Start-up Ecosystem

Facts:

Start-ups are responsible for 2/3rd of jobs in USA. The same can be true for India with the implementation of streamlined policies addressing the entire lifecycle of a start-up: creation, growth and shut-down.
Over the past three years, India has become the third largest start-up ecosystem
According to data compiled by Inc42, over $9.4 billion in funding has flowed into Indian start-ups in 2017, up 1.3 times over last year(as of September)
There are more than a hundred funds registered with markets regulator Securities and Exchange Board of India alone.

What are the strengths of Indian Start-ups?

Large pool of cheap talent
Huge domestic market
Willingness of foreign companies and invetstors to be a part of Indian market
Government support:
- Start-up India
- Start-up Fund
- Atal Innovation Mission
- Ease of Business etc.

Issues in India:

Due to excessive red tape in the investment processes, many companies are leaving India
Start-ups want government not to club them with SMEs, and to focus on removing regulatory hassles
They want abolition of capital gains tax to allow Valley-based entrepreneurs to invest early in Indian start-ups, and help them grow global businesses.
Lack of exits due to Bureaucratic and regulatory hurdles in merger and acquisition processes
Last year, 54% of funded tech start-ups domiciled themselves out of India to Singapore & USA because of better regulatory environment there.
Man power – scarcity of people who are ready to take risk.
Weak infrastructural support – need more acceleration centres, incubators etc.
Diverse market i.e. different languages, tastes, culture – it hinders growth of a big product.

Steps to Succeed

Central Government’s effort to improve the condition:

The Centre alone has announced a corpus of Rs. 10,000 crore to fund start-ups, of which 75 have actually received some money so far
India’s policy on foreign direct investment was specifically amended to include start-ups,
Start-ups are now allowed to accept up to 100% of their funding requirement from foreign venture capital investors

Tax write offs
Relaxation of rules for venture capital flow
Rules that make it easy for start-ups to shut down
Streamline patent process online to make it more convenient
Research park initiative – at 50 institutes Rs 100 crore from next year -> will foster the start-ups by students and former student -> handholding start-ups in initial phase

The Reserve Bank of India (RBI) has permitted startups to raise external commercial borrowings (ECBs) of up to $3 million in a financial year for three year tenure

Various schemes:

There are many schemes run by various arms of the government, all of which provide tax breaks, incentives, grant money and other forms of assistance to wannabe technopreneurs
Technical Assistance: The Department of Electronics and Information Technology offers technical assistance for filing patents.And up to Rs. 15 lakh per invention, or up to 50% of the costs incurred in filing a patent
The department has multiplier grants scheme which provide up to Rs. 2 crore for start-ups in the IT services, analytics, artificial intelligence, and Internet of things space
Funds for Borrowings: The Credit Guarantee Fund Trust for Micro and Small enterprises underwrites borrowings of up to Rs. 1 crore per unit
Encouraging initiative: The Centre’s Atal Innovation Mission funds up to Rs. 10 crore for each Atal Incubation Centre set up under the scheme
The Atal Mission also provides funding to schools to set up ‘Atal Tinkering Laboratories’ to spur the spirit of innovation and enterprise amongst the young
BHARAT Fund : It is a fund launched by the Prime Minister Narendra Modi during his recent visit to the US. It is a fund for Better Health, Agriculture, Renewable and Technologies (BHARAT). It is a major initiative to encourage start – ups.

NASSCOM Report:

With more than 4200 start-ups India has become third largest start-up base worldwide
72% of founders are less than 35 years of age (young start-up Nation)
Reasons:
- Hot spots like Bangalore, NCR, Mumbai
- Availability of VC’s
Impact:
- Innovative tech solution to key social problems
Need of hour:
- Clear policy: define what a Technology start-up is
- Easing rules and regulations for funding
- Simplifying compliance procedures by minimising licenses, permits, approvals etc.
- Tax benefits

NITI Aayog Panel Report:

1% of corporate profit can be directed towards research labs in universities &/or University – Industry research collaboration –> corporate venture capital fund for investment in start-ups and/or incubators
Contracts with foreign defence companies above $5bn –> 5% can be directed towards establishing research centric universities with emphasis on core products
GRAND Prizes can be established for finding ultra-low cost solutions –> Incentivised Innovation
Increase in investment in Business Incubators with up to Rs200 cr public spending per year and roping in Private players
Establish “FUND-OF-FUND” by the government to seed other early stage venture funds with corpus of Rs 5000 cr.

ATAL INNOVATION MISSION

Overhaul innovation ecosystem in country
Will provide the framework to government to encourage and promote self-employment as a career option
Seeks to combine innovators from Universities, consultant and private sector enterprise with government
AIM would have four working groups on
- Idea and Network: collaboration among various stakeholders
- Angel funds – fund of funds
- Governance Innovations
- Missions or Special Initiatives group to take ideas from concept to implementation

Good Articles: