Is India Presence an advantage for Silicon Valley start-ups?

India has always been a bone of contention during boardroom discussions of Silicon Valley based product start-ups. This is not the case with larger companies especially in services sector, for whom having a presence in India is non-debatable. That’s because India is satisfactorily able to meet the human resources needs of such companies, both in terms of talent quality and the headcount.

However, when it comes to start-ups in the technology product development space, there are questions raised with regard to quality, productivity and general mindset of talent. India as such has never had a great product development background. Therefore, there aren’t many engineers around with experience in this area. So talent availability is an issue.

Apart from that, many entrepreneurs with a base in Silicon Valley believe that the concept of sweat equity and stock options is not understood by people here. It means that out of the available talent, not many may be able to trade their monetary compensation for the satisfaction of development of a great product. They may in fact expect at least a 20 per cent hike every year simply because the market decides that rate for them.

The problem does not stop there. Once that talent is recruited there is a constant fear of losing it to other competing firms. High attrition levels in India form the basis of these fears.

Nonetheless, there are multiple reasons for start-ups in product development space to have a presence in India as well. The low cost of operation, courtesy the difference in salary levels of Indian Vs Silicon Valley based engineers ensures that value is created while maintaining low burn.

Besides, it speeds up execution because on an average you can recruit three people in India at the cost of one in the US. So with more number of engineers working on a product, the pace of execution increases. India is also home to companies (www.persistentsys.com) today that do not mind partnering with start-ups for better product development, unlike earlier when the few big companies that the country had were interested only in multi-million dollar deals.  

There is another side to this multi-faceted cube as well. With India specifically, and APAC in general becoming potential markets for growth, it makes better sense to have a presence in India so as to be closer to the customers.  No wonder then that corporates like SAP and Cisco have made India a hub for the Asia-Pacific marketing and sales activities.

So what’s the final call? Well, the balance finally tilts in favor of a presence in India , provided that certain parameters are taken care of. These include trying to rope in people of Indian origin willing to move back to the country after gaining significant product development experience abroad. Minekey (www.minekey.com) is a case in point.

Apart from that, it helps to ingrain and practice the concepts of stock options among employees in India . PortalPlayer (www.nvidia.com) and Party Gaming are good examples of companies that have followed the stock options route and helped generate wealth for their stakeholders.

Tools like Skype and Video-conferencing should also be used significantly to ensure that work progress becomes location-agnostic. India, therefore, is an advantage even for Silicon Valley based product start-ups provided that the upsides don’t get pushed under the carpet of avoidable inefficiencies.