Over the past few years, there’s been a trend of Indian startups moving to Singapore. To be sure, this is only true of a tiny minority of startups but the trend has become noticeable enough that Quartz felt compelled to write a piece titled How India Can Keep Startups from Moving to Singapore.
Now, there are several flavours of “moving” to Singapore:
Legal presence only
Some operational presence
Senior management based in Singapore
Majority of company’s employees based in Singapore
As mentioned, the number of Indian startups actually making a move to Singapore remains small. Of this already small number, ones that fall under the 4th category above are an even tinier minority.
Some notable startups, not only from India, who’ve moved to Singapore from elsewhere:
Plus a major VC firm now has roughly 40 of its Indian portfolio companies domiciled in Singapore. However, most of these fall under the 1st category named above, i.e., they only have a legal domicile in Singapore, with no real operations.
Is all of this a ‘problem’ for India? In aggregate, I think not. In fact, for some startups, maintaining a presence in Singapore may actually be a positive. Here are some benefits that looking outside India can bring Indian startups:
A broader regional perspective In my several years looking at startup investments not just in India but also across SE Asia, Australia and the US, I’ve noticed that Indian startups sometimes get “sucked in” to solving only problems in their own backyards and don’t realise that other countries outside India may be just as attractive places to operate in.
Ease of achieving exits We’ve started started to see good-sized exits coming out of India in the past few years. However, for a country of the size of India, the number of exits is still smaller than it should be and the exit valuations achieved could be higher, if not for the fact that the legal and financial environment for IPO and M&A exits in India could be more favourable.
Singapore (and some other places) in contrast is a good place to be based in when a startup has achieved exit velocity. Some startups plan ahead and domicile in Singapore from early in their development. As more and more exits start to happen, a virtuous cycle of innovation and entrepreneurship in India can get going.
Access to a different set of customers Enterprise-focused startups have often related to me sorrowfully that the typical Indian enterprise doesn’t like buying from startups and even if they do decide to go the startup route, there is a tendency to bargain for extreme discounts and favourable payment terms. For B2C customers, this is less of an issue. However, both B2B and B2C startups can benefit by at least examining the different market dynamics present in other countries, even if they ultimately decide not to expand outside India. Singapore offers one particular benefit in that a lot of major multinational corporations base their Asia headquarters in Singapore.
Spreading risk Abrupt policy changes, corruption scandals, hot-cold investor sentiment and several other factors beyond one’s control result in heartache for entrepreneurs. Being present in more than one country while certainly adding a layer of operational complexity may help reduce one’s overall risk.
Access to complementary talent Again this is a consequence simply of looking outside one’s own backyard. Someone who would bring a lot of value to your team may not be able to move to Bangalore but might be quite happy to be based in Singapore or another city elsewhere.
Improving operational metrics As a consequence of some of the above factors, operational metrics like margins, days receivable, pricing structure and so on can change quite dramatically from business-as-usual levels.
Each of the above can have a pretty major impact on a startup’s path of development.
However, simply because the above benefits are available to startups in Singapore doesn’t mean that India doesn’t have complementary benefits of its own. It really isn’t one versus another.
Some other perceived benefits may not actually be true. For instance, Indian entrepreneurs sometimes assume that Singapore’s status as a global financial centre means that it’s easier to raise startup funding in Singapore than in India. Arguably, this isn’t really true. India has a far greater number of active VC firms and other sources of startup capital.
So should India worry when startups migrate to other shores? Mostly, the answer is no. If anything, this is something to be encouraged as Indian startups start to forge regional and then global identities as they grow and mature.
The views expressed here are of the author, and e27 may not necessarily subscribe to them
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