Blume Ventures, an early stage investment firm that has invested in over 65 startups so far, took 12 companies under its portfolio to the Silicon Valley in California in April. Most of Blume’s companies have better markets in the US when compared to India. As such, it encouraged these companies to relocate their base to the US and get funding for their products/services from accelerators and cross border investors.
Developmental costs are usually low in India, thereby encouraging most of these companies to remain here until they finish building their product. Relocating their target market would be an option if they have already perfected their products and are ready for a test launch. Market validation for products in India is very low, with the testing market literally stagnant and void of customers willing to test new brands and services. As such, testing a product with a few customers would take a longer time in India than in the US where customers are more than ready to help validate a product and its potential. This in turn would make it easier for companies to get their products validated in these markets when compared to India.
Some startups that belong to the portfolio of accelerators like GSF (Global Super Angels) are already shifting their base to their target markets. Backed by these accelerators, companies like Pokkt (a mobile-based payment startup that is backed by GSF and Jungle Ventures) have shifted to their core markets early on in their developmental phases. For instance, Pokkt made its debut in India in 2012 and shifted its base to Singapore six months back.
Many argue that while this shift to core markets would be the best option for startups, the decision should be taken only after considering the potential of the product/service that is offered by the startup. For instance, if a startup is dealing with a product that is cutting edge, it would benefit greater by being near the target market so that its founders can meet potential customers on a day to day basis. On the other hand, startups can also retain their tech team back home while shifting a part of their operations to the key markets. This way, it would be easier to expand the backend as the startup scales up.
India is not considered as a great test market for tech startups owing to extremely long validation periods and a stagnant customer base. That is the reason many tech startups choosing to shift their base to countries like the US that are more welcoming. However, shifting only a part of the operations to these countries while retaining the tech team at home would help these startups cut down development costs and expand easily as well.