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While the software product start-up ecosystem in India has strengthened significantly over the past few years with several global majors including Facebook having made acquisitions here, getting discovered by potential buyers continues to be the top most challenge for Indian entrepreneurs.
According to software product think-tank iSpirt and Microsoft Ventures India, "most Indian startups fail to show up on the radar of the large acquirers in the US. Discovery is the number one challenge facing Indian technology product start-up."
Citing an example, Sanat Rao who heads the mergers and acquisition (M&A) connect programme for iSpirt said, US-based Autodesk that acquired Indian social collaboration platform Qontext in 2012 had first identified the target company through analyst reports in the US and not directly through the Indian startup ecosystem.
Additionally, another significant impediment to M&A activity in the country is 'entrepreneur readiness', iSpirt and Microsoft Venture said. "Indian entrepreneurs traditionally are techies and don't spend time building a clear differentiation story or preparing themselves for organisational and financial diligence."
To address this issue, iSpirt offers a 'M&A hotline', which can be reached by entrepreneurs to get advice in the event of an in-bound M&A interest.
Both iSpirt and Microsoft Ventures also plan to conduct workshops for entrepreneurs to prepare them for M&As and related activities, focusing on due-diligence and presenting their case to potential acquirers.
While regulatory hurdles and geographical distances are widely seen as issues that make acquirers hesitant about buying companies in India, Rao said, "Acquirers are mostly agnostic to the location of a company...They are looking for a specific product or technology fit, and location in secondary."
Based on the 'virtual mandates' or interests from potential buyers that iSpirt has received, Rao said, acquirers are eying areas such as machine learnings and analytics, software-as-a-service (SaaS) disruptions like human resource and recruiting, cloud infrastructure and mobility.
