Why it's simpler to bootstrap in India than Silicon Valley

Indian immigrants across the world are flocking back into the country like migratory birds post winter. A recent study by Kauffman Foundation titled America’s New Immigrant Entrepreneurs shows that while every third tech start up in the US has an Indian connection, thanks to the US’ frigid immigration norms, the percentage of immigrant-founded startups has declined from 52.4 percent to 43.9 percent in Silicon Valley alone.

Indian, Chinese and Taiwanese immigrants are packing up their great American dream and going back home to build new companies. As, immigrant critic Vivek Wadhwa argues Indian immigrants who are increasingly getting the bitter taste of US’ immigration norms are returning home for good.

[caption id=“attachment_506450” align=“alignleft” width=“380”]  World assembles in India. Reuters[/caption]

Why now?

The start up ecosystem in India is coming of age and the world is taking notice of it. With a healthy number of investors and the steady rise of support in terms of accelerators and incubators across the country is making immigrants move homeward.

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Prune or perish

It is why the world took notice of India during the dotcom boom – cost arbitrage. It is simply cheaper to bootstrap a company in India than in the Silicon Valley or anywhere in the US. This is what made Mohit Garg come back to India after spending a decade in the US. Garg, a Stanford graduate moved to India to start Mindtickle, a gamification company in August 2011. “In India you can live on very little which is great for bootstrapping. I see many college grads starting companies here straight out of college because the cost of starting a company here is really low purely in terms of Purchasing Power Parity,” said Garg.

Most such entrepreneurs like Garg prefer maintaining a development office in India and a few client facing sales executives in the US.

After remotely coordinating with an engineer in India, while in the US, Sunil Patro, CEO and founder of SignEasy, a digital signature startup thought it was easier for him to work out of India with a few of his marketing and sales colleagues based out of US and UK.

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“I had to remotely collaborate with an engineer in India since it is expensive to hire people in the Valley. After the first version of the product was ready, I figured that it was much more cost effective to work out of India and decided to move. I knew I would find good talent here for my company and hence decided to move to India in March last year,” he said.

SignEasy now has a development centre in Bangalore with five engineers and two customer-facing employees abroad. “You don’t need presence in the US when you are bootstrapping. There are so many problems here that can be solved with technology. A lot of product companies are building global products from India. I believe that you have to live where the problems are,” said Sunil.

Level playing field

When you have talent, infrastructure and the funding in place, in this world of cloud and web, any company becomes geography-agnostic. “For a product company like ours it is a level playing field and is very democratic. In that sense, base does not matter that much,” said Garg who believes that his company is comparable to any other start up based in Texas or Boston.

With most VC funds out of the Valley including Norwest Ventures, Accel Partners and Sequoia Capital have India-focused funds for early-stage as well as growth-stage start ups. Some of these investing giants are bullish on India’s entrepreneurs who are educated abroad and who have worked in the Valley.

Home is where opportunities are

If one were to go by Vivek Wadhwa’s arguments or the aforementioned Kauffman study, one will be led to believe that Indians immigrants are coming back to India due to the visa concerns. However, people like Garg and Patro decided to come back inspite of being green card holders.

“After I came back, I realised that there is a lot of angel and seed investments here. Funds are putting seed capital. India is no more a disadvantage when from the investing perspective. I always looked at India as the land of opportunities. It was an interesting and an unexplored market and I saw growth in all directions,” said Garg.

For Ashok Hariharan, who has worked in the US and in London, India was a place where he could solve easy problems. “Came back here because there are easy problems to solve and lots of money to be made from it. Contrary to popular belief, it is very easy to start a company in India. The venture capital ecosystem is maturing here in India and the increasing number of early-stage funds is an encouraging sign,” said Hariharan, who is the CEO and co-founder of IDfy, a website that helps you create a consolidated online profile.

Experts like Vivek Wadhwa agree that the return of Indian immigrants is US’ loss. “Indian students who are passing out of Stanford, Harvard are now going back by default. And, this is happening very rapidly. They are creating a mini Valley in India and it is only going to increase. Poeple like Vinod Khosla are investing in companies in India and many more are setting up accelerators,” he said in a telephone interview with Firstpost.com.

However, there are challenges that have to be dealt with in terms of infrastructural support for these mushrooming companies, reforms at the policy level where the government fosters small businesses and help them grow.

What is also very encouraging is that not only do Indians in the US come back to start companies, there are some who have come back to invest in companies. Karthik Reddy and Sanjay Nath, after working in the US for over a decade moved back to start Blume Ventures, which provides seed capital to early stage companies.