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When Sharad Sharma, a startup expert and Co-founder of software think-tank iSpirt, recently said in an interview to The Hindu that about 75 per cent of India’s new tech startups that intend to raise funding will be domiciled abroad (like Singapore), many people frowned. He was actually referring to the unfavourable regulations in the country for early-stage investing, M&A transactions and IPO.

Sharad Sharma is true to a great extent that India needs to change and roll out the red carpet to attract foreign companies and investments. But, it doesn’t necessarily mean that it is a bad place to do business for foreign firms. At least a few  entrepreneurs and investors who have studied the dynamics of both India and Singapore believe that India is a “force to reckon with”.

Look to India now

Roshni Mahtani, CEO, Tickled Media

Roshni Mahtani, CEO, Tickled Media

“India is a huge, under-penetrated market. The cultural sensibilities are similar to Singapore, so for startups from here it’s the right platform. To top that, Indians speak English and in a global work scenario, it’s a very useful skill to have,” feels Roshni Mahtani, CEO of Singapore-based Tickled Media.

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“India is also a force to reckon with when it comes to engineering talent; it has some of the best in the world. Skilled and technical personnel — the mainstay of any business — should easily be one of the greatest reasons driving startups here. I love Singapore with its great infrastructure and high mobile and Internet penetration, but we need to understand that it is a very small market. It’s a great first market though – a test bed on which you can fine-tune your skills and expand out. And why not (to) India?” she asks.

On the flip side, as Sharma pointed out, many Indian startups have their headquarters in Singapore that include e-commerce major Flipkart, cloud startup Knowlarity and Big Data startup AdNear. This is because Singapore has a business-friendly environment, where the registration process is simple and there is no red tape. However, for most of these companies the primary market is still India. This is because India is a much bigger market and the opportunities are huge.

A melting pot of sub-cultures

Nitin Sharma, Principal, Lightbox

Nitin Sharma, Principal, Lightbox

“India offers scale and volume for many B2C startups and a blend of developed market and developing market mindsets in the same region. As many B2C startups are built on social data sets and behavioural analytics, India is very attractive since it is a melting pot of different sub-cultures,” says Vijaya Kumar Ivaturi, Co-founder and CTO of Singapore-based Big Data startup Crayon Data.

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“For B2B segment, the sectoral diversity of a large market exists in India due to a mix of agriculture, manufacturing and service sectors. Due to a large presence of Tier I global product vendors in India, it is a good beachhead region to explore multi-national collaboration both from tech and market dimensions,” Ivaturi adds.

Nitin Sharma, Principal at VC firm Lightbox Ventures, agrees with Ivaturi. “I spoke with a few SEA-based startups at the RISE conference in Hong Kong. They are all excited by the potential upside from expanding to India, with its exploding Internet user base. They envy our enormous market size and acknowledge that while Southeast Asia as a whole seems like a large market, it is not easy to scale operations across multiple countries, because of the regional differences, with every economy and system operating differently.”

“However, for Southeast Asian companies to come to a very competitive India without strong local partners and without localisation of their product can also be challenging. On the other hand, Indian and Chinese tech companies have often tested and refined their products across larger consumer bases and now have the ambition and capital to address the region. So this two-way street will be interesting to watch in the next few years,” adds Nitin Sharma, who earlier worked at US-based VC firm, New Enterprise Associates.

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A unique talent base

Ivaturi also feels the talent base in India is unique. “India’s talent base is unique as it offers volume and diversity in skills to complement the focus areas of Singapore firms. Due to the presence of every major global corporation in India in the form of global delivery centres, blend of expertise in the form of global processes, sector-specific skills for global demand for services coupled with the emergence of product-focussed startups is a major attraction for many firms in Singapore,” says Ivaturi, who is also a member of Indian Angel Network.

AngelPrime partner Amit Somani

Amit Somani, Prime Venture Partners

AngelPrime’s (now Prime Venture Partners) Amit Somani believes that India is adding as many new Internet mobile users as the entire population of Singapore every two weeks. “Digital distribution has never been easier; you have several big, global platforms (Google, Facebook, InMobi) which can give you a reach to over 100 million users. There are also local platforms that are emerging (e.g. NewsHunt) that have vast reach. Plus, you have tonnes of access to great local talent, a globally connected ecosystem and even a lot of capital,” Somani says.

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New-age entrepreneurs who have considerable operations in both countries also feel that India is a perfect match for Singapore-based companies to explore. Says Varun Chandran, Founder and CEO of Corporate360, another Big Data startup in Singapore, “Most of the startups in Singapore have hit a dead-end when looking for technical talent to accelerate their product development efforts and R&D — either because of the lack of sufficient funds or the fact that the country’s technology-skilled talent is scarce.”

“India, on the other hand, offers excellent yet affordable technical talent. Startups are able to choose from freshers, mid-, junior- and senior-level software engineers without shaking up their hiring budget or compromising on quality,” Chandran adds.

VC investment: growing middle-class brings a paradigm shift

He also feels that although India has been known as the best location for IT outsourcing, there is a paradigm shift in trends in the recent years — a number of high-profile unicorns have created a positive momentum for startup success. “Today, the Indian startup ecosystem is one of the fastest growing across the world. Even global venture capitalists have set up shops in India for a considerable amount of time,” Chandran says.

The VC investment ecosystem is thriving in India, he continues. “In 2014, VCs invested over US$5 billion in Indian startups, which is 3X the money invested the year before.

“Apart from being the biggest and the fastest-growing economy, the Indian market is also complemented by a large segment of middle-class income households and a considerable youth population. There is a large addressable market for internal consumption which can help startups drive volume business,” he shares.

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Niranjan Rao, another new-age entrepreneur, also bats for India when it comes to expansion of startups. “India is an ideal place to hire people and build tech products, especially software, due to its rich talent and low costs. It is also a relatively tough place to sell paid products due to lower purchasing power, especially for B2B/enterprise products,” says Rao, Co-founder of 6degrees, a self-updating phonebook app startup.

Disadvantages of the Indian market

But he has his apprehensions too. “India may be a far bigger market than Singapore or even neighbouring countries in the region, but producing a product that fits the market requires a high level of local context. Cultural factors make it difficult for people from Singapore to use their existing context to build for the Indian market,” he believes.

“India is an extremely large country with huge differences across consumer segments — in access to technology, purchasing power and understanding of online markets/services; so designing a product that accounts for these requires an entrepreneur to be based in India and understand the local language and culture. Most entrepreneurs from Singapore would balk at moving to India due to the perceived lower standard of living there, in their eyes,” he adds.

Singapore works, but India does too

Rao also believes that there are some areas, specifically in deep-tech software and new-age hardware (including wearables), where Singapore offers advantages in development. If Singapore entrepreneurs in these areas can tie-up with the business development people from India, results could be good.

“Overall, despite obvious headwinds, Singapore entrepreneurs would do well to study the Indian market and identify areas of their own strength in order to ensure an appropriate product-market fit. The scale of the market ensures a large enough prize worth pursuing,” Rao concludes.

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