Having made presentations to the Finance Ministry and Securities and Exchange Board of India (SEBI), representatives of the sector last week hosted Reserve Bank of India (RBI) Governor Raghuram Rajan in the city to discuss the challenges faced by these young companies and seek his suggestions. The meeting, which lasted around three hours, was attended by several startup entrepreneurs, industry veterans and venture capitalists. The meeting that was organised by software product think-tank iSpirt, touched upon issues such as capital market challenges like raising funds from domestic investors and initial public offer (IPO), and issues around consumer market like the changing payments segment landscape.
"Rajan believes that for capital availability and funding process for innovators there needs to be a different risk framework that needs to adopted. The existing risk framework was meant to keep the bad-elements away from the system. The new risk framework should look at being a support system for good innovators," Manju Nanjaiah, founder of Swarmverse BigData Solutions, who attended the meeting wrote in a blogpost.
"Rajan, however, said we must all be cautious of back-door debt masquerading as equity and causing systemic harm," he added.
At a time when several Indian startups are opting to shift base to other countries in view of non-clarity on regulations and adverse taxation environment in some cases, Rajan said the RBI interventions may arrive late, but will definitely be latest and entrepreneurs must be patient and not take any steps in a haste, Nanjaiah said.
Around 10 startups, which started operations in India and are now compete with global majors, shared their stories with Rajan during the meeting and highlighted the kind of issues that they face.
Some of the startups who presented their stories to Rajan included InMobi, Uniken, Fintellix, FreshDesk, and Team Indus.
The meeting was attended by industry veteran Mohan Das Pai, IDG Ventures Managing Director Sudhir Sethi, , Accel Partners' Shekar Kirani, and Sharad Sharma and Bharat Goenka of iSpirt, among others.
In December 2014, iSpirt had hosted a similar meeting between startups and a team from SEBI led by Chairman U K Sinha. During that meeting, startups had discussed with SEBI chief the problems they faced while planning a domestic IPO, fund-raising from abroad investors, and regulatory differences.
Over the last month, several software product startup industry representatives had attended a slew of meetings at the finance ministry in New Delhi to lobby for the sector ahead of the Union Budget for FY16, which was detailed last week. While several wishes of the sector went unnoticed, Finance Minister Arun Jaitley proposed setting up a Rs 1,000 crore incubation fund for startups in the country. The minister also mentioned in his Budget speech the need for the nurturing startups and creating a healthy ecosystem for them.
According to people present at the recent meeting, Rajan assured full commitment to the "payments systems revolution" in the country, highlighting that payment banks and small banks will be in full steam in about 12-18 months.
"His willingness to open up a dialog with innovative companies, where banks are a purchaser of technology was also evident in his offer to have more follow-on meeting," a person who attended the three-hour meeting said.