I've been helping someone start their business in India, so I can give you some info.

Your company should be incorporated in the US. You get tax rebates (not available to Indian companies) if you pay for services in USD from a foreign account. Typically you'll pay a local company directly and they will pay your workers (something like a ghetto version of Ambrose Employer Group in the US). Labor is cheap, but often of low quality. Lying on resumes is rampant, and filtering the wheat from the chaff is very tough. Getting good people can be tough for a startup, most people will want to work for bigger company [1]. Pay can be considerably higher in bigger cities. Bombay is more expensive to live in than NYC, and pay can be comparable for great people (though the spread is much wider than NYC). If you need top talent, go to the Valley. If you need commodity talent, go to India.

(I'm not saying top talent doesn't exist there, I'm just saying you probably won't find it.)

Often you can get a package deal - office, servers, workers with a single payment. The SLA will usually have terms like "you don't have to pay workers while the servers are down." My friend exercised this clause several time - between power loss, workers tripping over wires, broken DSL (!!!) connection and the like, he has about one 9 of uptime. Just accept it, plan for outages (read: no MongoDB) and move on. Production servers live on linode/EC2/rackspace, not locally.

You want to avoid a permanent presence - if you can't easily walk away you are at risk of being shaken down for bribes. "Sorry, but the electricity is down, and it will take 2 years to fix it, though maybe I could do a personal favor for you and push you further up the queue." Same thing if you need permits, want to incorporate locally, etc.

Short version: living is cheaper (not as cheap as you think), commodity talent is cheap, but quality will often be lower. Look for bargains, and be aware that it isn't the valley or NYC.

[1] This is true for both cultural and economic reasons. Short version: a) working for an unknown company can mess up your prospects in arranged marriage market, b) family might be disappointed, which is a big deal and c) risks are a LOT higher so stability is valued.

On c), in India, you have a LONG way to fall. Utter destitution in the USA (i.e., bottom 5%) is roughly comparable to upper middle class status (top 95%) of India, in terms of PPP-adjusted income. http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-t...

Could you also comment on the following aspects:

How easy and practical would it be to have developers in India while staying outside the country? Would it help if a local manager is hired?

How secure would be the IP developed? Given you mentioned lying on resumes is rampant...

Thanks.

I have no idea how practical it would be to hire developers in India but you live outside the country. That's basically outsourcing, or perhaps a remote workplace. Some companies do it well (DeviantArt, Morgan Stanley), some suck at it (Boeing). Lots has been written on outsourcing, I have little to add to it.

However, I didn't mean to imply that you personally need to stay outside the country. It's unlikely you will be harmed - India isn't Russia, after all. I just meant that corruption is rampant and you should plan your business to minimize the impact.

As for IP theft, IP is probably about as secure as anyplace else (i.e., not very). How can you prevent `git clone ~/src/important_startup_code /media/usb`? Banks use PS2 mice/keyboards and put glue in every single USB port, not to mention paying for a massive surveillance infrastructure. Good luck with that.

The primary risk unique to India is that the courts are worthless. You can't get an injunction to stop them from building their own startup with your code, all you can due is sue and maybe win in court in 20 years (unless they bribe the judge).

If you want to hire only 1 or 2 persons, how long will $10k last you? (same question for $5k in case the costs are not linear)

On avoiding permanent presence, do you mean not living in India, or not living in the office space?

Depends on the people and the location. A good developer in Pune might be getting $15k/year or more, a bit higher in Bombay. Nationwide, salaries tend to range from 1-5 lakhs ($2.5-10k).

2 low end college students for mechanical turk type work outside Bombay/Bangalore/Delhi, they would probably last you a year or two. More if you go to the outskirts. (Note: I'm probably inappropriately scaling down here - in reality, you probably need to rent them 30 at a time.)

An illiterate peasant? You could pay him double market rates ($1-4/day) for 30-120 years on $10k.

By avoiding a permanent presence, I mean having the ability to pick up and leave at a moment's notice. If the phone company, the government or your landlord tries to shake you down, you need to be able to say "fuck you" and walk out. Keep your exit costs lower than the price of a bribe. I.e., don't get into a situation where downtime results in big monetary losses.

What's to stop someone on $15/k a year jumping on the internet, finding some good contract work and easily doubling or tripling this? If they are great developers.

Nothing, beyond economic incentives. The great developer can also move to Mumbai, Bangalore and earn $100k/year at a hedge fund, Google or Oracle. Top talent is not a lot cheaper than the US.

To clarify, "good developer", I meant a person you would trust to write CRUD apps.

Ok. One thing regarding the office space. The place we got was a 700 sq ft rectangle that looked like a run down warehouse. We spent approx 3k for the paint,flooring and cubicles. It is in an upcoming suburb. A similar space in a prime locality will cost at least 5x the price.

Very inspirational story. May I ask what software was used to make the "Fresh Office" video? Looks polished.

Just the simple iPhoto slideshow on Mac and screenflow for screen capture

Is this in Chennai? Whereabout in Chennai?

I'm not sure you have to go all the way to India for that. Here in Denver we had Downtown office space (about 1200 sq. ft.) for $500/month on a sublet. That's about $0.41/ft as compared to $0.21/ft for freshdesk. Sure it's about double, but they're within shouting distance of each other. Our four person team had a burn rate of about $12k/month at that point... again, about double but still really manageable. Given our access to capital in Boulder, it was a really nice situation all around.

Coming from the EU to India might be easier than from the EU to Colorado. If the visa situation was different, maybe, but if the problem can be redesigned to use average coders as explained by the earlier comment, it might be a better idea to opt for India. The cheaper living costs + office space + salaries means a lesser burnt rate, and thus more time to succeed.

Another reason to prefer India is that the food is tastier and the women are more beautiful.

You have obviously never been to Denver:)

India is a big country. Are you referring to a particular city or region?

I took away the same thing. Thats a fantastic burn rate. especially compared to a [hardware] startup I worked at that had a burn rate that'll make your eyes water.

How about BC Canada? It's west coast, and tech companies get a lot of corporate tax breaks, and canadian immigration isn't as horrible as US.

What tax breaks do we get in BC? I didn't know of any except for things like biotech, greentech, etc.

Immigration is going to get tougher in Canada from April

http://www.canadavisa.com/canada-immigration-discussion-boar...