Despite such challenges, some American technology entrepreneurs are seeking to pursue the countrys untapped opportunities, even without the clout of a multinational corporation backing them.
American-based venture capital firms and the Indian units of American venture capital firms, like Sequoia Capital India, invested $172 million this year through mid-December, excluding joint ventures. That fell from $250 million in 2006, according to Venture Intelligence, a research service based in Chennai that is focused on private equity. In the latest World Bank rankings on the ease of doing business, India slipped three spots, to 134th out of 189 countries.
Some 42 venture capital firms based in the US, however, have either opened offices in India or opened Indian units since 2006, according to Venture Intelligence.
Despite the challenges, the sheer potential in a country of 1.2 billion people with a stable middle class is enough to tempt entrepreneurs and multinationals alike to explore opportunities.
In the earlier years after I moved to India, around 2008-10, there was astounding growth in the mobile market, with 20 million new subscribers being added to the telecom network every month, said Valerie Wagoner of Modesto, California, 30, chief executive of the mobile marketing firm ZipDial in Bangalore. That monthly growth was nearly equivalent to the population of Australia.
Wagoner was working for eBay when she decided it was time to shift her focus to her passion: Emerging markets and technology. She did extensive networking in India with executives at mobile payment providers and joined mChek in Bangalore in 2008 as head of strategic initiatives. In 2010, she founded ZipDial, whose investors include 500 Startups, a Silicon Valley seed fund; Jungle Ventures of Singapore; and the Indian firms Blume Ventures and Unilazer Ventures.
The frustrations of doing business in India include bureaucratic hurdles in licensing and making other filings, and pressure for bribes, which Americans cannot legally give. Many start-ups avoid these hurdles by catering to private clients and by making products that do not need governmental approval.
Entrepreneurs have also had to adjust business plans quickly to get around complications. Sam White and Sorin Grama, co-founders of Promethean Power, won second place and $10,000 in a business plan contest at MIT in 2007 with the idea of using solar technology for rural electrification in India.
Grama, 44, a Romanian-born American citizen, and White, of Boston, both eventually moved to Mumbai in 2012. They ran into problems from the start in trying to make a cost-effective solar milk chiller for villages where milk was collected for dairies.
In 2010, they spent six months building a prototype, only to have the managing director of Hatsun, Indias largest private dairy, point out that the 2,000-litre thermal battery that was used to store cold thermal energy was too big for any shed found in the villages.
Finally, they let go of the idea of being a solar company. Instead, they developed a thermal battery that is able to take advantage of the intermittent power on the grid. The battery releases a cold fluid that chills milk quickly.
Now the company has Hatsun as a client and has attracted funding from clean technology investors like the Quercus Trust, angel investors and grants by the National Science Foundation and the US-India Science and Technology Endowment Fund.
A common complaint among the entrepreneurs was the difficulty in finding and keeping good employees. Even by Silicon Valley standards, Indian tech employees are restless. The job market is so hot its not uncommon for a young person to think they can build a career by quitting within three months to get a pay raise somewhere else, said Wagoner of ZipDial.
The tech companies have to offer salaries at the market rate or higher to attract job seekers, who prefer the stability of a conglomerate over opportunities for personal growth.
Entrepreneurs, for their part, have embraced another Silicon Valley trait and learned to try again after failure. Rahoul Mehra, 42, founded Saf Labs, a biotechnology trading company in Mumbai, with his wife, Glennis Matthews Mehra, a 39-year-old neuroscientist. They originally wanted to run all operations out of New York, where they lived. In doing business with India, we never intended for us to move to India, he said.