Skip to main content

Will Dr.Rajan wake up to the Exodus of SaaS Startups?

As an email addict, I'm only happy to have my credit card get charged automatically by Google (for extra storage) and Boomerang (a cute little Gmail management tool) - both US-based companies who (understandably for them, unfortunately for me) bill me in US Dollars. I wish we at Venture Intelligence could charge our customers the same way for accessing our database services. But thanks to the RBI, it looks like we can't - unless we re-incorporate in Singapore or Delaware, USA. As today's Economic Times article indicates, this combined with the 0% Capital Gains tax (on sale of shares in private companies) in Singapore just makes the proposition almost a no brainer and explains why so many of the venture capital-backed SaaS/Cloud-based businesses are rushing out.
Software product companies are also stymied by a RBI mandate - meant to protect credit card users- that prevent companies from debiting money without the customer approving every transaction. Enterprise software maker FreshDesk recognised this roadblock early and chose to register the company in the United States right from inception in 2010. Its development operations are in Chennai. The company now has over 18,000 clients, including Pearson and Unicef. "This mandate defeats the entire business model," said 38-yearold cofounder Girish Mathrubootham who did not want to lose customers who would have found the process tiresome.

But data analytics startup Profoundis wasn't so lucky. "Our retention rates went down to 30% as opposed to an industry standard of 80%. We were forced to register in Delaware last month," said Jofin Joseph, the 25-year-old cofounder of Profoundis which expects to earn revenue of about Rs2 crore next fiscal. The relatively low chances of big-ticket exits for investors who back India-based companies are also proving to be a deterrent for many startups.

"All things being equal, lawyers prefer to recommend a New York or Singapore-based startup over an Indian company to the clients looking for an acquisition," said Vaibhav Parikh, a partner at law firm Nishith Desai Associates. To address this perception issue, GamePlan, an Indore-based company which makes software for the construction sector, also incorporated a separate venture in Delaware, United States, called True Intelligence Technologies.
Tsk tsk.

Now that the rupee is appreciating (remember the day Dr.Raghuram Rajan took over?), interest rate hikes have been paused and the long talked about new banking licenses announced, hopefully Dr.Rajan will turn his attention to the small tweak that will alleviate the plight (flight?) of  startups (including that of poor old VI, of course) from the country. (The capital gains tax of course will have to wait for the next Next FinMin.)

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry.

Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back?

Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms of how…

PE investments in 2018 crosses $33-B to set new all-time high

Big Ticket investments in consumer apps Swiggy & Byju’s dominates year-end activity, even as investments in Core Sectors slow down
Private Equity (PE) investments in India rose to their highest ever figure of $33.1 billion in 2018 (across 720 transactions), according to data from Venture Intelligence (, a research service focused on private company financials, transactions and their valuations. While PE investments have already surpassed the previous high - $24.3 Billion across 734 deals in 2017 - in the first nine months of 2018, the mega investments in Consumer Internet & Mobile startups such as Swiggy and Byjus towards the year-end, helped the 2018 total vault by 36% year-on-year. (Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate.) The year witnessed 81 PE investments worth $100 million or more (accounting for 77% of the total investment value during the period), compared to 47 such transac…

ChrysCapital and Sequoia Capital India grab two awards at APEX’19 PE-VC Awards

Mumbai, India, Feb 27, 2019: ChrysCapital and Sequoia Capital bagged two awards each as part of the “Awards for Private Equity Excellence” (APEX)event organized by Venture Intelligence. 

ChrysCapital bagged the Private Equity Fund Raise of 2018 Award (Closed $850 M Fund VIII within 4 months of launch) and the Private Equity Investor of 2018 Award (for its Exits from LiquidHub with 4x in dollar terms (within 4 years of its $53-M investment), AU Small Finance Bank with 11.5x return,  Torrent Pharma with 2.95x, City Union Bank with 2.83x, L&T Infotech with 2.56x)

Sequoia Capital India won the Early Stage VCInvestor(the firm registered 10x+ exits in Byjus Classes and SCIOInspire) and VC Fund Raise of 2018 (the firm closed an almost $700-M Fund VI).

Award Winners at APEX'19 PE-VC Awards

The event opened with a Fireside Chat with Kiran Reddy, CEO of SPI Group interviewed by his long time friend and colleague Vineeth Vijayraghavan.

Snapshots of the Awards Ceremony: (L-R) Gopal Srinivasan, …