India's startups will flourish if the regulatory environment becomes more friendly as all other things - funding, talent and ability to connect to global market - are in place, says a senior IT industry figure.

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V Balakrishnan, the former chief financial officer of Infosys Ltd, told PTI that investors are now focusing on B2B start-ups than B2C.

According to him, a lot of churning has happened in the start-up field in the last two years but there is lot of stability now, and funding has become much more focused with not all companies attracting money.

B2C start-ups had funding challenges which have reduced of late with large players among them having raised money.

"But B2B market is the focus now; most of the funds are focusing on B2B because capital requirement is low and I think exit is also happening in B2B. I think a lot more focus in the VC circles is on B2B companies now than B2C," he said.

The biggest problem faced by startups is on regulatory and compliance front, Balakrishnan said, citing the Income Tax department's notices to startups vis-a-vis the angel tax.

"I think some of the regulatory changes have to be much more friendly for startup companies and compliance regulation should ease because you can't expect a startup started by an entrepreneur who is 25-30 years (old) to comply with some 30 to 40 laws," he said.

He said regulations and compliance have to be made simple and much more friendlier for startups. "The recent notice issued by Income Tax department to all startup companies on funding is not helping because you can't expect a startup company which raised money to pay tax on the capital," Balakrishnan said.

Regulation is a key challenge and there needs to be much more clarity. If that comes, the environment (for startups) will change for the better, he said.

"Startups should have a different environment for regulatory compliance; you can't expect a startup company to adhere to all matured company regulations," Balakrishnan said.

"I think if the regulatory environment becomes much more easier, startups will flourish as all other things are there...Funding is there, talent is coming in, I think they are also able to connect to the global market," he said.