Startups are leaving India for a variety of reasons, including housing IPRs abroad, capital, and talent

• ByStartupStory     |    October 26, 2022

There are numerous other reasons for the funded Indian startups to relocate outside of India, according to investors and others. It is not just that the foreign investors want their IPR (intellectual property) to be housed abroad.

Nirmala Sitharaman, the Union Finance Minister, has stated that the government may speak with Indian entrepreneurs and address their problems in order for them to remain in the nation rather than leaving.

After their first growth phase, Indian startups are increasingly venturing abroad to the US, Singapore, and even the United Arab Emirates (UAE), according to industry insiders.

“The US and other countries are home to many investors and private equity (PE) funds. They also put pressure on Indian startup entrepreneurs to leave India and store their intellectual property abroad, the entrepreneur told, asking to remain anonymous.

It’s interesting that many investors shared that opinion and gave other justifications for the entrepreneurs leaving once they reached a certain size.

Deep tech businesses and B2B software as a service
(SaaS) providers frequently relocate to the US and some do so to Singapore. They initially set up shop in India because of the country’s entrepreneurial talent, vibrant investment environment, high-caliber tech workforce, and most crucially, its capacity to create and manage pilot programmes at reasonable rates.One of India’s oldest venture capital organisations, told Ventureast, Managing Partner Sarath Naru.

Naru claims that being close to their market is the main motivation behind their relocation. “The Indian market is often limited for these companies, making it unprofitable for them to keep investing in technology and competing with multinational corporations. Being close to the markets makes the most economic and strategic sense given that the US and Southeast Asia both provide sizable, ready markets “remarked Naru.
In addition, housing IPRs elsewhere and ongoing access to technology are other motivations for leaving.

The IP may still be owned by Indians, which is typically the case to the level of ownership. Additionally, there are rare instances where certain talent is more readily available abroad, according to Naru.

“Investors choose some nations’ tax policies because they have lower income and capital gains taxes, aside from the IPR housing factor. Additionally, this encourages firms to relocate, wherein the founders eventually become Non-Resident Indians (NRI), “was informed by Kris Gopalakrishnan, Chairman of Axilor Ventures.

“Some of these governments offer particular incentives, such as grants based on local employment and rent reimbursements. Additionally, there is access to capital that does not finance Indian businesses.

Finally, SAS businesses, particularly enterprise SAS, relocate to the US or UK to be nearer to their business clients “Added Gopalakrishnan.

According to Gopal Srinivasan, Managing Director and Chairman of TVS Financing Funds, a private equity firm, the lack of local capital is the main cause of the companies leaving. Industry executives identify further reasons in addition to finance and IPR perception.

According to Dr. Murali Panchapagesa Muthuswamy, President, Council of Presidents, Association of Biotechnology Led Enterprise, “raising money from the financial markets, shortage of analysts with technical experience, ease of doing business and biodiversity laws are also the factors.”

Officials from the business indicated that other problems that need to be resolved include the challenging online application process and the famed Indian bureaucratic delays.

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