India’s tech stars shifting to Silicon Valley

June 30, 2015 12:00 am | Updated 05:53 am IST - BENGALURU:

Apprise Jaitleyof bumps in M&As and investing

Excessive red tape in processes such as early-stage investing and mergers and acquisitions is forcing young, promising ventures in India to shift overseas, a group of top Indian entrepreneurs and investors told Finance Minister Arun Jaitley during his trip to Silicon Valley, U.S., last week.

They, however, welcomed the recent easing of listing norms by the Securities and Exchange Board of India to help start-ups raise money locally. Manu Rekhi, director at Inventus Capital Partners, told Mr. Jaitley in an e-mail: “A Facebook corporate development executive vented to me about the complexity of doing a deal in India. He mentioned that the $22 billion acquisition of WhatsApp in the U.S. was simpler than the $10 million acquisition of Little Eye Labs in India.”

“The red tape and ambiguity in Indian rules and taxes were overbearing,” he added.

Mr. Rekhi said Mr. Jaitley, who was on a nine-day visit to the U.S. last week, responded by acknowledging the issue, and saying the government is looking to make transactions simpler.

Mr. Rekhi was part of a delegation including Raju Reddy, founder of tech firm Sierra Atlantic, Kanwal Rekhi, managing director of Inventus Capital, and Arvind Sodhani, president of Intel Capital, which met the Minister. Naren Gupta, managing director of Nexus Venture Partners, Sanjay Mehrotra, co-founder of memory chip-maker SanDisk, and Ram Reddy, founder chairman of Global Industry Analysts, were the other industry leaders who participated.

“The Indian tech start-ups are shifting their headquarters to the United States and Singapore, as it is lot easier for start-ups to raise money and have options for acquisition by tech companies like Facebook, Google and Twitter,” said Mr. Raju Reddy. He said it took just $800 (Rs. 50,000) to incorporate as a U.S. company online within an hour.

One major issue Indian entrepreneurs in Silicon Valley discussed with Mr. Jaitley was the bureaucratic hurdle for early stage investors in India. “Why is investing in India so difficult and treated with disdain? As an investor why do I have to go from San Francisco to Delhi via Mauritius?” said Mr. Kanwal Rekhi, one of the India’s most senior venture capitalists.

‘Why is investing in India so difficult and treated with disdain?’

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