Why Indian start-ups are looking abroad


When Avijit Sarkar was planning to set up a fintech start-up last year, he wanted to do it in the US, so that he would have access to a larger market. But, he soon realised that the incorporation expenses were high, and getting a visa could be difficult. He came across Estonia’s startup programme and […]


Indian-StartupsWhen Avijit Sarkar was planning to set up a fintech start-up last year, he wanted to do it in the US, so that he would have access to a larger market. But, he soon realised that the incorporation expenses were high, and getting a visa could be difficult.

He came across Estonia’s startup programme and decided to apply on a whim. He didn’t have to visit the tiny Northern European country , but had a virtual address within weeks. “I got my VAT (value added tax) number in 15 minutes. The ease of doing business is a big draw. Being incorporated in Estonia means we can hire foreign talent easily ,“ says Sarkar, founder of CapOne Research, which has applied to the EU for funding and has bagged in-principle approval.

Being headquartered in Estonia, gives Sarkar access to the member states of the EU. And the county where Skype was founded, is no stranger to start-ups with 13 incubators and accelerators, a robust VC and Angel Investor Network.

While Singapore, UK and US were traditional hubs for Indian entrepreneurs, start-up founders are now looking towards Estonia, South Korea, Dubai, Saudi Arabia, Qatar, Israel, Chile, Spain and Ireland. Smaller start-ups often relocate as these countries offer government funding, minimal rent, zero taxes and easy access to neighbouring markets.

Late in 2015, Hyderabad-based CloudBoost signed up for Startup Chile, an eight-month start-up accelerator programme, in the South American nation. Apart from a monthly stipend, the 72 start-ups in the programme were provided mentorship, access to businesses in Chile, and help in gaining Chilean residency .

“We established one sales person there and managed to bag Spanish telecom provider Telefonica in Chile as a client. Chile is Latin America’s strongest economy and there are companies with a lot of money there,“ says Nawaz Dhandala, Founder of CloudBoost.

Since India is home to more than 5,000 start-ups and is known for its technology talent, quite a few countries are easing the way for start-ups to relocate with visas and offers of funding. Estonia launched a start-up visa programme in January and has received applications from 16 Indian companies.

Among the first companies to move from India to Estonia was Velmenni, which develops high speed LiFi technology . The company started in New Delhi in 2012 and moved to Europe in 2014, after attending the Buildit Accelerator programme. Deepak Solanki, founder and CEO, says that he has been able to sign up more clients in Germany due to his Estonian link.

Challenges to face

Language, finding talent and breaking into the market can be challenging. Estonia, for instance, has a population of 13 lakh. India’s technology workforce alone is double the size. Chile’s Startup scene is tiny compared to India and talent is hard to come by. CloudBoost’s Dhandala says that they had to convert software to Spanish before pitching to a customer.

Despite the challenges, founders say that the experience of working in a new country has its advantages. Dhandala also signed up with Startup Denmark, which handholds foreign entrepreneurs who want to open office there. He holds a Danish residency permit and plans to use his base there to enter the European market.

“Entrepreneurs must have a clear idea of what they want to achieve in the new country ,” says Sathvik Muralidhar, Founder of Preksh, a Bengaluru-based start-up that was selected for the Korean Startup Challenge. Preksh works on ARVR solutions for retail, and wanted to get a feel of the Japanese and Korean tech innovations, which are far ahead of India in the space.

“Before applying for the start-up challenge, I spend time studying the Korean and Japanese markets.They are advanced markets in terms of internet penetration and consumer awareness about ARVR. We knew there would be more enthusiasm from customers and would get a good sense of how technology is moving,“ says Muralidhar.

The Korean government also provided some funding. “We worked with the top retailers there and their feedback helped us improve the product.We got a real feel of how the technology will be adopted by big retail clients,“  adds Muralidhar.

Fostering innovation

Most of these countries are hoping to draw entrepreneurs who will inspire their own citizens to start their own businesses and innovate.

“In Korea, most start-ups are associated with conglomerates like Samsung or sell to conglomerates early on. The Korean government wants to cultivate the entrepreneurial mindset among young people so that they will build the next generation of innovative companies for Korea,“ says Muralidhar.

The fact that India is home to 45% of the world’s R&D centres outside the US makes these governments believe in Indian innovation. “The Indian startup ecosystem has seen explosive growth over the last three years.The South Korean government is looking to India for help to grow its startup ecosystem,“ says Caleb Kyung Hwan Lee, Executive Director at National IT Industry Promotion Agency, South Korea. He says that Korea’s hardware strength will complement India’s software strength.

Another favourite destination for Indian entrepreneurs is Dubai, where it is not only easy to hire Indian talent, but it is also a gateway to Europe and US. “Start-ups in Dubai get Rs 60 lakh angel funding from the government in the early stages, which is unlikely to happen in India,“ says Vineet Budki, Founder of Guiddoo, a travel company . Budki has been working in the Dubai government-backed In five accelerator in the tourism space.

When companies decide to move, they should know whether the market is big enough. “Unless that country can be a big market, it does not make sense. Or the funding should be large enough,“ says Muralidhar.

Source: Economic Times

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