Spotlight on regulations as desi startups ‘flip’ base

Info Edge co- founder Sanjeev Bikhchandani tweeted on how Indian startups are ʻflipping their structure and raising early-stage capital from foreign investors.

Here Flipping refers to domestic startups housing their shareholding, intellectual property (IP) and at times even other assets in a firm overseas, and relegating the local entity to a subsidiary. According to Bikhchandani this leads to loss of tax for the government, and loss of IP and overall wealth creation for India.

It seems that setting up a US entity to raise money from investors like Y Combinator (YC) is easier than getting stuck in lengthy processes in India to raise funds from a US-based investor.