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Risk capital is the need of the hour for entrepreneurs. What governments can do is provide a process to give credibility to businesses which in turn will help them build their brand and find investors, said Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore (MAS), speaking at the TiE Global Summit in Mumbai.
MAS is cited by global fintech and management consultants for the intense regulatory sandbox they have set up for startups. This sandbox allows businesses to tinker with the legal complications that their technology/financial solutions can run into and get guidance from regulatory bodies on how they can reduce risk to the business as well as consumers.
His sentiments were echoed by other industry watchers who said that shortage of capital keeps pushing businesses towards foreign investors.
Foreign investors will continue to be relevant as long as there is a dearth of capital in the country. We have at least ten years to go before we build up a savings ecosystem to push more capital for entrepreneurs, said Sanjay Nayar, MD, KKR at the summit.
He added that while the government has taken great steps to end favouritism through various measures like the Bankruptcy code and RERA, the capital base is still missing and will take some time to build up.
Another area where governments and regulatory bodies need to build credibility is their own investment plans which need more accountability, a thought echoed by industry watchers.
When governments announce grants for initiatives or businesses there should be some follow up on how much of the capital is actually disbursed, said Mohanty. He added that start-ups need a lot of risk capital to grow and regulators and governments alike have a role to play not only in helping them raise this capital but also in providing them a level of credibility so that they can find other investors.
A proper research framework to certify credible business models which meet regulatory requirements is the need of the hour, he said.
Mohanty also noted that one of the chief reasons that global startup ecosystem is keen to work in Singapore because of the extent of risk that the regulators are ready to take. That said, he also noted that the sheer size of the Indian economy made it that much more complex to bring about regulatory changes.
Mohanty points out a need for regulators to keep an open mind toward technology and to wait for the applications to mature well before taking a regulatory call on them as in case of cryptocurrency.
While Cryptocurrency is in a very experimental stage we should let the model mature. Unreasonable speculation on cryptocurrency value may bring negative regulatory attention to it when the technology can actually be applied to a lot of areas given proper time, he said.
US-based venture capitalist Tim Draper mirrored similar views on cryptocurrency saying that governments should be careful about writing it off.
China's view on cryptocurrency is pushing entrepreneurs towards Japan which is open to the concept. We have seen that countries with an open mind towards businesses do better economically and if India starts accepting Bitcoins, it will certainly attract more business, said Draper.