US Shutdown Hurting Indian Start-ups? Check Out What This CEO Has To Say

The US government shutdown has entered Day 9, with the debt default deadline looming large. As the impasse continues, we bring you a series of quick chats with entrepreneurs and start-up experts who are evaluating the situation in real time. Today’s chat is with Rohit Bhatia.

The fiscal deadlock in the US shows no sign of letting up. Although most analysts believe that a deal would be reached in time to avert a dire crisis, investors and businesses are, understandably, feeling uneasy. So this time, we got in touch with Rohit Bhatia, CEO of an India-based social music streaming site that operates extensively in the US and claims that 30% of its business comes from that market, along with 2.5 million users.

Asked if the deadlock will affect the Indian start-ups, as many of them are headquartered in the US, funded by the venture capitalists there and target the U.S. markets for business expansion, Bhatia says that a macro-level impact can’t be ruled out if the shutdown goes on long enough and it may also affect the next phase of VC funding for start-ups. Here are the excerpts from our chat.

How will this current shutdown affect the Indian start-ups – those with significant operations in the US?

The private sector is completely disconnected from the government and because of this, we are not seeing the heat of the shutdown (as we are a private company). But if this goes on long enough, the larger companies are the ones that will be hit first.

What about start-up funding? Will this have a long-term impact on seed-stage or early-stage funding?
If the shutdown prolongs and a negative sentiment arises, there is a possibility for a macro-level impact – especially if the US defaults on its debts and standards. It may not hit start-ups right away, but after some time, it could hit the next phase of funds from VCs who are hit by a prolonged shutdown.

Of late, VCs have been quite cautious about investing in Indian companies. Does the current situation mean investors will turn to emerging markets again?
I actually believe it’s the other way around. In India, there are more VCs than start-ups who are viable to invest in. Therefore, there is plenty of money in emerging markets. But these countries lack the abundance of start-ups that you find here in the US.

Finally, will small businesses consider it a breach of trust? Will Indian start-ups now think twice before entering the US market?
To be frank, it’s really too early to tell. Certainly there is a negative impression, especially when this is happening in the world’s No. 1 economy. But having said that, a lot of people understand that there is a lot of political posturing between the Democrats and the Republicans and it is likely that this will blow over. To sum it up, it doesn’t completely shake our faith, it dents our faith.

Watch this space tomorrow for another start-up reaction.