Every now and again, I’m privy to rather amusing conversations at the pub — that bar banter after a few pitchers, where my sozzled friends debate how to “fix” India. Words like “revolution” are bandied about as free and fast as the successive rounds of brew, and inevitably, someone suggests facetiously that India needs “dictatorship” to succeed. I guess it’s an opinion typical of some millenials, products of a post-liberalisation era who don’t value choice as much as their parents would and didn’t live through the Emergency. Backing that argument, they bring up Singapore — the incorruptible financial hub whose “benevolent dictatorship was much to its benefit”. Before we’d embark on a new
drunken tangent, everyone takes a collective oath to move to Singapore in the next decade.
It’s a view Indian start-ups have taken as well, sans the inebriation. Over the last few years, we’ve seen an exodus of start-ups that re-domicile to Singapore to list on their stock exchange and broaden fund-raising prospects. According to a Forbes study, “over half of all startups to receive early-stage funding in India are expected to re-domicile to Singapore”, a list that currently includes e-commerce major players Flipkart, because “regulations there make it easy for companies to receive global venture funding”.
However, SEBI’s recent move to ease regulations for start-ups to raise capital on our recently minted institutional trading platform (ITP) is a welcome and timely one for SMEs. For investors, the biggest takeaway is the lock-in period for pre-issue capital at six months; the easier entry-and-exit for VCs makes it a lot more appealing. Much of the start-up narrative so far has revolved around how private equity players have swarmed around our tech start-ups, broadening the scope of capital-raising. A recent piece by two journalism school colleagues of mine for a business daily impressed on me just how large this pie is. Quoting figures released by venture capital research firms, they pointed out that in Q1 this year, India has edged past China in terms of investment in tech companies, with 69 deals to China’s 66. In the first four months of 2015 alone, they noted, capital raised for tech start-ups as a little under half of what we saw come in during the entire previous year.
Yet, one of them pointed out in a later conversation that this investment has converged around the bigger players, while smaller start-ups still have to pass the hat around. Maybe the new rules on the ITP could change this status quo, increasing funding potential for ambitious start-up newbies.