This article originally appeared on Livemint.
In 1994, a couple of years into liberalization, Prabhat Agarwal decided to launch Parsec Technologies, an enterprise software company, along with two friends, both non-resident Indians living in Silicon Valley. Their venture quickly ran into hurdles.
According to Agarwal, in the mid-1990s, there were virtually no angel investors or venture capitalists in India willing to invest in a company without a proven track record. Attracting talent was also a problem. No one wanted to work for a start-up, where the initial pay might only be stock options. There was also professional risk to the entrepreneurs. “There were no safety nets. So, if the venture failed, it was always looked at as a black mark on your résumé,” Agarwal said.
Today, funding is more readily available and despite the red tape, start-ups are booming. According to the National Association of Software and Services Companies, India ranks third globally in the number of start-ups and is among the fastest growing start-up ecosystems.
In the last financial year, according to the ministry of corporate affairs, around 100,000 new companies were registered. And since 2008, more than 4,500 venture capital (VC) and private-equity deals totalling a shade over $100 billion have been struck, according to data compiled by Bain & Company.
Gopal Sarma is a partner with Bain & Company and leads the firm’s infrastructure practice in India. Prateek Majumdar is a principal in the firm and a member of the technology, media and telecommunications practice in India.