dna Conversations: Want to launch your own startup? Then read on

With Microsoft, Infosys, Wipro and a host of other IT companies also setting up shop in Bangalore, it was bound to become the IT hub in India. That helped spawn many IT related concepts and startups. Not surprisingly, several venture capital (VC) companies also opted to set up shop there. Gradually an eco-system developed to nurture such startups. Many organisations emerged that promised to incubate such talent and try see if they could become profitable ventures. In the recent past, the Microsoft Accelerator (MA) programme has become one such major Incubator, and DNA watched the graduation ceremony of MA’s second India batch of technology startups, at which nine technology startups made a presentation before more than 200 VCs, angel investors and industry bigwigs.

But what makes a startup succeed? To discuss this DNA’s R.N.Bhaskar (along with editorial support from Priyanka Golikeri) began a conversation with some of the best brains in the industry. The panel comprised (in alphabetical order) Shekhar Kirani - Partner, Accel Partners; Mukund Mohan - CEO, Microsoft Accelerator; Bala Parthasarathy - Managing Partner, Angel Prime; Raman Roy - Chairman and Managing Director, Quatrro; and Nishant Verman - Associate, Canaan Partners.

Their views sparkled. Given below are edited excerpts:

Kirani: I am Shekhar Kirani. I am a partner at Accel Venture Partners. We run a $160 million fund in India.

So from my point of view, if you look at the industry, we are in an extraordinary country. The world has given another opportunity for Indian entrepreneurs to go and create, I would say, world class companies. We don’t have to just depend on creating companies for Indian consumption. In telecom, retail, a lot of things are happening. The last global players we know are services. And now the new global player is possible from India, so I am very hopeful that in the next 10 years, we will see at least several billion dollar companies coming out of India. So that is my hope, and you know, I see entrepreneurs, I see the money coming in, I see the world opening up to the India potential, because things are going online. I am starting to see elements of our own companies giving a run for money to global companies already.

DNA: Brilliant.

Kirani: Yeah. All are possible right now and I am seeing the starting point. But, of course, I am already two years into this job, so I am very optimistic.

DNA: Anyone who is more than two years is stated in this industry.

Mohan: Only Raman.

Roy: [wryly] Makes us feel old.

DNA: Nishant, will you make your opening remarks?

Verman: Sure. I am an investor with Canaan Partners. We are an early stage venture firm investing in India and the US. So, again, I echo the remark that Shekhar made. We look at all this as, I think, what Raman also said, this is probably the best time we have ever had to start a company.

For one say, as an entrepreneur, what do you care about? Right. You care about, having the right kind of people, having the right kind of support and then finding the right kind of eventuality.

And I think across all three of those, when you look at them again, there is this common story about, “If I join the startup, I won't get married”. I think these things are changing. I mean you are seeing people who are with Google, Microsoft, often saying, I am going to start my own company. As more and more of that sentiment becomes common, suddenly you have amazing talent. And we saw some of it on-stage, but people who’ve gone to Cornell, MIT, Stanford, Harvard, are actually coming on and saying, “Listen, I can actually change the world”.

DNA: Yes.

Verman: And I can change the world from India, right? Now I think that kind of optimism was, maybe, a little bit overoptimistic, But this is exactly what we need at this stage, right? We do need people with big dreams in their eyes.

DNA: Yes.

Verman: So I think in terms of people, you are starting to attract the right kind of people. I think part of that is because of funding availability. Because now what's happened is -- if you have the right kind of potential, whether that means you went to the right school, you worked at the right companies -- suddenly there is an early stage capital ecosystem that has suddenly emerged, right?

I mean, we did some work a few months back. The number of early stage investors from 2006 till today I think has gone from 7 to 32. What that also means is that the number of deals has shot up like 80 early stage venture IT deals versus 200 investee companies by the Angel Incubators in India. 80 to 100. 80 early stage venture deals versus 200 incubated companirs. So, if you’re a guy who is smart, who has an idea and who is passionate, today you can actually get money. You can get support in India. You don’t have to go out to the Valley in the US.

DNA: Yes.

Verman: You can actually build it from here. Another thing. This is probably something that’s still maturing. Can you build a big business?

At least we are positive. We are seeing things become much more accessible. And again, a part of it is that you look at some of the early signs. I mean, look at things like Facebook. Today it has I think 70 million users in India. We are the second largest market. LinkedIn has just reported 20 million users in India. People like Evernote just reported 1 million users in India.

Now, look at the first stage of innovation. Look at the first stage of things that have happened now – the message boards, those job boards, the Naukris of the world, the matrimonial sites of the world. Now you've got very, very advanced, developed means. Right?

Which finally takes me to the last stand. I’m an investor, and we do look for for the exit opportunity, for the flywheel to turn fully there has to be an exit. Because someone has to make money.

And this really has been quite interesting. With the news about RedBus, Justdial among others, I think there is an increase in interest. Again, honestly, it still takes a lot to do an IPO, but at least you do see an industry now. M&A [mergers and acquisitions] have begun to emerge in India. Suddenly we are taking a lot of interest and think I can actually buy out businesses that are doing well in India. So I think we are really positive. I think it's a great time to become an entrepreneur. From start to end there are positive signs all through and hopefully can only get real.

Parthasarathy: Sure. I am from Angel Prime. So my background is that I was in Silicon Valley for like nearly 20 years and then four startups there. So when I moved to India in 2007, I still remember talking to entrepreneurs and it was very nascent, the ecosystem. And to be honest, the quality of the entrepreneurs was not that great.

What, I think, has changed dramatically is that the quality of entrepreneurs we get, atleast the ones I’m seeing now, has improved; the bar has just gone up. And these guys, and many other young people, are not taking up jobs with Facebook or Google.. I see a number of people in their 30s, even 40s, who have a family, who have a mortgage, EMI payments, but quit and actually giving it a shot.

DNA: Yes.

Parthasarathy: That to me is a big change. And they are absolutely fearless in the sense that they want to take on the world. Because it is unbridled optimism that Nishant was talking about, which you need . You need this overdose of optimism.

DNA: Yes, I agree with you.

Parthasarathy: And like everybody else has said, the ecosystem has come together very nicely. You know, there's early stage capital, there is late stage capital, there is great mentorship, Microsoft is a case in point. Mukund and team have done a brilliant job – just taking some of these very raw people and ideas and shaping them into forming their own businesses. So I think its all come together, even though there are some some obstacles, which we’ll talk about later. But it's definitely a great time.

DNA: Okay. Raman over to you. You are known as the man who pioneered BPO in the country and have become a role model for some many aspiring Indians.

Roy: Okay. I’m the Chairman of Quatrro. I think we are in the midst of some sort of a revolution. If you read history, it says when the industrial revolution was happening people living during it did not know that the revolution was happening.

So too when you consider the the mindset of the Indian educated adult who was getting out of college only thinking of “naukri milega” [will I get a job?]; when the kid got out of school, what the mother spoke about was, “What kind of job would you like to take up when you grow up?”

So we had a culture of jobseekers. I think there is a shift in [the blocks of ] that pyramid, some significant part of the pyramid is changing from jobseekers to job givers.

DNA: It is.

Roy: And that is fascinating, because that similar change is happening in some of the more developed markets, like when we speak of Cornell, and we speak of all the places where people come from.

The way I look at it, it is like what happened in the telco [telecommunications] sector. You know, you didn’t have to go from copper cable to whatever other kind of cable to – this Wi-Fi . Now in India, the Wi-Fi revolution went straightaway to the third generation, to the fourth generation. So that generational change from job seekers to some sort of a cooperative collaborative movement where you create and offer jobs has also happened.

But if you look at the educated elite, there is that fundamental shift that is happening. And I think with programs such as what Microsoft is doing, funding availability, everybody sitting round the table, we too begin to look for such opportunities to fund the Angel Networks coming into being. It allows that funding capability. There is a huge amount of acceptance in the society. And that to me is very basic requirement because that acceptance in society gives it an impetus that is needed.

DNA: Very true.

Roy: So I think that we are sitting in the midst of a revolution, How it happens, all the governmental aspects, the hurdles, are things that we will speak about later. But who said life is simple? I mean if it was then they wouldn’t need us.

DNA: Okay. Mukund, the creator of the show.

Mohan: I’m the CEO of the Microsoft Accelerator. I want to take the numbers perspective.

This is just a small slice of what we track because we track a little over 14,000 entities in India. So the dramatic shift in numbers that we have seen – and we’ve been doing this for a few years now – is quite impressive. The number of entities that got started – these may not be companies, these are just let’s say two people and a dog wanting to start a company or two co-founders wanting to say let’s do something-- has increased tremendously. Idea stage building some small things, has witnessed a 107% to 110% CAGR increase in the last five years.

Kirani: CAGR. Compounded Annual Growth Rate.

Mohan: Thank you. Amazing growth, right, it’s gone to nearly 1,400 -1,500 entities and ideas. When I say ideas, I’m not just saying two people saying I like this idea scratch it let’s do another one. They’re actually building some thing, going around talking to people and finding out that there is a need for them.

Kirani: It’s their day job.

Mohan: Right. And it’s also, maybe, a side project to a certain extent because their day job is also a sort of starter in some cases. So what has been the trigger for these things, for the dramatic increase? The first one has been the phenomenally lower cost, I believe that this is the number one thing driving a lot of these things. The cost associated with starting the technology company, and the ones that we are talking about have dramatically reduced costs.

DNA: Yes.

Mohan: Compared to buying a server, buying whole bunch of other things, and then getting started.

So the first part is the dramatically lower cost.

DNA: Okay.

Mohan: And the second part is we looked at a number that I think we tracked. It’s a very small number. That number has increased dramatically. That number is of role models available that give confidence to the people starting anew. Five years ago, in the technology space, there were maybe 10 role models. Today the role models are literally tenfold. They are younger.

DNA: Yes.

Mohan: They are often women. And they are achieving success even given their humble backgrounds. So the second dramatic reason why we are seeing this huge movement towards startups is the number of role models, the confidence of those role models. Whether they are women or men, they are younger; it is dramatic.

DNA: Yes.

Mohan: The increase has been tenfold.

Mohan: They are looking around. You can hear them say, “Hey, I can go be a Sachin Bansal”...

DNA: Aspiration!

Mohan: Yeah, They begin thinking, “you know, she is like me”, or “he is like me”. “If he could do it, I am also from the same college, I went to the same wing as he did, I should be able to do it as well.”

And the third thing is that the availability of capital has been dramatically increased. So in India, right now, you can confidently say that there is a good amount of money chasing entrepreneurs.

Although, entrepreneurs, on the other hand, come back and say “there are not enough investors”. I think both sides of this equation are true. But compared to five years ago, the numbers that I see are impressive. There were 78 investors as of last month that are both early stage and seed stage [investors].. And also seed stage investors such as Bala’s Angel Prime and people such as us and Angel Investors such as Raman, and his role is Indian Angel Network. All of them have helped push up this number. That has gone to 78, from literally 6-7 in the seed stage and about 20-30 on the Angel sidesome years ago to. Cumulatively, they have gone up from 36 to 78,

Those are the three dramatic reasons why we are seeing 1400 aspirants compared to 300 before Angel Prime.

DNA: True. The mood is electrifying. But India has not reached the stage of Silicon Valley as yet, has it? The ecosystem is emerging, but it’s not reached that level like you all mentioned, I can lose my job. There is no safety in it for me.

Roy: I think we are being very unfair in looking at the maturity. I don’t know of a single case where somebody was born as a 30 year old.

Mohan: Very true.

Roy:. You are born as a baby and then you grow up and mature to be a 30 year old. So, there is an aspect of maturity. Yeah, safety net is not there – we don’t have a social security system…

Mohan: Yes…

Roy: So do we have to wait for a social security system? for the safety net? I don’t think so.

But people architect solutions. They architect solutions for exit options. There is a lot of work that is happening because that entrepreneur, who has a wife and a kid and an EMI that has to be paid, needs to find a solution.

Paying his EMI, doing the minimal. But some of the solutions that are being found are fascinating. I mean, I go and meet some of these people, there is a frugal innovation that is happening.

DNA: Frugal innovation is a good one.

Verman: Indian entrepreneurs are tough. I would say that they are some of the toughest in the world, simply because you have to be.

Mohan: To grow in India you have to be tough.

Verman: To cross the street you have to be tough.

If you are sitting in a valley, you know, you press a button and then you wait for the signal light to turn green. Here you'll be waiting forever if you wait for signal lights. And that is a small example.

I think they are smart and they are extremely tough and very frugal like Raman rightly said. I think the larger – the most important – challenge for us is that our market is still very small and there is nothing you can do about it.

So if you look at any sort of online buyers for example, you have just 10-15 million active buyers, right?

DNA: Yes.

Verman: Just the state of California has more buyers than that.

Kirani: Australia has got more buyers.

Parthasarathy: Right. I think that is the challenge, honestly. So what the most enterprising do is to follow a trend. They start here, quickly develop a market for their product here. Then they go abroad. They quickly figure out that it is best to sell your innovation abroad.

This does not mean that things are not changing here. It's dramatically improving, but, honestly there is no place like the Silicon Valley because even by U.S. standards, nobody has been able to replicate that experience.

Mohan: That’s why I have this comment; Boston is the same as Beijing, is the same as Bangalore; after the valley they are all the same.

Parthasarathy: There is a valley and then there is everybody else.

Roy: I want to add a point. The markets are small, valid point. And when I speak to people and they take examples of published data is available only out of the U.S., and they look at the numbers and say – “oh, we’ll never get to that stage”.

The point is, yes, the market is smaller. You know you can’t change it. But so is the cost of living and so are the chances of success in that market…

DNA: Relative success.

Roy: Yes, exactly. So I think a lot of guys, without any disrespect to the ones educated abroad, tend to look down upon the market. It is still a market and there is a way . . .

Kirani: I think there is a difference. What is success, is very relative from person A to person B. So right now when I meet an entrepreneur, say at Accel, we see approximately 2,000 companies right now each year, and invest in that.

So what happens to the other 1,990? Some of them get funded by others. Some of them may not; in fact a lot of won’t get funded. So what is success for them? So what happens is that success shouldn’t be measured just by the inventor's side.

Parthasarathy: Very good point.

Kirani: So, what about an entrepreneur who gives up his job at Yahoo, where he earned say Rs.25 lakhs per year? If I use raw numbers, and if that entrepreneur can create a company in three years, there is much more money with full freedom, with no risk of unemployment. For me, that is a success.

And what happens is, many people think that success comes only by raising money and creating these bigger companies. But then, not every company can be big. Yet, you can make a significant living in a small company.

So, sometimes, these small companies become big. I will give you the example of my own story for the last two startups. We raised zero money, yet both exceeded $200 million. We didn’t take any money from any of these.

Right now I have a case, that if we have taken money we could have been billion dollar companies.

Mohan: The successful entrepreneurs need to look for challenges; India looks for templates for success.

Why do people aspire to go to IIM or IIT, or seek out computer science or IT jobs? You are just playing it safe, by taking a path is well driven on. Success factors for such paths are well defined in the market. If success factor is a template, I do A, B, C, D because I know it translates into money, it translate to success, and then, guess what? you can’t stop.

You can’t stop them. Everybody will run, because there is a template.

DNA: Except that this time you are creating new templates.

Mohan: We don’t have enough success-based templates yet.

Kirani: We don’t have as of now.

Mohan: That is the one we are hoping to be creating now. See, Flipkart does an IPO [initial public offering] would be one template as would some of these big companies making an IPO. There is another template coming. eMobile has created another template right now pointing to how fast one can create more than $500 million value.

DNA: I see.

Mohan: Our other Indian story is Justdial – India's only story on the internet and with phone call I can make a modern company. Redbus is the other $100 million template. So people need to see those templates and once these templates come out people will recreate those.

DNA: Brilliant.

Verman: Well said.

I think honestly as an ecosystem we should stop trying to eat the rest. I think we are expecting too much. Are we creating the next silicon valley here or what?

Look at everything around us. How we look, how our social structures are. What is our background, what are our routes in terms of IT. I think we are in a very different terrain. We don’t need to create Silicon Valley honestly. I think we can create something very different. One of my beliefs is how soon can we get people to try and fail. I think given where we’re coming from, failure breeds success much faster than anything else. So, in a sense, how can we get someone to quickly try, cheaply try and then fail; and then learn on that and build?

DNA: Yes.

Verman: So there are a couple of accelerators that could come up – one down south called startup village where again our goal is to listen; we're not creating venture fundable companies there. You come in, you are a college student, you bang your head for two years, we'll give you some money.

If you do well, you'll create a nice business. We’ll invite 20 people and you will live a good life. If you fail don't worry, there will be 10 other people who will be willing to hire you the next day, right. So in some sense…

Mohan: Better employment.

Roy: I don't think we've progressed to that level as yet but we are on the path.

Verman: We are moving, we are moving…

Roy: And showcase the successes and evangelize the successes.

Kirani: Equally important is how the media and all of us promote successes.

Roy: Very good.

Mohan: The challenge – I'll mention only one – The ability for validation at a very, very early stage – which is what we operate at.

They need validation, not necessarily from investors alone but also from customers. One of the challenges we consistently see is the large number of companies in India on the business side. One of the key points of failure is just getting people to come back and tell you, this doesn't make sense or this makes sense.

From a challenge perspective, we’re still not at the point where both companies on the business side and also consumers are ready yet to be able to try as frequently to give them feedback, and tell them you’re on the wrong part: “Stop doing this”. So that's one of the challenges that we see on a consistent basis. Not enough early adopters we call them; early adopter kind of customers that are willing to very quickly try.

Just to give you an example, a very brilliant mind, a guy called Rajiv Chilaka is the founder of Chhota Bheem. He took 26 rejects from Disney, Nintendo and every other children's network, before he got to Pogo after seven years.

In the U.S., I'll give you another example – SpongeBob SquarePants.

SpongeBob SquarePants was the 14th attempt by the founder to be able to start this kind of a network, he did that in one and half years.

But if you look at it, Rajiv went to 14 rejects in a matter of less than 2 years.

Roy: Also the information flow from the earlier adopters. That is what is critical.

Parthasarathy: Just want to add one thing specifically in the area of Indian enterprises. There is one thing with consumers as early adopters. The enterprises are particularly slow in India and there is definitely one challenge here -- which is getting enterprises to adopt software and most importantly to pay for it.

DNA: That paying culture is not there.

Parthasarathy: There are some excellent developments with good reports that I am seeing. They have done good work; they show the software, they prove it out on one company. They tried to take it to another company and show the thing . . .

Kirani: I’m of a different opinion there.

See we are trying to take a US model and say I’m going to sell a software to a company. But many companies are not yet used ot paying for software; they have not gone through their evolution of a computer desktop software. They are using Microsoft products, email, Excel running on their machines and price per employee is going through the roof by hourly cost out there.

But if you go with a value proposition to the companies where you tell them “I will save money, and get you customers”. If you go on the customer giving module, there is a high possibility of success.

That’s the reason you see that entire lead module in India is flourishing. You know so many lead based modules have succeeded. Obviously. I’ll get you a customer, give me Rs100.

DNA: Yes, that works.

Kirani: That's what Redbus does. What is 8% at the end of the day? You know that's what they are making per booking, I mean per ticket, maybe around Rs60-70. That’s all they are making. But they are bringing a customer to your doorstep.

Roy: I agree with you 1000% on this; because the license based model, which is what people are trying to duplicate as against pay-by-the-drink model when you utilize.

See the entire software as a service market did not take off because yeah, you can get some sophisticated software, but you still need to hire some guy who has that capability to use it, as against running the restaurant where you get pre-cooked meals which is ready to eat, which is pay by the drink model. And I think that is….

Kirani: This particular case, it was a pay by the drink model, it was not a lead-generation, I agree.

You need to consider the culture – the shift money. Don’t try to create money. If somebody is spending money on that, you can shift in your direction. If you can’t shift, you’ll say buy this software, but when the budget comes in, the company does not spend. It will never happen.

Roy: It will never happen.

DNA: Yes.

Kirani: On the other side you have a person who is making say Rs30-40 lakhs, who loves the entrepreneurial activities, the mentoring, but doesn’t know how to transition from fully corporatized BMW- 7 series, paying for all the perks. He says I want to become an entrepreneur, but I still want to relax.

Mohan: Travel by bus.

Roy: Those are the people we are not encouraging because they get frustrated very quickly. So what I am – what we are trying to do – is to look for that sweet spot right now where the person is just married, or both are students, but with advanced degrees, are people who have made some money and they can survive for two years. And the killer combination of entrepreneurial zest is there even in the spouse. Wife is working, making money, husband is taking the risks. So, there is a safety net in a very different way.

Mohan: By the way…just to give you a comment…

DNA: Yes, Mukund.

Mohan: All of my three startups were the same.

Roy: My wife told me, you will not die of hunger. That said, now go, do what you want to do.

But at one stage, I did want the cars and clubs, right. So I relate to that.

Mohan: Yeah.

Roy: I mean you want to live your life saying you had an opportunity, you had this great idea about what you want to do. You don't want to want to live your life saying you didn't try it and that 24 hours later I had quit.

DNA: What are the challenges that you think must be overcome to nurture this? Can a change in government policy help?

Roy: I think the understanding of the entire value chain is not there with the people who sit and make policy. Their understanding is only the overseas model. To understand what it takes. What does it take for an Angel investor to be able to play? What does it take for a VC to be able to play?

You know, we set out a law that says if you invest in a company and your investment is greater than the value as seen by the IT guy, the money will be treated as profit in the hands of the company, and will be taxed. Excuse me! In SpectraMind what was it that they invested? I would never have been able to prove the value of that. And that was my first startup. It's insane.

So there is no understanding. There needs to be a greater dialogue in the accelerator model. There needs to be a government person sitting to observe, to understand, what is there, so that the right policy can be made.

DNA: Investment is not just money, Investment is also time. So many more things.

Roy:Absolutely.

Kirani: From my point of view, first make it easy for investors to bring money into the country.

In the VC world, it is the riskiest type of capital.

So make it easy to bring money into the country. Don’t get in the way of bringing in the money. Make it simpler, because regulations are being introduced to control how much goes and so on. So that is the one part, okay, that is the key.

The second part is that we don't have a way to set up a modern IP-led software company. We go by the traditional asset-heavy company that old-age entrepreneurs are used to. So what happens is that the government is going in for the worst case scenario. The government sets out a policy that looks at tax evaders and the people who are using company's structure, and saying they are loading up car, house, maid, and everything else and don’t pay any tax. The tax authorities trying to scrutinise that is where the starting point of our problem lies. If you look at this modern IP-led companies, they are creating value, and we – as venture capitalists - are stuck in between.

DNA: Yes.

Kirani: I’m part of a group called iSpirit. We are trying to think through, how do we influence, to let the government understand? Government also is realizing this, but there is no instrument or policy to easily separate the two[asset-based companies from IP-based companies].

The third problem relates to exits. It is extremely hard for global companies to buy Indian companies, whether it is private, or even listing requirements on going public. If you go to a global player and ask him to buy an Indian company, they will shy away. Predominately because of the rules and IP, and how much extra cost you have to pay for it. It is not normal when compared to the global standard. So if exits don’t happen, more money won't come. If more money won't come, entrepreneurs have to adopt a self-sustaining model, and that takes a longer time cycle.

DNA: Very long.

Kirani: So, this ecosystem will come to a grinding halt. The optimism is there. If after two more years, there are not enough exit stories, you will start writing about those failures. God only help the ecosystem then.

Parthasarathy: I think just to add to what Shekhar is saying. I think the laws are basically – always – to prevent crooks. And yes, we have a lot of them. But the mindset should go beyond preventing the bad guys to working on how to encourage the good guys.

The second issue is whatever the laws that are there – and I have just come in from a meeting with one of the big guys – is there a straightforward answer to “what is the tax”? What is the capital gains tax? Okay, for start-up exits --. is it 10% or 20%? Even the accountants and lawyers do not have a clear answer. The laws are not clear.

Mohan: They are so loose, they are open to subjective interpretation.

Parthasarathy: So if you are a company, you have a practical problem. The company exits. How much tax should you withhold – 10% or 20%? That is a real problem.

The global buyers therefore go by the advice: “You are buying in India, okay, allocate this extra, keep it in the bank for four years until the taxman decides. That money gets stuck. .

Kirani: This whole mentality of “guilty until proven innocent” has to change.

Mohan: From our perspective – we are on the flip-side of the argument – we are the kind of company that would like to acquire technology companies. So we are a buyer for many such companies. And it almost always boils down to – let’s not call it tax in the traditional sense of a tax – an extra effort, energy, resource and money required to do the same deal in India versus 154 other countries. Why would I do it here?

In the other 154 countries, it’s less expensive, less resources are used, and it takes less time. They offer better protection of intellectual property as already mentioned. So, why would I do it here. As a big company, I’ll say, “okay, this doesn’t make any sense”. Now, think of the buyer who is coming from the outside.

Right now, we all know that the valuations paid by people coming from the outside are higher than those from inside. That's mostly because of whatever we already discussed, right?

DNA: Paying power, the acceptability factor . . .

Mohan: And access to market. I mean the two reasons why people buy companies here are access to market, and access to technology.

But they won’t get access to markets here. In many cases, the access to market is so expensive, that you end up paying 30% more, and spend 30% more time. If a deal is done in the U.S., I can announce it on Monday after doing the deal on Friday. In India, I’m not even sure when we can announce it.

We tried, tried, tried for two months and we finally said, “Okay all right, let’s just not do it all,” The same things take thagt many more people here. For instance, how many more people should I allocate for dealing with the provisions of the FCPA, Foreign Corrupt Practices Act in the US, merely for validating that I did not pay anybody any money in the Indian government to get this deal done.

So if it takes more time, it takes more resources, it takes more people to do things here. Sometimes, it is not worth the effort and the cost.

Verman: I have a slightly different point to make. If you look at the spectrum of start, grow, exit you think of both IPOs [initial public offerings] and M&As[mergers and acquisitions].

If you consider M&As or even IPOs there's all this noise. And at this early stage of the ecosystem I think that this noise can really kill the ecosystem and prevent it from maturing. So I think the government needs to have a vision – look at the US where a significant percentage of companies listed on the NASDAQ are nurtured in that country.

So if we want the same to happen in India, you have to let the plant mature.

So the noise really needs to be very, very carefully managed.