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Are IP Start-ups moving to India/ East Europe/ China

B

barun

New member
In recent past as well as now, several IP companies got incubated/ getting incubated in countries like India, East Europe, China etc. Some of them (like Cosmic, Evatronix) are already great success. Are these countries slowly becoming a preferred location for IP start-ups. Let us look the advantages and disadvantages

These countries have acquired extensive design expertise due to presence of R&D centers of leading SoC companies. The knowledge is not only IP architecture and implementation, but also usage of IPs in the SoCs. This has created a perfect knowledge base to start IP companies. It is a fact that the engineering cost in these countries are still substantially competitive w.r.t. engineering cost in US or Western Europe. When a significant part of your product development cost is engineering cost, you can not ignore this factor. The lower development cost can easily results in lower selling price and help to acquire more market share.

But on the other hand these geographies (except China) do not have domestic SoC companies, so the market is completely outside. This is creating a lot of obstacle in terms of reaching to potential customer as well as increasing both pre-sales and post-sales support cost. Hence IP companies in these geographies need to come out innovative sales and marketing strategy to overcome this.

Regards,
Barun
 
Barun,

You've captured it perfectly, so the successful IP company in India has to open up a sales office in Silicon Valley and other locations where their customers are located. The cost of sales and marketing can easily reach 30% of total revenue.
 
Hi Daniel,

Your comment is right, but in my experience there are few obstacles to make this fully successful.

In any early stage company, the sales is typically done by promoters (CEO himself) because the company can not afford a sales person due to lack of fund. Also as the company is new the product portfolio is not rich and it takes long time to establish brand in the market which discourages promoters to have a sales person. But here this is not possible as the promoters are not in customer location.

When the company has grown up to a reasonable extent then company starts to open sales office or have sales representative. Then the issue comes to keep the sales person motivated and updated (particularly if he works as a consultant). Unless promoters and sales representative have very good understanding and regular discussions the chance of failure is high and off course the main cause is distance.

And last but not least absence from customer location reduces the exposure to the promoters and in several situations he is not able to strategize his product (it may be product features/ target customer segment/ price etc) very effectively

In my opinion the solution may be to have a good sales person (who is located at customer location) as an equity holder of the company. Only then the promoters and sales person can work in sync and makes the company successful.

Regards,
Barun
 
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