Startup Founder Blames Bad Governance for India’s Innovation Failures

Says Government’s Systemic Inefficiencies Block Technical Breakthroughs

April 10, 2025

A semiconductor entrepreneur has written an open letter to Piyush Goyal, Union Minister of Commerce and Industry, in response to his criticism of Indian startups for focusing on food delivery, betting, and fantasy sports platforms instead of high-tech sectors such as semiconductors and artificial intelligence. The founder argues that it is the government’s systemic inefficiencies that pose the real barrier to innovation in deep-tech industries.

The founder, a former Intel engineer, explained that he started a chip design firm in 2018 which now operates profitably, catering to clients in the U.S. and Europe, including a well-known figure in AI, as reported by The Wire, which did not identify the founder.

The core argument of the founder, in response to Goyal’s remarks at the Start-Up Mahakumbh event on 3 April, is that the problem is not a lack of ambition among startups but rather a system that actively discourages innovation through bureaucratic red tape and poor institutional support.

In the letter, he shared some experiences dealing with the Ministry of Electronics and Information Technology (MeitY). The Ministry often invited startups to submit proposals through RFQs (Requests for Quotation), but offered no concrete commitments in return, he pointed out.

He recalled being told to go ahead and build a chip without any assurance that the government would purchase it or even confirm if there was a market for it. In one such session, he asked how many chips would be needed and stated the development would cost several crores. The response he received was vague – either that the government would decide after the product was built, or that he should first determine whether the market exists at all. He questioned how any startup could afford to invest two years and up to 200 million (20 crore) rupees into building a product that had no guaranteed buyer.

He also recounted an experience at a defence conference where he offered his company’s help to solve a specific technical problem. Instead of interest, he was met with hostility. A government official reportedly dismissed his offer with a defensive outburst, claiming that government engineers were already capable of solving the problem and did not need outside assistance. The founder interpreted this as a forced meeting, likely arranged by higher authorities, with no genuine intention to collaborate with the private sector. He questioned the point of holding public-private partnership conferences if government officials were unwilling to accept help.

The founder also described other difficulties in dealing with government systems.

He said his startup qualified for tax incentives, but his application had been stuck in limbo for over two years. It was eventually returned with a request for further documents, along with a note stating that the application would go back to the end of the queue – potentially delaying approval by another two years. Just hours after this rejection, he received a call from someone who identified as a “facilitator” offering guaranteed results in exchange for a fee to “help prepare the documents.” The implication was clear – success could be bought, even in dealings with government departments.

He further noted that the cost of importing essential hardware and software licences into India is double what international competitors pay, purely because of Indian tax policies. This, he said, puts Indian deep-tech startups at a disadvantage from the outset.

He argued that startups have the potential to build world-class products, but are being held back by the system. He cited the burden of regulatory compliance as another example – pointing out that businesses are expected to sift through over 300 compliance items to identify which ones apply to them and follow each one diligently.

He ended his message by stating that instead of blaming startups for the state of innovation in India, Goyal should focus on providing effective governance and stop obstructing those who are trying to build something of value.