tend to move out to the US and some towards Singapore. The reason they start in India to begin with is the entrepreneurial talent, active investing ecosystem, solid tech employees and most importantly the ability to develop and run pilots at competitive costs,” Sarath Naru, Managing Partner, Ventureast, one of the long standing venture capital firms in India told IANS.
According to Naru, the primary reason for them to move out is to be near their market.
“Indian market tends to be small for these businesses and not economically viable to continue to invest in technology and be competitive against global players. The US and Southeast Asia offer large ready markets and it makes most economic and strategic sense to be close to the markets,” Naru remarked.
That aside there are secondary reasons for moving out – to house the IPRs overseas and continuous technology access.
The ownership of the IP could still be Indian-owned and is usually, to the extent of ownership. There are also some limited situations where specific talent is better available overseas, Naru said.
“Other than the IPR housing reason, investors like the tax regime in certain countries; lower income tax and capital gains taxes. This also attracts the startups to move and later the founders become Non-Resident Indians (NRI),” Kris Gopalakrishnan, Chairman, Axilor Ventures told IANS.
“Some of these governments give specific incentives like rent reimbursements, grants based on local employment etc. Further, the access to capital which does not invest in Indian companies. Finally, SAS companies, especially enterprise SAS, move to the US/UK to be closer to the enterprise customers,” Gopalakrishnan added.
Non-availability of domestic capital is the primary reason for the startups moving out, Gopal Srinivasan, Managing Director and Chairman, TVS Capital Funds, a private equity company, told IANS.
Apart from funding and IPR perception industry officials list out other reasons.
“Raising money from the capital markets, lack of analysts with technical experience, ease of doing business and biodiversity laws are also the factors,” Dr. Murali Panchapagesa Muthuswamy, President, Council of Presidents, Association of Biotechnlogy Led Enterprise told IANS.
Difficult online application process, the infamous Indian bureaucratic delays are other issues that are to be sorted out, industry officials said.