The relationship between Silicon Valley and India has greatly evolved over the years, from the diaspora of Indian engineers hired by American technology companies to the outsourcing boom of remote Indian workers. The two tech hubs have shared an intimate relationship over many decades that has resulted in innovation for both sides. Yes, the Indian startup scene is still young, but it has surpassed Israel to become the third-biggest startup market worldwide, behind only Britain and the U.S. in terms of growth and size. Furthermore, we’re beginning to see the product of the economic and technological opportunities the connection between the Valley and India has engendered.

India is on the world’s stage with big bets from Silicon Valley and global investors in its startup sector. In fact, venture capital investment in India hit a record high with $1.44 billion as of October — exceeding the $1.17 billion invested in all of 2014. Indian IT industry representative Nasscom has predicted that Indian startups are on track to garner $5 billion by the end of 2015.

The Indian startup scene is still young, but it has surpassed Israel to become the third-biggest startup market worldwide.

Not only has there been an upswing in financing, there has also been a push from India’s government to facilitate the technology industry’s growth within the country. Just this past September, Indian Prime Minister Narendra Modi visited Silicon Valley, making it clear that India is seeking to continue the mutually beneficial relationship. According to reports, Modi assured top technology executives that work is under way to resolve their concerns around bureaucracy, deregulation and infrastructure development, among other issues, to facilitate investment and business in India.

With this support, accompanied by the resulting market growth, India has a budding startup scene, with companies like Flipkart and Zomato that are already competing on a global scale and have real potential to impact Silicon Valley. And some are already generating business in the U.S. Perfint, for instance, is a robotics company that has FDA approval, and Capillary has revenue here without outsourcing. There’s clearly an opportunity for global competition, and we expect to see companies, like Borqs and others that are export-driven, also breaking into Western countries. But to continue on this path, there remain areas in which the Indian startup scene needs to mature in order to achieve its true potential, and Silicon Valley can help.

A needed push from Silicon Valley

Silicon Valley has its own role to play in the development of the Indian technology industry. It’s important that U.S. investors and startups alike take strategic steps to integrate locally with the budding startup scene. Investors should continue to put money into India and encourage U.S.-based firms to adopt strong growth strategies for the Indian market. In turn, more startups should continue with India-based operations — ensuring a local presence with a strong connection to Valley headquarters.

There remain areas in which the Indian startup scene needs to mature in order to achieve its true potential, and Silicon Valley can help.

But outside workforce decisions, there are rules and regulations that require maturing before Silicon Valley investors and businesses can truly bolster the Indian tech boom. From the institutional investor perspective, for example, the first thing we need to see is more clarity and more progress around how foreign investors are and will be treated under the proposed General Anti-Avoidance Rules.

In India, the GAAR is still in the developmental stage, and its impact won’t truly be felt until 2017. However, if it is to foster a better working relationship with international investors, it should be on par with many of the established rules in other countries. It’s very important because, considering other treaties and tax agreements, India could lose out on a huge opportunity. For example, Norwest Venture Partners plans to remain very committed to India — we’ve been there from the early stages — but without clarity on taxes, specifically on GAAR and what happens after 2017, it will be difficult to hone strategic planning for investing. There needs to be assurance that incentives are in place to keep long-term commitments from U.S.-based investors.

Bridging the talent gap in India

Unlike a few years ago, the best Indian talent is now choosing entrepreneurship over traditional employment roles, due to an improving economy and growing startup scene. Following in the footsteps of their Silicon Valley counterparts, they are taking the helms of their own technology companies. Even though there isn’t a shortage in engineering or technically oriented roles focused on project management, there is a lack of product management positions, especially when compared to the U.S.

Just like the Valley sourced engineering talent from India, it’s time for India to do the same with product talent in the U.S.

Indian companies need to enable domestic talent to develop the skills necessary to fill the current void for an export-driven go-to-market company. Most companies already have the technical talent internally, but they need to foster talent in a wide range of roles, including product management and marketing. Alternatively, they can also look to the U.S. technology companies that have been in the startup game for much longer, honing the product management skills needed in a budding tech scene, while the more technical roles have been increasingly dispersed globally. Indian companies could take advantage of this by sourcing that American talent, which would also, in turn, foster a stronger relationship with the U.S. Just as the Valley sourced engineering talent from India, it’s time for India to do the same with product talent in the U.S.

Breaking open new markets, and changes to come

Ultimately, the startup scene continues to become more and more vibrant in India. For example, sectors focused on the Internet and Software-as-a-Service solutions will see more funding and acquisitions. However, they will eventually see a moderation in the pace of funding as investors become more selective and look for better unit economics. To stand out, Indian companies will require strong, product-oriented thinking and a better understanding of the needs of the global market.

Once “globally”-focused Indian startups do take off, there will always be the proverbial question, “Do I go public in the U.S. or India?”

For now, investing in India remains elastic, and undergoing liquidity is somewhat difficult. But once “globally”-focused Indian startups do take off, there will always be the proverbial question, “Do I go public in the U.S. or India?” The answer is that it all ties into finding the ideal exchanges and the general market. There are also specific differences in the amount of time company founders and investors are locked into their shares following an IPO. If a company chooses to go public in India, founders are typically locked into their shares for three years, and outside investors for about one year. In the U.S., it’s only about six months.

For globally-focused Indian companies to be able to go public in their own country, Indian markets need to be attractive enough in their own right. Not to mention the obligatory requirements related to listing, like a track record of profitability, which may need some modifications for tech companies to achieve IPO in India.

Matthew Howard, a managing partner at Norwest Venture Partners, has more than 30 years of experience in marketing, product management, engineering, business development and sales in a wide range of technologies. He focuses on mobile, security, rich media, cloud-based services/applications, networking and storage sectors. Reach him @mattdhoward.

Promod Haque, a senior managing partner at Norwest Venture Partners, has 25 years of experience in the venture capital industry. His investments have been worth more than $40 billion in aggregate exit value to date, as 25 of his portfolio companies have gone public and 37 have been acquired (or have gone public and been acquired). Reach him @promodhaque.