Homegrown startups in India are proving more resilient than those founded by returning diaspora entrepreneurs, as local founders navigate unique market challenges and develop essential instincts for success.
There is a well-known joke about Harvard: how do you know someone went there? Don’t worry, they’ll tell you. India has its own version of that joke, particularly in the startup ecosystem. It’s often easy to identify a startup founder with foreign education, as they frequently mention prestigious institutions like Stanford, MIT, or Wharton, or affiliations with renowned accelerators such as Y Combinator or Thiel.
This signaling has historically worked well, with investors showing increased interest, pitch decks appearing more sophisticated, and media profiles following suit. A foreign credential became a convenient shorthand for entrepreneurial quality in a crowded market.
However, when examining the most successful startup founders in India over the past 15 years, the advantage of these credentials starts to diminish.
Consider some prominent names in the Indian startup landscape. Nithin Kamath built Zerodha into one of India’s largest stockbrokers without a foreign degree, venture capital, or accelerator affiliation. Vijay Shekhar Sharma founded Paytm after facing repeated rejections from investors who deemed him lacking the right pedigree. Bhavish Aggarwal created Ola after dropping out of IIT Bombay, not Stanford.
Sridhar Vembu presents a more complex case. Although he earned a PhD in the U.S. and worked in Silicon Valley before returning to India, his success with Zoho stemmed from rejecting the typical Valley playbooks. He avoided venture capital, embraced profitability, and built his company quietly from rural Tamil Nadu. Vembu’s journey serves as a critique of the conventional wisdom surrounding foreign credentials.
Falguni Nayar built Nykaa after years in Indian finance without a foreign tech background, while Deepinder Goyal established Zomato from Delhi, not Palo Alto. Ritesh Agarwal, who dropped out of college in India and learned entrepreneurship on the streets, built OYO by iterating locally. Despite his success, he continues to reference his Thiel Fellowship, as if that credential were necessary for a narrative that was already thriving.
In contrast, many returning entrepreneurs arrived in India armed with foreign degrees, Silicon Valley résumés, and accelerator badges. While they often secured funding quickly and garnered media attention, few have built companies that match the scale, profitability, or longevity of their homegrown counterparts. The foreign degree has not vanished; it simply no longer guarantees dominance.
A recent study co-authored by UC Berkeley professor AnnaLee Saxenian and researchers from the Indian Institute of Science examined the landscape of Indian high-tech startups founded between 2016 and 2023. The research analyzed 596 startups across various sectors, including fintech, healthtech, and artificial intelligence, revealing surprising insights that challenge long-held assumptions.
For decades, the prevailing belief was that Silicon Valley produced the world’s best founders, who would return home with invaluable knowledge to foster new ecosystems. This concept, known as brain circulation, shaped policies and investor behavior globally.
Early research by Saxenian highlighted how immigrants transformed Silicon Valley in the 1980s and 1990s, with Indian engineers emerging as a significant group. By 2009, immigrants were founding more than half of Silicon Valley startups, with Indian founders accounting for about 15 percent of these companies. The logic seemed irrefutable: if America trained the best, those individuals would naturally excel upon returning home.
Governments and investors embraced this narrative, leading to policies that incentivized returnees. However, recent data suggests a shift in this dynamic.
The study categorized founders into three groups: domestic entrepreneurs with no significant foreign exposure, returnees with one to two years abroad, and returnees with over two years abroad. Notably, two-thirds of the startups were founded by purely domestic entrepreneurs, while long-term returnees accounted for 180 startups and short-term returnees for just 21.
This distribution challenges the established narrative, and the performance data further underscores this shift. While returnees enjoyed advantages in securing capital and accessing networks, the outcomes that define successful venture ecosystems stemmed from domestic founders.
All unicorns in the dataset were founded by domestic teams, with the highest valuation of approximately $1.9 billion belonging to a domestic startup. The largest funding round, exceeding $300 million, also went to a domestic company. Notably, the only startup reporting over $1 billion in revenue was domestic as well, with no returnee-founded startups reaching unicorn status.
This trend does not imply that returnees lack capability; rather, it reflects how different environments cultivate distinct strengths. Domestic entrepreneurs thrive in markets that impose strict discipline. They face price-sensitive customers, inconsistent infrastructure, unpredictable regulations, and limited capital. Mistakes are costly, and inefficiency is rarely tolerated.
Founders who succeed in these conditions develop instincts that are difficult to teach, prioritizing distribution over branding, cash flow over storytelling, and unit economics over grand visions.
While returnees often possess excellent training and global exposure, they may also carry habits shaped by environments of abundance, such as larger teams and longer runways. This model has thrived in the United States, where capital has subsidized it. In India and many emerging markets, however, efficiency is key to survival.
This phenomenon is not unique to India; China experienced a similar returnee experiment, encouraging overseas talent to return. Over time, domestic founders not only caught up but surpassed their returnee counterparts. Today, companies like ByteDance and DJI are primarily driven by local talent operating within deeply rooted ecosystems.
Ironically, the U.S. played a role in shaping this outcome. Flawed immigration policies have trapped skilled immigrants in limbo, with green-card backlogs stretching into decades and visa uncertainties creating instability. Many skilled immigrants, primarily from India, faced prolonged waits, leading some to leave not by choice but due to a lack of viable alternatives.
As a result, these founders returned home to compete against local entrepreneurs who had been honing their skills in the market for years, learning lessons that cannot be taught in classrooms or accelerator programs.
In light of these findings, my advice to the Indian government is straightforward: shift the focus from returnees to investing in domestic entrepreneurs. While foreign exposure can be beneficial, it is no longer the primary source of India’s entrepreneurial advantage. That advantage is being cultivated locally by founders who understand Indian customers, constraints, and unit economics because they have navigated these challenges firsthand. To foster more enduring companies, India should support those who have remained and learned to build in their home market.
This article was first published in Moneycontrol.