Lack of Trust in India, and how startups should deal with it

@dkhare of Lightspeed India Venture Partners has an interesting article about the problems with the Indian startup ecosystem that makes it difficult to start and grow a startup in India, title The Silent Killers of Startup Growth.

While some of it is the usual whining about the usual problems, there are parts that I liked, especially section about lack of trust across the board in India, the problems it causes, and how to deal with it:

Lack of trust is endemic in India, whether you are driving through the streets (and perhaps Delhi is an extreme example of lack of trust!) or negotiating with corporate partners. Examples include:

  • (some) people misrepresent themselves materially without any consequences (eg overselling).
  • (some) founders focus on control at the expense of value creation.
  • potential buyers have a hard time parting with payment details or paying for off-the-shelf software.
  • (some) people negotiate all the corner cases in extreme detail, to the point where the law of diminishing returns kicks in pretty strongly.
  • trust gap between regulators, law enforcement and business.
  • trust gap between promoters (aka founders) and investors and potential misalignment on timelines and strategy.
  • (some) government and companies focus on protecting themselves from the 1% of customers who are gaming the system at the expense of the 99% remaining customers.

Relationships, not contracts, govern deals. Many brands in India are created from execution reliability at scale rather than product differentiation. Brands in India are disproportionately more valuable as they represent a trusted provider of products or services – think about the enduring value of the Tata brand in multiple unrelated categories. As one consequence, I believe more startups should think about brand-building here in India relative to if they were in the US.

I think the takeaway message is important: in India, build relationships and reputation and the contracts will take care of themselves. Read the full article here

A validation of this same idea comes to me from an entirely different source. My father-in-law, Badri Baldawa, a self-made successful entrepreneur has this blog post on Trust vs Written Agreements which says pretty much the same thing.

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