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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

India: The Unsuitable Destination for Innovative Startups

Rakesh Verma
Thursday, April 1, 2010
Rakesh Verma
Small businesses and innovative startup ventures have made significant contribution in building and growing American wealth. During tough times, innovations have played a key role in rebuilding the economy. While large American corporate houses have taken advantage of the cost competitive offshore capabilities in India successfully, the innovative American startup companies could not do so. The reason lies in the business environment, unprofessional attitude, the legal system and the lack of it India, in addition to corruption in India. Startups generally lack enough resources and time to counter these hurdles in the beginning as opposed to large corporate firms.

Indian corporates have wrongly positioned themselves as cheap labor suppliers in global markets, while they could have commanded intellectual property ownerships and resultant premium as well as value. If you compare market cap per head count of Microsoft, Google, Oracle, or VMware with their Indian counterparts such as Wipro, Infosys, and TCS they are 15 to 25 times inferior. These companies do not have their own intellectual properties, technology, and products and they land up being mere contract laborers for American IP owners.

American soil produces entrepreneurs, while India breeds talent and technocrats. It has been found that 93 percent of intellectual properties created in India capitalize in America, ultimately adding to America’s wealth. Most of the American companies have budget and departments that constantly look for innovative startups that can be acquired to multiply small successes into large volume rather than doing everything themselves. The American manager takes the risk of trying a small and or unknown company for magnifying the order of benefit while Indian manager avoids taking risk at all. Therefore there is no incentive for Indian startups.

Bring up an innovative idea, creating a business plan, attracting angel investors and venture funds, and getting acquired by large companies is a very well accepted goal of life pursued by American professionals, while in India such success stories are not heard of.
This attitudinal inability originates from the depth of Indian psychology. A typical American student from a top university such as Stanford or MIT thinks of starting a venture while his counterpart in India wants to become a part of the crowded labor market. The parents here always advocate safe jobs rather than ventures for their kids. It means that the age when someone can take up risks in life is wasted due to a mindset that prevents taking risk. There is a general assumption that talent and education guaranty prosperity, while the fact that prosperity comes to those who take the risk is neglected.

The role of innovation in progress is recognized in America and is encouraged at the highest levels in government. I would like to quote the United States Federal CTO’s speech where he mentions “Conventional procurement process aim at a saving of 10 to 15 percent through vendor innovation. How about saving 85 percent by innovation?” Government procurement process ensures a fair share of business to the right vendors irrespective of their size in America.

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