Daybreak - Gandhinagar vs Delaware: Are India's next 1,000 startups ready to live in Gift City?

Episode Date: January 18, 2026

For over a decade, Indian startups have chosen to be incorporated in Delaware and Singapore when raising venture capital. Now India wants to change that with Gift City—a financial enclave designed to compete globally. But can it? We explore why founders still choose Delaware's speed and legal certainty, what Gift City offers to funds but not startups, and the structural gaps that need fixing.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. It's a humid afternoon in Bangalore. In a coffee shop on Church Street, Raj sits at a corner table. He works at a boutique advisory firm and across from him is a founder building a workflow automation tool for logistics companies.

The venture is barely six months in, but it has a handful of paying customers and a seed round that's almost closed. The product works and the pitch deck is nearly there. But there's one question that still needs to be answered. Where should the company actually live? Rad's role as an advisor is exactly this. He helps early stage Indian startups decide what to do in this kind of a situation. He helps them work out how to do.

to structure themselves for capital, customers and exits. His job is basically to translate legal geography into survival math. So, he lays out three options in front of the founder. The first is Delaware. It's a default option that every US investor understands. It's backed by a century of corporate case law and global venture capital has basically memorized its entire legal system. The second is Singapore.

It offers a cleaner tax treatment, treaty advice. and the fund ecosystem Indian founders know as well as the back of their own hands. And the final option is Gift City. It's a financial enclave outside Gandhianagar where companies can operate in US dollars and it is India's pitch to onshore global capital. In December, its regulator, the International Financial Services Centre Authority, or IFSCA, turned five and hosted journalists to showcase the entire experiment. When Raj finishes listing these options, the founder comes with his own questions.

Like, will USVCs invest here? Can I do a US IPO from GIF city? How do ESOPs work over here? And can I even open accounts on Stripe or Mercury? Raj doesn't answer right away, because the honest answer depends on one uncomfortable variable. How much uncertainty can this founder afford? If the founder makes a wrong choice, Raj doesn't. knows that the consequences won't show up immediately. This founder isn't the only one. Many founders struggle with this choice.

To understand the complexities here, my colleague Etta Ken, reporter Wally Vikram, spoke to a venture lawyer who advises India-U.S. funds. They put the situation quite bluntly. They told her that it's never in corporation that kills a startup. It's the cleanup that happens during Series A, when the founder realizes that their structure isn't compatible with the investors they want.

See, for more than a decade, Indian startups have always made the same decision. When it's time to raise real money, they leave for Delaware and Singapore. Eventually, some return to India to list, like Flipkart, the e-commerce giant, or Grow, the trading platform. But that solves for the investors' exit,

not their beginning. And now, India wants to change all of this, and at the center of the plan is Gift City. Four years ago, in 2022, Dinesh had two tabs open on his laptop. One tab was on Stripe Atlas, the platform that helped startup set up shop in Delaware. Another was on India's corporate affairs ministries portal. But he already knew which path he'd take. Just a couple of hours after clicking Submit, his Delaware parent entity was live.

By the end of the week, he had an employer ID number, bank account, and the green light to shares. Dinesh claimed that if he'd tried this in India, he'd still be collecting documents. Even in GIF City, the incorporation takes nearly four weeks. He would be running around for Pan and Tan applications. Tan, by the way, is tax reduction and collection account number, GSD registration, Provident Fund paperwork, and multiple sign-offs before the company could legally exist. It's pretty inconvenient because startups are scared of losing time. Term sheets expire in 30 days. A key engineer may try to weigh offers, and pilot customers could be waiting for the company to exist on paper.

Still, for Dinesh, Delaware wasn't about just taxes. If anything, the US capital gains can actually be harsher than India's. But what Delaware does offer is speed. He told us that a four-week delay doesn't just slow you down. It also creates doubt. And that doubt can kill deals. But Delaware also comes with a second advantage. It's just invisible until you need it.

It has a judiciary that's built around corporate disputes. The Delaware Court of Chancery handles shareholder fights and vote disagreements without juries and with judges who have spent decades interpreting corporate law. Here, outcomes are predictable, and so investors know exactly what they're getting into. Delaware's third advantage is cultural. Global venture capital runs on a shared language. Preferred shares, liquidation preferences, drag-along clauses. These structures were born in Delaware and have followed wherever VC culture went.

A former Lightspeed analyst told Wally that investors actually expect a Delaware-style corporation because that's what their lawyers understand and know best. Especially for US Angels who don't have a presence in India, investing in Indian entities feels risky. The PAN requirement means registering with Indian tax authorities, reporting under FEMA, which is a foreign exchange management act, adds another layer of compliance. And then there's capital repatriation rules, which is basically the governance of money that leaves the country.

The Lightspeed analyst told Wally about an American angel who took one look at the PAN form and joked that he'd rather wire money to Uzbekistan. Dinesh says, that if he has Delaware, then he doesn't need to explain anything. And investors just feel right at home. Stay tuned. On a weekday in Gip City, packed elevators stop on nearly every floor. Glass towers are all around.

And they're all stamped with familiar names like J.P. Morgan, HSBC, NSE International Exchange and more. A financial services CEO told Wally that three or four years ago, there were barely any buildings. Now there are 30 to 35 towers coming up, and his company has moved from an accelerator to a full-fledged office. Now, while the dev team works from Bangalore, IFSA rules demand that some roles have to be physically present. For example, at least a principal officer and compliance head. That is the exact opposite of Delaventho, which has no such requirement.

For firms like the CEOs, Gift City changes the game. 10-year tax holiday, GST exemptions, stamp duty relief, liberalised currency controls that maintain smooth foreign inflows and outflows, and a single regulator which is IFSCA, replacing India's usual bureaucratic maze. The perks are many. Last year, a Singapore fund relocated to GIF City when the tax rate under India-Singapore treaty dropped to 15%. With Morris's losing appeal as a tax-efficient investment route, GIFCity is a tax-efficient investment

route, GIFCity's 10% dividend withholding tax looks pretty competitive. Clearly, these advantages have been attractive. Registered entities in GIFCity jumped to over 1,000 by November 2025, from just 80 in 2020. They've accumulated over $100 billion in banking assets. For startups, though, these advantages change into disadvantages. The same regulatory oversight that comforts fund managers, becomes a burden young companies can't handle. For example, a few months ago, Raj met a 24-year-old founder from Hyderabad.

She was building a fintech product to automate compliance for small merchants. She had a working prototype, angel checks were lined up, and she was ideologically committed to building in India. Two weeks into the process, she called Raj in a panic. Her lead angel, a former Stripe engineer, was refusing to wire money because the share class template wasn't standard. Another investor was hesitating over unfamiliar ESOP structures. And a US accelerator had rejected her outright.

Of course, the founder was heartbroken. It wasn't like her decision was bad. But the ecosystem just wasn't ready to support her yet. See, GIFCity has to offer three things that startups need. speed, predictability and investor comfort. All things that Delaware has offered for decades. More on this in the next segment. Right now, GIF City is actually much closer to Singapore than Delaware.

A Kotuk banker told Wally that Singapore succeeded as a fund hub long before becoming startup friendly. And even then, only for certain types of companies like later stage ones and holding structures. GIFCity seems to be following the same path. The CEO we mentioned earlier says that the problem isn't ambition. It's just that the legal and financial rails that startups run on don't exist here yet. In late 2025, IFSE-based firms sent a note to the finance ministry. It was their perspective on what needs to change for GIFCity to become a genuine startup jurisdiction. The list focuses on three specific gaps.

First, companies in GIFCity still follow the Companies Act, which is designed for domestic firms, not venture-backed startups. Operators want a separate IFSE corporation code, something that's modelled on Delaware or Singapore that recognizes preferred share structures, venture rights and ESOP pools. It would allow for fast, fully online incorporation. Second, GIFCity has no equivalent to Delaware's court of Chancery. operators are arguing for a startup-focused tribunal inside IFSC with specialized judges and public rulings that let investors predict outcomes. Third, GIFC has marketed aggressively to banks and funds, but not nearly enough to founders and investors.

So what GIFC really needs right now is to have conversations with Y Combinator, conduct USVC roadshows, have standardized legal templates and visible early startup sites. success stories. Now, there are early signs. Singapore-based payments provider called Brook Bond took an IFSE license and plans to build a large on-ground team. GIF City also allows transactions in 15 currencies which is an advantage Bangalor can't offer. Also, in mid-2020 an executive education and training firm called XED Executive Development filed for GIFC City's first-ever public issue. It's expected to raise $12 million. While these are all great signs, structural contradictions still remain.

A U.S. company can raise money from Indian investors. But an Indian company can't easily raise domestic capital through GIFT City. The CEO we mentioned before called it absurd. He felt that companies were based. basically being asked to cut their umbilical cord to India after spending so much time growing here. If these frictions are fixed, then GIFCity can become India's true international capital market. Companies from Bangalore, Hyderabad, Noida could all raise global capital right from home. But if GIFCity doesn't fix its issues, then it ends up succeeding but at the wrong job.

Conversations like the one Raj was having with the founder in the Bangalore coffee shop, will keep happening in different cities maybe and with different advisors and different companies. But the answer to the question of where the company should live will stay the same. Not here and not now. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the ken.com and click on the red subscribe button on the top

of the Ken website. Today's episode was hosted and produced by my colleague Rachel Vargis and edited by Rajiv Sien.