Despite having a pool of talent, Indian startups fail to get their big break from social media giants like Facebook, which recently grabbed Little Eye Labs, while its talks with another startup simply failed.
Social media analytics startup, Salorix, which had raised 3.5 million dollars in funding, had also been eyed by Facebook. However, since the investors acted too pricey for Facebook, the deal eventually was stalled.
According to Tech Crunch, the reason why India ranks quite poor on M&A exit returns is because the investors quote higher prices than initially offered and also because they end up giving away too much equity during early stages of funding.
One of the persons familiar with the Salorix episode said that there is a real danger of many Indian startups giving away too much equity, 50 percent and even more, during very early stages of funding and raising subsequent rounds of funding with lesser and lesser equity becomes very tough.
The source further said that even the investors need to understand what can be a realistic exit in India, especially for a startup that's not any big disruption in the space.
However, investor expectations couldn't be blamed solely for what happened in Salorix's case, as even the management failed in execution and delivering on their promise of building sustainable revenue streams.
The report said that Little Eye Labs acquisition has shown that there's growing interest from Facebook, Google and Yahoo in acqui-hiring from India, but the expectations of the investors need to be aligned better.