The full transcript of the letter appears after the image (so don’t strain your eyes reading the text on the image 🙂
I wrote this letter at the behest of the Economic Times as a post budget reaction from an entrepreneur’s perspective.
I hope you enjoy it and share your views and comments!!
Dear FM,
I looked you up on Facebook but found a cold ‘page’. I checked on Twitter, but came across some fake ids. I searched on Linkedin but you don’t seem to be there. I gathered that I can’t hang out with you on these internet-mobile places I hang out in, because you probably don’t visit them!
Let me come to the point. I read your budget speech with interest (all 14,234 words of it).
Amidst your Pacific Ocean of words, I found:
The word ‘Startup’ mentioned 0 times.
The word ‘Internet’ mentioned 0 times.
The word ‘Mobile’ mentioned 2 times.
The word ‘Entrepreneur’ mentioned 3 times.
Now, the word ‘Farm’ is mentioned 16 times and the word ‘Agriculture’ is mentioned 18 times.
Sir, let me share with you some interesting trivia. In another country, a couple of years ago, an entrepreneur created a new agricultural community that invited farmers from all over the world.
The address of the farm was the Internet. The place was ‘Farmville’. Believe it or not, this Farmville ‘thingy’ generated `300 crore of revenue in the first year. About 5 crore farmer ‘players’ signed up! When the Haiti earthquake struck, this community actually garnered money and sent it to Haiti. To cap it all, the company, Zynga (that started this virtual agricultural business), is actually listed on the stock exchanges and is currently worth Rs 5,000+ crore!
Sir, just pause and think if Zynga was created in India.
You, sir, would have earned juicy service taxes, revenues from corporate taxes, even would have a nice new age listed company on our otherwise boring bourse. The point I am making, is that new age businesses of the internet and new age entrepreneurs like myself, deserve a bit more attention from you.
Because we attract venture capital, we employ people, we generate revenue, we pay our taxes and sometimes, even sell our companies and bring the money home!
Sir, I don’t like wearing suits and ties; or coming to meet you in Delhi. But I can request you to help us in a few critical issues, on behalf of the Internet, entrepreneurial community.
Consider These Two Examples
A month ago, a team of four young entrepreneurs came to meet me. In a couple of minutes, I figured two things about them:
i) They came from families that a decade ago, would have never dreamt that their children would be graduates, speak fluent English and earn more money than their fathers ever did, all at a young age.
ii) This quartet was smart. I mean really smart. Smarter than anyone I had ever met!
This was a goosebumpy moment for me. It signalled that the ‘Indian Dream’ was working. Despite all our odds, we were producing local ‘chaap’ Einsteins!
These four friends told me that they were quitting their jobs and becoming Internet entrepreneurs. And they presented an idea to me that blew my mind. They wanted me to mentor them, and I readily accepted. I felt it was a ‘Googlesque’ moment (what may have transpired when Google started up).
A week later, I got an SOS from one of them. They wanted to acquire a web domain (a site name) that was available on a foreign auction site since it was critical to their business. They requested I help them. I readily agreed. What transpired is something I want to bring to your attention.
To buy the domain, I needed to transfer about $1,000 to a German company. They accept only ‘PayPal’ payments, but PayPal is not available in India. When I wrote to the Germans they were flabbergasted! They said, “PayPal ‘is’ the global payment platform for small transactions”.
But I had to tell them the Indian government had severe restrictions in letting them operate here. I begged them to allow me to wire the money to them. They agreed.
When I started the transfer, I realised that it was ‘impossible’ for a startup to manage the process using the Indian banking processes! I had to sign some 8 forms, get my CFO and his team to ‘solve some major paperwork crosswords’ and also pay for certification charges.
Finally, I did get the domain, but trust me, on their own, this hot start up would never have made it. The over-regulated and complicated banking laws of India would have killed this ‘google’ in-the-making even before they started up.
After many years, I was able to woo a senior gaming expert in the US to join me. All he wanted was independence and esops. I gave him independence on day one, but the procedures to carve out esops for a foreign national to be employed by an Indian company became a mystery that would make even Dan Brown’s Da Vinci Code look like an amateur essay!
It took a good four months to solve the riddle, and I went through hell to keep Mr Gaming Rockstar motivated. He liked me and hung on, but now he is really nervous about India and its laws.
Sir, the number of do’s, don’ts, regulations, forms, certifications, validations, permissions, etc that small, startup internet companies require to comply with, kill our energy, excitement and enthusiasm to grow. We need special treatment.
Let me say, that we entrepreneurs are like delicate flowers. We need special farming rules to grow. Give us those, and I promise you, when we bloom, your treasury will be full. Not just with revenues but also the scent of a new and fresh Indian Industry!
***
Special, special thanks to Asha for super editing under lots of pressure!!
Puneet Sharma
Wow !!! Hope this letter reaches our buddy – Dear FM 😉
Hemant Pulijala
Mind blowing article , a slap on indian bureacracy and red tapism.**whistles**
Manish Kumar Saraf
Alok, you sure have highlighted one major area of difficulty with the govt setup in your letter to the FM. However, our recent experience with the one of the startup angel investor has been on similar lines. I personally believe that Startup have one strength and that is a complete understanding of the idea that they are working on. However, while speaking with Startups, if angel investors start discussing on areas (and jargon) related to company management, which a start would be able develop after some experience , I am sure that in such instances it would only make things difficult for startups. Have you also come across similar situations in the private/ startup sector?
Aditya Singh
This is one. And we need a whole lot of clarifications from the Central Board of Direct Taxes on which categories do our transactions fall into. Why is this a product and not a service ? I had a tough time explaining to my CA and i am still wondering how will he explain the assessing officer. You should have also asked him to have some technology guy in the taxation department too who can categorize stuff properly. They have just heard of one thing – software and hardware.
I currently have to send a remittance out and they want me to deduct 10% because the receiving party is liable to pay taxes in India for no reason even when they have no permanent establishment in India.
Piyush Siinghal
Alokbhai, it is good that you are talking about internet. But out of all you had written, one thing that has struck me is “Mentor Alok”. Believe me, I appreciate that. We need to have mentors like you. But it is my humble request that please expand your horizon and look beyond “Cyber World”. There are other areas also where we need “Mentor Alok”. There is Insurance, logistics, health, etc etc – Broadly speaking all kinds of service industry. The question is who is my “Alok”. Obviously not the FM! Please let me have such platform where I can also board my train.
Nishant Agrawal
You speak like a typical new-Gen internet entrepreneur. No matter how good the crop is, Farmville won’t help the hungry and dying children in my State. Zynga might be worth billions, but it’s just entertainment. The FM has a plethora of things to take care of. Visit the villages of India, and ask people what they want: Farmville, or grain to feed on.
Yes, we need to invest our time and money in internet, technology etc … but we cant leave out the basics for that. The FM can’t leave behind the 50% population of this country to serve the interest of internet entrepreneurs. This ain’t America. People still die of hunger here.
Alexander Gounder
Hi Alok,
This is a nice read, but the issue as highlighted by Nishant here is that Mr. Pranab Mukherjee has more important things to look at in his budget like Food, Oil, inflation, infrastructure, EDUCATION and so on.
I recently went to Velas Beach in Ratnagiri, the place where we stayed had Electricity, TV, Solar water heaters etc but no mobile network, and had horribly narrow roads… I’d like to see this place get better connectivity than all that you ask for, considering this place is conservation grounds for over 40% of the Indian west coast’s Olive Ridley turtles…
Further with regards to this particular issue of it being difficult to pay abroad through paypal… a while back paypal changed it policy on dealing with Indian users. From what I understand (I may be wrong) Paypal didn’t want to fall under RBI and hence tried to circumvent Indian law by just reducing the threshold limits on cash you can receive or send for indian account. they also introduced many other such rules, like you can’t leave cash in your paypal a/c, in order to circumvent India law and to not be answerable to Indian Agencies.
I feel we should be asking Paypal to bend rather than our government to.
Also with paperwork I think most of it is because of ambiguity in procedures among bank employees, they are never sure about what is required and what isn’t and often they just ask customers to fill out everything to be sure. We should ask Bank managements to have more trained staff to help out than blindly blame the system.
All said and done our Government and Institutions like RBI take a more holistic approach to policy, things are the way they are because they are inline with how most businesses function and can block illegal activities. If its not right, and businesses work differently then Industry should get together discuss what works for one & all and then probably a more informed and workable suggestion could be put forward to the FM.
Thanks,
Alex
Amrendra Kumar
The real cause of hunger is the lack of money, not the shortage of food. ( Refer to Amartya Sen’s work on Bengal Famine). 98% of people in Advanced countries do not work in agriculture but they are able to feed themselves well.
Infact the very policies that keep people attached to their land is impoverishing them and the country. Instead of spending almost half of our Govt. Income on Fertilizer, Diesel, Free Water & Free Electricity type of subsidy, govt. should have invested more in the productivity increasing sectors.
It is a forgone conclusion, if India is to achieve prosperity for all it’s citizens, a large percentage of population has to move out of the agriculture sector and do something more productive.
Nishant Agrawal
Alexander raised a good point. Blame PayPal, not the government. RBI has strict guidelines to prevent illicit inflow and outflow of money from the country. PayPal does not care about the same. India has one of the most regulated backing sector in the world, which is a good thing. It makes our banks more stable, transparent. America has a very liberal banking system, and it caused the 2008 housing crisis.
And anyways, it is not the Finance Minister’s call to take decisions on the working of the RBI.
Alok Rodinhood Kejriwal
I think you missed the point!
Its the ease of creating businesses on the internet that I am talking about.
PS – if a Company does a business of 5000 crores, then its contribution to the Indian Economy will be?
Believe it or not – 45,000 CRORES! See this blog for the calculation
Imagine what kind of impact it has on the economy.
Amrendra Kumar
Was it a reply to Nishant Agarwal or to me! Either way, i get the point you are making about impact to the economy.
PS: Zynga’s IPO valuation was around $10billion ( 50,000 Crores)
Alok Rodinhood Kejriwal
oops – sorry! I guess i made the point!
Raunak Guha
Great article Alok and actually speaks the travails of an “unfortunate” Indian entrepreneur.
Being in the UK for couple of years, and working here and getting involved in the startup community, I have been observing how this country is reeling under fiscal deficit and is trying desperately to introduce measures to raise money for the Government. Last week, the Chancellor announced the budget and there were many controversies to it (which are irrelevant to our discussion here).
But what I have to appreciate is the government’s focus to help small businesses and to promote entrepreneurship. The PM, the Chancellor, all agree that to get this country out of its present situation, we need a strong Ecosystem for Entrepreneurship. This is why they have incentives for investors and entrepreneurs at different levels. From EIS, SEIS to capital gains tax exemption to Corporate taxes reduction, incentives are aplenty. Government is banking on London 2012 Olympics to inspire more entrepreneurs to develop businesses. Given the infrastructure issues in London and the expenses therein, the Mayor of London too is promoting entrepreneurship vividly.
India needs good lobbyists who can take the cause of entrepreneurs and investors to the ministers when they are drafting the budget proposals. Why are the the entrepreneurship networking events so few and far between different cities? Why can’t private investors, business angels and entrepreneurs form a group?
I was researching on the Venture Capital Trusts in India, and I could see that the last one drafted by SEBI was a decade back!
Budgets are always populist in nature and are indicative of masses. Unfortunately, the masses like the words “Agriculture”, “Inflation”, “Industry” and “GDP”. Startups and entrepreneurship are limited to the Kisan Rozgar Yojnas and Jawahar Rozgar Yojanas. “Internet Entrepreneurs” as a phrase will not connect with the masses. Given the current soup in which UPA government is in, it is preposterous to think that they will do and act anything other than populist!
We need to make Entrepreneurship mainstream and only then we can see some positive government initiatives.
Abhijit Junagade
Hi Alok,
Great article. Congrats. It surely is a pain to get a lot of thigns done easily for us technology enterprenuers in this country.
Having said that we cant blame the government to do everything for us. Lets face it. The reality is not compeltely what we see in our urban world. Just 25 to 40 kms out of Greater Mumbai muncipal limits , you wont find power and basic infrastructre in place. Leave aside food and poverty. host of things and can be a endless topic for discussion.
Paypal is completely functional in india. You can attach you bank account and a credit card, verify it and use it for making international payments. You can also accept money and it gets transferred to your bank every week. Its just that paypal doesnt have a banking licence in india and they have to folllow the local norms. Like all we businesses follow the local norms of the American or the british govt when we do business in their jurisdiction.
It is the local Eienstiens and the people of this country who run this nation. Govt is a facilitator. Ofcourse it can be tons better than what it is. Belive me every govt will be. To post a reply on your site, i had to fill a form. register online; then verify a email which had rodinhood in the sender ;which went in the junk email folder. Everyone wants to protect their own domain and their is a cost of protection. Unfortunately their are more brains in our country to find jugads and ways to screw up system than to follow them.
We cant be at the mercy of so called Govt but find way to make our country properous at large. That is what a real Entrepreneur is .
Abhijit
Yash Shah
Hey alok,
Its just not the internet industry. It is the whole of India INC suffering because of the policies. And its not just banking, but the whole of the peripheral support that a business and especially start ups need is screwed up.
I would like to post a link wherein the countries are ranked on various parameters which judge the ease of doing business in these countries. https://www.doingbusiness.org/rankings
Sudhakar adapa
Alok,the Indian dream is possible now bcoz of the transformation in the regulatory regime,there is nothing wrong in expecting to make our life easy think of the situation where 70%of the Indians doesnt have bank accounts and zynga,and Internet doesnt solve food inflation,which is the biggest problem that we as a country are facing with,the other fact is bcoz of tougher regulations paypal may not grow in India but that’s an opportunity for a lot of fellow entrepreneurs.india has been a safer place bcoz of tougher regulatory regime unlike the us.
Alok Rodinhood Kejriwal
If you just read out what you have written (very well) to anyone who doesn’t understand tax and service tax and Indian to India, they will faint.
THAT’S THE POINT