7TH NOVEMBER, 2019
|RAJYA SABHA TELEVISION|
THE BIG PICTURE: India’s Start Up journey
India continues to be home to the third largest start up ecosystem in the world. According to a recent report released by NASSCOM 1300 tech startups were added up to September this year. While 7 startups entered the Unicorn club talking the total number to 24, potential unicorns also saw a significant increase to 52 from 15 last year.
The volume of investments in startups also grew, touching 4.4 million US dollars for January to September this year. According to the report these startups have created and estimated 60000 direct jobs and between 1.3 to 1.8 lakh indirect jobs
What is the Startup India Initiative?
Launched on 16th January, 2016, the Startup India Initiative has rolled out several programs with the objective of supporting entrepreneurs, building a robust startup ecosystem and transforming India into a country of job creators instead of job seekers. These programs are managed by a dedicated Startup India Team, which reports to the Department for Industrial Policy and Promotion (DPIIT).
Key Pillars of Support for Startups
- Simplification and Handholding: Easier compliance, easier exit process for failed startups, legal support, fast tracking of patent applications and a website to reduce information asymmetry
- Funding & Incentives: Exemptions on Income Tax and Capital Gains Tax for eligible startups; a fund of funds to infuse more capital into the startup ecosystem and a credit guarantee scheme
- Incubation & Industry-Academia Partnerships: Creation of numerous incubators and innovation labs, events, competitions and grants.
Criteria for a Company for a Startup?
- Company age : Period of existence and operations should not be exceeding 10 years from the Date of Incorporation
- Company Type: Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership
- Annual Turnover: Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its Incorporation
- Original Entity: Entity should not have been formed by splitting up or reconstructing an already existing business
- Innovative & Scalable: Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment
Challenges faced by Startup Company
The corporate world is quite fierce. There is always a competition going on between the giants. Competition poses one of the biggest challenges for the survival of startup businesses
The competitive environment keeps the startups on their toes, as there is no margin of error available. Both B2B and B2C organizations always tend to feel the heat of the fierce competition.
Startups tend to face challenges when they set ‘unrealistic expectations’ following a booming success. This is where startups need to translate what the real expectations are. Sustainability is the name of the game. And sustainability requires consistent efforts.
It is a fact that small startups rely heavily on financial backups from the so called investors. At times, when there is a cash influx, small firms, most importantly startups tend to find it really hard to properly manage their finances, and they bog down against the pressure.
This is the digital age. And surviving the challenges in this age requires small startups – especially the ones operating online – to be super agile to counter the so called online security threats. Hackers are everywhere, and they are going to take advantage of any loophole within the systems installed within a startup firm.
Winning Trust of Customers
Customers are the real force behind a startup’s success. Their word-of-mouth power and their presence on social media can give tech startups an edge against all the traditional businesses.
Shell companies should be distinguished properly from the Startup companies
Steps taken by government to ease the ecosystem of Start Up in India:
- Tax holiday has been increased to 10 years from 3 years.
- Exemption from angel tax
- Public procurement norms made easy
- Get exempted from requirement of earnest money deposits, prior turnover, and experience requirement in Government tender
- Easy winding up of company in 90 days under Insolvency & bankruptcy code, 2016
- Start Up patent application and IPR protection of the innovative ideas
Some important schemes for Startup:
- MUDRA: The Micro Units Development and Refinance Agency or MUDRA, is a flagship program by the government of India to provide funds to micro and small enterprises. What sets MUDRA apart from other loan schemes is the fact that no collateral is required to avail this loan
- Credit Guarantee Scheme: The CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) was set up by the Government of India to provide business loans to micro and small industries, with zero collateral
- Stand Up India Scheme: Launched in 2016, this scheme was implemented to cater to women entrepreneurs, as well as those from SC and ST communities. Ranging from 10 lakh to 100 lakh, it is available for Greenfield ventures in manufacturing, trading, and service units.
- NewGen IEDC : the NewGen Innovation and Entrepreneurship Development Centre is applicable to industries like healthcare services, chemicals, hardware, aeronautical/defense, IT, AR/VR, construction, design, food and beverages, textiles, nanotechnology, and renewable and non-renewable energy sources, among others. It provides a one-time non-recurring loan of up to 25 lakhs to finance startup units
- SMILE: The SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises provides soft loans to MSME units at reasonable terms, to meet the debt-equity ratio of a unit or to help in its growth and expansion.
- M-SIPS: The Modified Special Incentive Package Scheme provides capital subsidies to manufacturing and electronic units in sectors of technology hardware, IoT, automotive, renewable and non-renewable energy sources, nanotechnology, green technology, and aerospace and defense industries