India not a great test-market for tech startups

In April this year early stage investment firm Blume Ventures, which has invested in about 65 start-ups, took 12 of its portfolio companies on a trip to Silicon Valley, California. About half of Blume's companies have a larger market in the US than in India and the aggressive investor was urging these companies to locate in the US, apply to a good bunch of accelerators like 500Startups or get follow-on funding from cross-border investors in the Valley. Some of Blume's companies that are already located in the Valley are gaming company Hashcubes, Insieve with a content discovery and recommendation product Pugmarks and Shephertz which provides cloud-based solutions for app developers.

Re-locating to their core market early does make sense if one looks at certain factors. If startups are building something that is really out of the box, staying on in India, unless they have perfected their product might make sense because here in India they can keep their development costs down. However when it comes to ease of getting market validation for their new products, Indian customers suck. Sitting here and trying to test the product with a few initial customers takes much longer than elsewhere. "Customers here take twice as long to accept the product and pay half the money," says Karthik Reddy, Managing Director at Blume Ventures who believes some of his companies have suffered long test cycles in India.

So if you are an early stage company which has raised anything between $50, 000 to $150,000 and have largely invested the funds in hiring engineers to build the product and do test runs with some early clients in India, you might burn the money without much happening. Compared to that, companies in the US are much more savvy about trying out new products, so one can get the market validation much faster.

Some startups that are part of the portfolio of other accelerators like Global Super Angels or GSF are also making an early shift to their core markets. Mobile payments startup Pokkt, backed by GSF and Jungle Ventures is one. Started in 2012 from India, it shifted to Singapore about six months back.  

There is more and more push by Indian accelerators to give global exposure to their companies. GSF on TUesday launched a new global programme called GSF Global to give global exposure to its fresh portfolio of companies. The 11 startups that will be part of the programme will undergo a 13 week acceleration, about nine weeks of which will be held in places like San Francisco, New York and Singapore. Last May, NASSCOM 10000 Startups Programme took about 27 startups on a week-long trip labeled as Innotrek 2014 that was meant to initiate collaboration between Indian startups and startups and accelerators there. Startups that were handpicked for the trip were necessarily early-stage, tech startups which have products that have a good chance of acceptability in the North American market. Some of them that made it were digital content technology startup BookPad, ContractIQ, an online showcase for mobile development companies and Tookitaki, a real-time audience discovery platform.

Startups' decision to pull out of the Indian market early on may work, depending on what they are building.  "If you are developing something that is really cutting edge, you should be closer to your market and facing your customer eye-to-eye everyday," says Sawhney, Founder of GSF. Silverpush, the mobile ad re-targetting startup has its major clientele in the US and hence set up a California office recently.  Infact nine of the 25 startups Sawhney has invested in so far are largely focused on the US market. Another GSF company LittleEyeLabs, which provides a performance analytics and monitoring tool for mobile applications and recently got acquired by Facebook was an all-US focused company.  

However, taking part of their operations to key markets while retaining their technology tech team back home can payoff as well, since India has no dearth of engineering talent. "As you scale up, it is easier to expand your backed here," says Sawhney.