India has built a reputation as a notoriously tough place to do business, one that has stymied even giants like Wal-Mart. And unlike Silicon Valley, where a decent idea can attract funding, investors in India are much more reluctant to risk their money on start-ups.
Despite such challenges, some American technology entrepreneurs are seeking to pursue the country’s 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