

Why The Y Combinator Model Does Not Work In India - skbohra123
http://frontiernxt.com/why-the-y-combinator-model-does-not-work-in-india

======
netcan
_Imagine a puddle waking up one morning and thinking, "This is an interesting
world I find myself in — an interesting hole I find myself in — fits me rather
neatly, doesn't it? In fact it fits me staggeringly well, must have been made
to have me in it!"_

\- Douglas Adams -

YC is an evolved system. It's probably better suited for Silicon Valley in
2011 than New York 1997 or Curitiba in 2025. That shouldn't be a surprise.

That doesn't mean that Curitiba in 2025 is or is not a good place and time for
a YC-like creature to exist. Certain types of people, investors, exits,
consumers... make it a good place for certain types of founders abc to receive
xyz in exchange for 123. India is very different and obviously the local
version at its best would need some adaptations. Who knows what those are.

India's opportunities are lots of programmers. Talent available at very low
costs. BTW, a local hirer would be able to get much better work for his $25
per hour than a New Yorker can get via elance. A 10 person team could
potentially have a burn rate under that of a two person team in California.
They have under-served markets. Ballooning markets and they are potentially
better placed to understand under-served ballooning markets elsewhere.

Anyway, the two conditions that supposedly don't exist in India either do or
don't actually need to exist in India depending on how you interpret them. I'm
nowhere near an expert and they seem silly to me. (1)Big exits are
international. Maybe Facebook would be more open to buying promising small
team for $2.5m locally but once you get to $250m you're not going to be off
the radar anywhere. (2) Why does the market need to be able to support 2-3
large players in _every_ market. That's not a requisite. It needs to be able
to support players in some markets. Luckily some (many) markets are
international and can be accessed from anywhere. And India is a large market
for plenty of things.

~~~
DjMojoRisin
Nice! Continuing on the same thread; India is a huge market for Infrastructure
and Manufacturing right now(Power plants, roads, rail, clothing etc), so
people are putting their money and their brains into those markets, rather
than working on a world changing technology. That money is easier to get than
the world changing technology money.

~~~
netcan
I wouldn't say those things aren't part of or can't include world changing
technology.

~~~
intended
This. India doesn't need a tech based YC, thats why tech startups can't gain
as much traction here. The issues we face were the ones faced by other nations
a while ago - building infrastructure, and improving governance.

~~~
netcan
Nations face multiple issues at once. Almost all large countries need
infrastructure, health, science, tech, manufacturing, etc. etc. to thrive
economically.

India needs a little more infrastructure in its diet. That doesn't mean it
stops needing the other stuff.

Anyway all this "India needs x" is not the useful way of looking at things.
Think "Can x succeed in India? How?"

~~~
intended
I never said that India doesn't face multiple issues, if that was suggested
from my comment, it was misleading and I apologize.

That said over here, the risks to failure are higher for startups due to
having to overcome the lack of infrastructure - which means more support work
is required for each hour of work spent on the actual product. Just getting a
good internet connection, or even electricity, can be hugely difficult, adding
to the chores which an entrepreneur will get out of his way, before he can
focus on his product. This is one of the reasons, India has far more
successful service companies than product companies.

To me this means that a product/service has to have a much higher chance of
succeeding (risk reduction) or higher pay off when it takes off, to make seed
funding viable in the first place.

If infrastructure is built though, then costs are lowered, and risk/cost of
failure goes down. Especially risk brought on by external factors not related
to the team, market, service or product.

Please note: I am not saying that failure doesn't hurt in San Francisco or
America. I am saying that in comparison, you would rather fail in the states,
than you would in India.

~~~
netcan
I think its just your style of writing. Also I think you are writing from a
political perspective rather than an entrepreneurial one. Nothing wrong with
that. Most people here are neither Indian politicians or entrepreneurs, it's
just that this forum is biased to one perspective.

------
ankeshk
The market is not limited to India. The market is global. There is no reason
why Indian startups cannot have global clients and be acquired by a non-Indian
company. Sure the legal costs will be slightly higher during the exit, but
thats not a deterrent.

The problem of why ycombinator model has not worked in India is the same as
why other ycombinator copycats in other parts of the world have failed too.
(Besides TechStars, I can't think of very many successful ycombinators in
other parts of the world - including Canada and Europe and Australia.)

The reason is: these copy cats have not cracked the code of attracting and
accepting awesome startups. The success of ycombinator is mainly based on the
success of its startup selection.

You need someone like Paul Graham to attract a lot of startups. You then need
to be good at filtering out and select only the startups that show promise.
And you then need to help these startups with huge demo days.

Who else has managed to crack this? No one. If you see the Indian and other
ycombinator copy cats, you will still see such a high degree of crappy startup
acceptance rate. Fix that, and you will have a successful ycombinator copy
cat.

Because the market is global.

~~~
jasonkester
_The market is global_

Excellent point, and the one I came here to make. I think you're off, though,
on the reason YC companies are so successful.

It's not the quality of the startups or the quality of the talent. It's the
connections and exposure that YC comes with that gives them such a huge
advantage.

Imagine if your little one-man company could land itself on TechCrunch
whenever you wanted. If you had reporters at Inc. magazine using you as
examples in articles related to your industry (or writing articles about your
industry specifically so they could drop your name). If you could call in
favors from pretty much _anybody_ in the tech world.

That would be pretty cool. Way cooler than $30k (plus 150k), and certainly
worth 6% of your thing. At this point, YC companies are successful because YC
companies are successful. It's so self-reinforcing it's essentially a
tautology.

~~~
apu
PG has repeatedly said that connections and exposure are NOT the biggest
advantage. It _is_ the talent that matters, AND the fact that YC can provide
extremely relevant and detailed guidance on all aspects of startupping.

<http://ycombinator.com/atyc.html>

~~~
jasonkester
Do you believe that though?

Talent happens everywhere, and the knowledge and advice that they give is
freely available to anybody with access to Google. So why, given two teams
with equal talent and equal guidance, would the YC company do so much better
in the general case?

If you look at the link you referenced, you'll notice that every single one of
them is about connecting YC startups with important people (including VCs, the
YC team, other YC companies, angels, tech press, and Silicon Valley as a
whole).

It's a good thing, by the way.

~~~
apu
I definitely believe it.

 _The knowledge and advice that they give is freely available to anybody with
access to Google_

Definitely not. They're not giving general advice -- that's already been given
in the form of PG's essays, etc.

They give detailed, _specific_ information for each company. From what I
understand, it includes everything from tactical information on exactly when
to launch or what features to cut, to longer term product and UI design to
long-term strategic advice for the company. Also, they have expertise in
everything from team dynamics to product development to knowledge of the press
and funding, etc. With hundreds of companies as YC alums, the YC folks have an
unrivaled amount of experience -- whatever your situation, they've probably
seen something like it and can give you great advice.

I think there are very few other advisors who could give really good advice on
all these fronts.

 _If you look at the link you referenced, you'll notice that every single one
of them is about connecting YC startups with important people_

What? Maybe half of it is, but did you miss the whole "office hours" section?

------
erikpukinskis
_The main problem is that the Indian market for digital goods and services is
tiny. In a non-existent market, neither product finesse nor pricing can make
much of a difference._

Yeah, and you know what? McDonalds doesn't try to sell Big Macs to Indians
either. They sell them Chicken Majaraca Macs.

So there's not a market for software for rich lazy people like there is in the
U.S. It's not like there's not _money_ in India. The marketing channels are
different. The payment channels are different. Peoples' needs are different.

Maybe Y Combinator (incubator for rich people problems) won't specifically
work. But Y Combinator (funding model for lean, adaptive startups) surely
would. I think the problem is that the OP isn't thinking adaptively enough.

~~~
codelust
YCombinator works in very mature and evolved market/ecosystem where efficiency
and filtering provides a major advantage as there is an oversupply of decent
concepts. Thus the money invested itself is only a relatively minor factor,
compared o the speed up that YC brings to both companies and investors.

India is not that evolved and there is a shortage of good ideas. Even when you
get good ideas you may not have a market to sell it to, thus making it
necessary that you have more than a YC-level round to get it going.

The McDonalds comparison is valid only to an extent. They did not launch in
India with funding the size of YC round, which is my point in the previous
paragraph - it needs a lot of money, you will often be opening up markets on
your own and that is not cheap.

------
DjMojoRisin
The issue with Indian tech startups is the they are mostly knock offs of
already successful US based companies. i.e yelp knockoffs, ebay knockoffs etc.

Indians are more focused on making the quick buck, rather than working on a
product for the long haul, and actually developing something new, unique and
innovative. Unless this mentality changes, there will not be a market for YC
type shops in India.

Disclaimer: Born and raised in Calcutta, but in the valley now.

~~~
dimmuborgir
India has a huge untapped market so there's definitely a place for Indian
knockoffs of ebay/amazon/groupon etc. Nothing wrong in it.

Almost all Chinese web startups which are making huge IPO exits these days are
direct ripoffs of successful American web companies.

~~~
DjMojoRisin
I agree that there is nothing wrong in it. However the Indian market and
Chinese market are different in this regard. For example there is no need for
an Indian language based search(since most people use English), there is no
need for an Indian facebook(since people are allowed to use facebook). My
point is that in a lot of cases, the US based product just works out of the
box for the Indian market, whereas that's not the case in the Chinese
market(due to language, culture etc.), so there is much less upside in an
Indian knockoff than a Chinese one.

------
nsomaru
As a 5th generation Indian ex-pat, I can say that that when I first landed in
India, I was _appalled_ . There are so many factors holding this country back,
it's not even funny. A lot of it has to do with mentality, corruption,
illiteracy and a general sense of lethargy which pervades existence here.

Once I went into the city (Pune) and was informed that nothing (given, in a
certain area) would be open until 11am. Every day. How can you expect markets
to grow in such an environment? India really needs to catch a wake up and
start implementing viable infrastructure and services. Until that happens, I
don't see how people would have a use for technology (X) when they don't have
access to the basics.

~~~
shareme
a question..

Is there a national sense in individuals in India that if it was communicated
to them that its their family-cultural duty to empower business without
corruption that one would make progress in this?

The obstacle seems to be cultural dynamics, Or am I miss-understanding the
situation?

~~~
DjMojoRisin
42% of the worlds poor live in India. There is very cheap labour, and extreme
social inequality.

To give you an idea, a primary school teacher in an average school makes about
$200-$300/month. With this type of pay scale for most _middle class
professions_ , there will be corruption. A traffic cop can make 3 months
salary by pulling over a few guys speeding in their BMW's and taking a bribe
from them, so why won't he, especially since the current system supports it.

Also, our judicial system in India is broken; it takes years(5-10) for any
court case to get resolved, which is another problem since the corrupt don't
get prosecuted in a timely manner.

------
shivam14
This assumes that for an Indian startup, the domain of potential users,
investors and acquiring companies is limited to India. This is not true for
most promising startups in India, especially web-based ones. The only pre-
requisite for a YC-type model is a pool of talented potential founders, and
that seems to be pretty big in India.

~~~
codelust
I'm the author of that post, can't recollect many exits from web-based
companies in India to companies from outside in India. You could, I guess,
point at sosasta.com (acquired by Groupon), but the deal flow certainly is not
there.

~~~
aufreak3
Whats the fuss about exits? Why not focus on revenues? Do Redbus, Cleartrip
and Flipkart need to be sold before they're worth doing?

~~~
daleharvey
they do need to be sold before they are worth investing in as an institutional
investor

------
intended
One more point - In India, a startup has HIGHER risk associated with and
higher opportunity costs. A failed startup means - "oh you were such a smart
kid, see, you wasted your time! why didnt you do TCS or Wipro?"

I work at a startup, but since its not famous in the country, when I mention
it to some of my in-law's friends, I can actually see their face drop "she
married him? why?". I'm fortunate to have supportive/unconcerned friends, but
feedback like that can be hugely discouraging in a society where people are
not highly individualistic.

On top of that, your chances of getting a job elsewhere are drastically
reduced if your startup gig doesn't pan out. "where did you work?" leads to an
answer that most HR departments wouldn't really care about. This makes the
opportunity cost of losing a normal job higher,especially if you could make it
to a brand name firm.

I'd argue that in India, you need to become an entrepreneur later (perhaps at
40-50), when you have connections, and a larger network to fall back on to
make things happen.

To give you an idea of what its like to be in one of the better cities in the
country, NYT had a great article. It really helps to show at what stage India
is currently mired in, and the issues aside from your product you have to deal
with.
[http://www.nytimes.com/2011/06/09/world/asia/09gurgaon.html?...](http://www.nytimes.com/2011/06/09/world/asia/09gurgaon.html?_r=1&scp=5&sq=india&st=cse)

A lot of these issues you will face in India, need larger firms to help you
solve them.

------
beagle3
Well, I remember that when pg et al started YC, there was a general sentiment
that the Y Combinator model cannot work in the US either.

Hell, as late as 2010, a friend of mine who is a VC partner said that "YC has
lots of nice names in its portfolio, but it is unclear whether it is going to
succeed financially". And about 6 months later, his VC started a YC-inspired
fund.

------
dimmuborgir
The title should be _Why the Y Combinator model doesn't work in India YET_.

The Silicon Valley has a classic chicken-egg situation where companies are
chasing investors and investors chasing companies. Both are equally
responsible for the valley's ecosystem and it took it a great deal of time and
struggle to become what it is today.

Whining every other day that _"OMG my country is so not valley, nothing will
work here, we're screwed big time"_ helps no one. Be ready to take big risks.
Be ready to grab every little opportunity. There's no reason why every
emerging economy can't have its own Silicon Valley in the near future.

~~~
codelust
Quite presumptuous is it not to say that nobody is grabbing every little
opportunity here? I quit a well-paying job during the downturn to explore this
side of life, so, yes, risks are being taken, but that is not my point.

I'm not saying we are screwed big time, if that is how the post appears to
you, I need to apologize for the way that I put it across. My intention is
this - what we are doing now is not working, let us try something different as
the potential is certainly there.

~~~
dimmuborgir
Apologies if I sounded rude. It's just that there has been increasing number
of blog posts lately by Indian entrepreneurs comparing India with Silicon
Valley and expressing overt pessimism. No offence was directed at you.

------
Jun8
The problems described (mainly, VC's to support exiting companies from
incubators and large customer base willing to spend money on new stuff) here
are true to varying degrees for all countries other than the US, I think, i.e.
it's not unique to India. The produce a chicken and egg problem, since in the
US many startup are fed by rich, knowledgeable people from earlier successful
start ups.

One way out is for the rich expatriates in the US to invest back in their
countries, which is happening for India and China.

------
rushabh
I think the problem is also with the lack of US style Universities. Most of
the good quality successes from the US come from Stanford, Harvard and the
likes. It is this entrepreneurial and enlightened culture that YC taps into to
get quality of startup it has along with the exits. YC is only the finishing
school for such startups considering their strict selection norms.

The problem is also proportional to how many new technologies are coming out
of India. How many companies / hackers are hosting open source projects on
Github, Google Code etc.

I think the problem is not with the market. Its that the culture is not
sufficiently mature. When you build products for India, you tap the whole
developing world market - Asia (other than Japan / China), Africa and South
America. English is a barrier but so is the lack of good solutions.

------
known
India follows the "Sheep Herd" mentality. The whole country's economy is based
on people getting into "Profitable" domains mostly following the success of a
pioneer in the field. The most recent example of this ideology is the
"Business Process Outsourcing" industry. New BPO units are propping up here
and there at a dime a dozen leading to a quality deterioration in the final
deliverable. This process will continue till a saturation level is reached and
then they will wait till another "Killer" domain picks up momentum. Till then
India will be in a so called "Calm Period" where nothing great and major takes
place.

------
kalyanganjam
Its a lot of fun and provides intellectual satisfaction to make theories on
why something would not work. You can make a convincing argument for the
statement "Why Startups does not not work in India". or better yet, You can
write a series on "Why X does not work in India" - replace X with anything
that was/is successful in US, (Obama, Microsoft, Google, Skype)

------
braindead_in
Another problem is lack of angels who can feed off from seed funds like YC.
There's a gap. The startups who come out of seed funds are not yet there to
qualify for VC funding.

------
rrrazdan
Shouldn't the title be , 'Why The Y Combinator Model Will Not Work in India'?

------
aristidb
Does anybody else get a redirect loop?

------
skbohra123
very interested to see PG's comment over this.

~~~
brandnewlow
Hasn't YCs withdrawal from Boston shown PG thinks it can't work as well
outside the valley, much less in another country?

~~~
philwelch
I remember PG writing that YC withdrew from Boston because he thought Mountain
View was a better place to raise his family. He wrote Mountain View was also a
better place to have startups, but that wasn't an important concern.

~~~
hollerith
There's an interview in which PG say that if YC had stayed in Boston, then
some other firm would have become the YC of Silicon Valley, but PG wanted YC
to be the YC of Silicon Valley.

