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By the way, just out of curiosity, is there a similar "Start Up" frenzy in India, to your knowledge, with venture capital, angel investors, etc.?
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India is definitely seeing a lot more startups popping up too. But its not as frenzied as North America.
Lack of money and resources: Not as many angels and VCs are there in India. And there is a big gap in the middle where startups are past the angel stage and need to raise about $50,000 to $500,000. In USA, there are investors who specialize in that money bracket. None in India.
Marketing problem: No startup blog or magazine like techcrunch that has mainstream acceptance. There are lots of startup focused blogs in India - but none having a readership of over a few thousand people.
Legal problems: It still takes 30-60 days to incorporate in India. Getting a merchant's account to accept credit cards is a really painful process. Even if you get a merchant's a/c - you can't charge cards on a recurring basis. If you sell a plan that has monthly billing with it, you have to ask the client to fill in their credit card details every month. (Thats why, most tech Indian startups create something that can be sold globally - and accept PayPal or get a US based merchant's a/c.)
What is working for India however is the
people.
Lots of people who were working for software outsourcing companies are starting their own ventures. Many of them are taking a concept thats worked in USA and replicating them in India. But there are quite a few very innovative ideas coming out too.
So things are changing. And rapidly. But the ecosystem is still no where close to that of Silicon Valley.