The Great Return: Indian Startups Come Home

For years, the trend among Indian startups was to set up their legal headquarters abroad, seeking global investors and funding in places like the US, Singapore, and the Cayman Islands. However, a significant shift is underway as these companies are now moving back to India in a movement known as 'reverse flipping'. This trend includes major players such as Razorpay, Udaan, Pine Labs, and Meesho, with some like Zepto having already completed the transition.

Driving Forces Behind the Shift

The move back to India is driven by several factors, including better IPO prospects, streamlined compliance processes, and the booming Indian economy. Alok Bathija, Partner at Accel, highlights the maturity of the Indian capital market for IPOs, offering an attractive alternative to global markets. Startups with $50-$60 million in revenue and stable growth can now list in India, a stark contrast to the $500 million revenue requirement for a US listing.

Simplifying Compliance and Regulatory Alignment

For startups in highly regulated sectors like fintech, shifting back to India simplifies compliance and aligns them with Indian laws. Amit Nawka, Partner at PwC, emphasizes the importance of fintech startups being headquartered in India as they grow and play a significant role in the country's financial system. The expansion of domestic funding options and the abolition of the angel tax have further encouraged startups to make the shift.

Impact on the Indian Startup Ecosystem

Industry estimates suggest that over 70 startups are currently reversing their domiciles, with at least 20 being major ecosystem players. The Indian government has taken steps to reduce bureaucratic hurdles, making the transition faster and more efficient. The rally in Indian tech stocks has also challenged the notion that startups must list on NASDAQ to achieve significant valuations.

Looking Ahead: The Future of Indian Startups

As India emerges as a global startup powerhouse, the trend of startups returning home is expected to accelerate. Sunil Khaitan of Goldman Sachs India predicts that this trend will further position India as a key hub for entrepreneurial activity, leading to increased capital market access. With regulatory reforms and a strengthening domestic investment ecosystem, the era of Indian startups incorporating overseas may soon be a thing of the past.