The first investor in unicorn Games24x7 reflects on India’s evolving startup climate and shares why it remains one of the world’s most compelling destinations for venture capital
By Asif Ismail
New York-based angel investor Tariq Khan was one of the earliest U.S.-based backers of an Indian unicorn. He was the first investor in Games24x7, launched in 2006 by two PhD scholars from New York University. The company went on to become a trailblazer in India’s online entertainment space, attracting millions of users and helping reshape the country’s digital gaming landscape.
In this in-depth interview with The American Bazaar, Khan explains why he remains bullish on India — and what opportunities and challenges lie ahead for foreign investors eyeing the Indian market. “In a country like India with 1.4 billion people,” he said, “the whole economics of business is so much more fluid,” pointing to the nation’s strengths in innovation and scalability. “I’m very bullish on [India’s] ability to do [well].”
This is the second installment of a two-part interview series. [Read the first part here.] The conversation has been edited for clarity.
Asif Ismail: You have invested in Indian multimedia, social media, and health tech spaces. How do you see today’s Indian startup landscape?
Tariq Khan: I think it’s fantastic. I think the very fact that there’s a huge market makes a difference. For example, you come up with an app. Let’s say it’s not something huge, but just a small and simple idea, but it is truly new and innovative. The ability to push that app out to maybe 20 million people, and maybe only one percent respond, but one percent of 20 million is 200,000 responses. That’s a huge response. In America and other countries, you struggle to get that, right? So, the size of the market is one thing that’s fantastic. The other thing is that, as more and more people have money, they are able to follow their own desires and group two or three people together, they can create something. I think it’s a flourishing environment. The country is doing well that way. And there’s no reason why it should not continue in this way. I’m very bullish on their ability to do so.
Is the process of building startups in India different from the U.S., or is it the same all over the globe?
No, the process is different. The process is different because angel investment in India is different. It doesn’t happen that easily. Angel investment is hard there. Sadly, Indians who have money, maybe they’re treating the investment in a harsher way than an equivalent person might in the USA. They are more tight-fisted or have more conditions for investments. Even the in the professional venture space investors, VCs, past the angel rounds. In India, it’s just harder to get the story going, get the agreement on the terms and the details and so on. So that aspect of the process is different for sure.
More and more Indian American angel investors are now scouting the Indian market. U.S.-based venture funds and private equities are also investing in India. As a result, there’s a lot of money available for Indian startups in the United States. What advice would you give those startups that are seeking money from the U.S.?
I think my experience has been that if they’re able to somehow have a U.S. presence as a legal entity, whether it’s a Delaware company or a company based in another state, that can avoid a lot of conversation on individual Indian PAN numbers, local rupee accounts, other requirements on a a US investor. Thus, you can raise U.S. money through a legal entity that’s in the United States. And then that legal entity channels the money of all the angel investors in the U.S. I found that to be a more convenient model for U.S. investors. And if the Indian founders accept that, they’re going to incur a little cost in setting up something here. It doesn’t have to be tens of thousands of dollars. You set up a Delaware company, and get a lawyer who’s helpful. For a couple of thousand dollars, you’ve got a vehicle that channels the money. So that’s one thing that I would say Indian startups trying to raise money in the U.S. could consider.
Are you satisfied with the ease of doing business in India?
I think the Indian bureaucracy and infrastructure is moving in the right way. They want to simplify the attraction of foreign capital and its deployment. Of course, there are sectors they don’t want everybody to invest in. So there are some protections that have to be in place when it comes to foreign investment. Thus, India with its huge machinery, has to get that right. And I think they will get it right. But India will benefit from encouraging not just American but European investments to come in, Arab flows, sovereign funds, and so on. They have to continue doing that. Because the youngness of spirit, the youngness of experience is there. It’s not in Germany and Italy. As much as I like it, Italy has to have a renaissance of sorts. But it isn’t coming soon enough yet because of the geriatric population, stifling environment and below the replacement level fertility.
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There is a perception that those who go to India to invest consider only a handful of big cities and states, and a vast majority of states are untapped. What do you think about that?
Well, I think it’s a natural consequence of the fact that venture investing is hard work. It’s very hard work. If you go after well-known companies that have already de-risked themselves — they’ve got a product, a market, and operations in place — your return might be modest. Maybe 1.2x, 1.5x, or if you’re lucky, 2x.
But if you’re willing to do the groundwork, get in early, provide capital and support, that’s where you could see outsized returns — 3x, 5x, even 100x if everything aligns. Those stories are still possible. But again, it’s incredibly hard work. That’s really the only observation I’d offer on that.
In your experience, what are some of the most common mistakes that founders make early on?
I think, generically, you have to recognize that U.S. founders and U.S. markets are different from Indian founders in Indian markets. So, there are natural differences. U.S. founders are much more profligate. They don’t know how to act on a cost-contained basis in the same way as the Indian founders do. There’s a difference in access and availability to capital in the U.S. and in India. So, typically, my experience has been that Indian founders are very careful with how they deploy the money. U.S. founders go with the flow much more, and that may lead them to spend more.
But in terms of the mistakes, with the Indian founders, I think it’s the articulation of the story. If you have a very good idea and you have technical or specific expertise on something, you have to be able to convey that in a way that shows clarity and confidence. And a lot of the times, that mistake is made, and it’s not leading to a situation where they get the right investment at the right time at the right valuation. That is a challenge, for sure.
Speaking of spending discipline, many Indian founders say that in India, if you fail once, you’re done. Whereas in the U.S., failure is more accepted. How accurate is that?
Is the Indian market less forgiving of failure? Maybe, but you’d have to look a little more carefully at the grassroots level. I think it’s more driven by the fact that, in India, they are used to doing things carefully and spending our money carefully. In India, a software developer’s cost ratio is three to one or five to one. So, you’re able to stretch the money. But there’s also a downside to that. If businesses require capital, you have to deploy a certain amount of capital at the right time for a certain result. Then you cannot also be at the same time overly tight-fisted about that.
And I think there’s a parallel with India and China here. What I’ve noticed is that, in India, for capital investments for machinery and capital equipment of that sort, companies have a harder time in India than in China, where they deploy the best machinery. It’s a different ability and appetite for how to use the capital.