US Shutdown: Spending Cuts Will Slow Down Start-ups, Says Emo2 CEO Mir Abid Hussain

How will the US shutdown impact the Indian start-ups operating in that country? We bring you a series of quick chats with entrepreneurs and start-up specialists who are tracking the situation in real time. Today’s chat is with Mir Abid Hussain.

A multi-touch, multi-user, interactive computing surface is not an everyday product developed by an Indian start-up, but Bangalore-headquartered emo2 Inc. has done that and more. Set up by serial entrepreneur Mir Abid Hussain a couple of years ago, the company develops tablets, touch-enabled table tops and integrated walls for food joints; offers a custom OS and also provides a cloud platform. Making foray into the US is a given for a tech firm like that, but will it be hit by the ongoing US shutdown? Hussain feels that a budget shrink is bound to hit businesses in the long term and investors will remain cautious about parking their money. Here are the excerpts from our chat.

How will this current shutdown affect Indian start-ups operating in the US?
The current shutdown should not affect operations significantly as it impacts the federal government more than the individual state governments. Companies in the US are registered to states. Hence, as long as the particular state – in our case Delaware – is unaffected, there will be very less effect on start-up ops. Morally, however, this would definitely add to the woes of the start-ups.

The federal government is going to spend less this year and the effect will trickle down sooner or later. If the shutdown continues, we should definitely expect businesses to spend less on IT. The federal government will spend less on IT as well, making it quiet difficult for B2B companies in the US.

Start-ups who are immediately affected by the shutdown are the ones that need federal licences or clearances. This could mean lesser businesses created in this space. The USPTO is shutting down, which means our patent examinations maybe delayed as well.

Do you expect your niche business to be affected?
Not in the near future. Every market is different for us. The US market already poses challenges for us that are inherent. This is a fresh challenge with the ability to affect us in the long term. So the shutdown could definitely be a concern.

What about start-up funding? Will this have a long-term impact on seed-stage or early-stage funding?
Series A funding is definitely seeing a crunch at this point. And this kind of recklessness in deciding the US budget could lead to less funding in the seed stage. Long-term prospects of funding within the US are also a question mark at this point. But start-ups need not be too concerned. We should remain positive that there will be a settlement to the issue and we can all move on.

Of late, VCs have been quite cautious about investing in Indian companies. What’s your take on that? Will the shutdown move the money back to the emerging markets?
In recent times, we have seen that when there is a problem with the US economy, money moves to emerging markets and when there is good news in the US economy, money moves back. I think this is the general economics at work and VCs being cautious about investing in Indian companies is unrelated to the short-term movement of money between the developed and emerging markets. In my assessment, VCs are cautious and may remain cautious for some time now.

Finally, what’s the India reaction as far as the start-up community is concerned?
The US is a unique market and this is not the first time the federal government has shut down. The US, with all its flaws, will still be attractive for Indian start-ups in the near future. The tech ecosystem in the country is generally unaffected by recession and shutdown. We should assume that individual states will perform well during this period and will remain unaffected. The situation may change if there is a debt default and we should wait to see how that plays out.

Watch this space tomorrow for another start-up reaction.