Start-up India 2016 – How does Government plan to boost the start-up ecosystem!
To begin with – the Chinese economy, which has been a driver of the global growth, has been rapidly slowing down, leading to a global setback. IMF (International Monetary Fund) has quoted China’s growth projection at 6.3% in 2016.
On the other hand, IMF has projected India to grow at 7.3%, and is projected to remain the fastest growing major economy in 2016. It is widely said that the 21st century belongs to India, and that India can be bigger in momentum than China in next 10 years.
The Indian start-ups hold immense potential. Currently, with a total of 4200 start-ups, India ranks 3rd in the global list, and more than $18 Bn has been pumped into the Indian start-ups between 2010 and 2015. Half of which i.e. $9 Bn, came in 2015 alone.
And to boost this further, PM Narendra Modi has kick-started Start-up India!
What is start-up India 2016?
Start-up India campaign is an action plan initiated to help start-ups with most of their requirements to boost entrepreneurship and encourage start-up ventures. Start-up India was not just a campaign to help with Investments, but was aimed at the overall development, upliftment and smoothening of the start-up ecosystem.
The campaign was organized by the Department of Industrial Policy and Promotion (DIPP), and was launched on the 16th of January 2016, by Arun Jaitley – Union Minister of Finance and Corporate Affairs at Vigyan Bhavan in New Delhi. Nirmala Sitharaman – Minister of State for Commerce and Industry, was the Guest of Honour.
It was first announced by Prime Minister Narendra Modi during his speech on the 15th of August at Red Fort, and has now been put to action.
DIPP have partnered with Invest India and Start-up ecosystem players like – iSpirt, YourStory, NASSCOM, SheThePeople.tv and Kairos Society and youth wings of FICCI and CII.
The event was an all-day global workshop on Start-up Entrepreneurship and also included panel discussions on topics such as: -
- Unleashing Entrepreneurship and Innovation: What do Indian Start-ups Need to Grow and Prosper
- Celebrating Women: Stories of Innovative Women Entrepreneurs
- Show Me the Money: How do we Capitalize Entrepreneurship?
- How digitization will change India’s future
- Making Indian Healthcare Leapfrog
- Financial inclusion is within reach
The panels also included representation from Securities Exchange Board of India (SEBI) and Small Industries Development Bank of India (SIDBI) as well.
There was also a unique (Q&A) session titled “Face-to-face with Policy-makers”, wherein Secretaries of Key Government Ministries and Departments answered various questions on how Government will be creating a conducive environment for Start-ups.
A virtual exhibition was also organized at the event, to showcase the unique and innovative work done by Start-ups in the country.
Google also conducted an innovative session called “Launchpad Accelerator” which involved live pitches being made by early stage start-ups to potential investors. Additionally, Nikesh Arora (President and COO of SoftBank) was also seen interacting with participants on aspects related to funding.
Other than that, the Start-up India Campaign was also seen promoting the ‘Stand-up India Initiative’, which again was aimed at promoting entrepreneurship, but amongst the SC /ST / OBC, Women, and all other Communities.
It has often pointed out that the quality of education in Indian institutions have not been found up to the mark and do not match with the organization’s standards for the required skill-set, and eventually the companies are forced to spend more on training the freshers. Hence, to solve this issue, the country has also launched the ‘Skill India Campaign’ as well!
The event was telecasted live at all the IITs, IIMs, NITs, IIITs, all other Central Universities and to all the youth groups in over 350 districts of India.
What is the purpose of Start-up India?
The objective of Start-up India was to regain the confidence of the start-ups and to show that the government was committed to the well-being of the start-up ecosystem.
As rightly pointed out by our Prime Minister, the most successful start-ups are usually the ones those aim to solve a real-life problem. It is a well established fact that, one of the major reasons for the rise of the IT sector was due to minimum Government Regulations or less involvement of the Government in general.
And, the GOI is trying to implement the same mindset by launching the Start-up India Campaign as well. Our present government wishes to assure minimum interference from the government, and to play the role of a “facilitator” for start-ups.
This campaign is aimed on to restricting the role of the States in policy domain, along with complete removal of “license raj” and all other hindrances that are faced while performing a business like in land permissions, foreign investment proposal, environmental clearances, etc…
The launch of this event is focused at celebrating the entrepreneurial spirit of India’s youth, and wishes to turn the youth of India from job-seekers to job-creators.
What are the KEY takeaways from the event? How will it benefit the start-up Ecosystem?
The campaign was attended by CEOs and founders of more than 1500 top Start-ups from across the country and abroad.
Among the attendees, there were over 40 CEOs, Start-up founders and Investors from Silicon Valley as special guests who also took part in the interactive Q&A sessions. These included Masayoshi Son – CEO of SoftBank, Kunal Bahl – Founder of Snaa, Travis Kalanick – Founder of Uber, Adam Nuemann – CEO of WeWork, Sachin Bansal – Founder of Flipkart, etc…
The much-awaited Start-up India has brought a lot of positivity in the start-up environment in India, and comes as a fresh ray of hope in these harsh working conditions. This action is said to boost up the lost confidence from within the entrepreneurs to start-up through a hassle free process.
The Ministry of Human Resource Development (HRD) and the Department of Science and Technology also announced during the event, that they would be setting up more than 75 ‘Start-up Support Hubs’ in all the major institutions across the country, including – National Institutes of Technology (NITs), the Indian Institutes of Information Technology (IIITs), the Indian Institutes of Science Education and Research (IISERs) and National Institutes of Pharmaceutical Education and Research (NIPERs).
Additionally, under this scheme, a set of start-ups will also acknowledge an MOU (Memorandum of Understanding) with these institutions and will also establish start-up centers in the campus.
Overall – below mentioned are most of the KEY initiatives that have been taken at the campaign: -
- Single day and Single window clearance
- Registration of the start-up using the new Start-up mobile application.
– The app will be rolled on April 1st
- Launch of a start-up fund worth Rs. 10,000 crores with an initial amount of ₹2500 crores that will be spread across 4 years.
– The nature of this fund would be “Fund of Funds” (FoF), which means that it will not directly invest in start-ups, but will participate in investment rounds done by SEBI registered venture funds.
– The Life Insurance Corporation of India will be an investor in this the FoF. It will be managed by a collective board of private professionals from industry bodies, academia and successful start-ups.
- Credit Guarantee Schemes for loans
- Friendly Bankruptcy Code that would ensure 90-day exit window
- Elimination of Red Tape
- Self-certification compliance
- Patent Regime and IPR (Intellectual Property Rights) to be simplified
– Panel of facilitators to provide legal support and assistance in filing of patent application
– 80% reduction in patent registration fee
- 3 years of freedom from mystifying inspections
- 3 years of freedom from Capital Gain Tax. 20% Capital Gains Tax is charged to all the Investors (VC / Angel)
- 3 years of freedom from tax in profits
– Due to this tax, Overseas Venture Capitalist are forced to route their investments through Mauritius, because capital gains tax on investments from Mauritius is waived since there is a provision in Double Tax Avoidance Treaty. They have been asking for the exemption of this tax, since a long time
- Exemption of Tax above ‘Fair Market Value’ (FMV) for incubators in start-ups. This tax till before was only applicable to VC funds, and has been implemented to encourage seed-capital investment
- Promotion of Entrepreneurship in Biotechnology. 5 new Bio Clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.
- Innovation hub under Atal Innovation Mission
– Initiation of Innovation Programme starting with 5 lakh schools and a target 10 lakh children.
– Entrepreneurship promotion via: –
- Strengthening of existing incubation facilities, establishment of sector specific incubators, and pre-incubation training to potential entrepreneurs
- 500 tinkering labs with 3D printers in universities
- Seed funding to high growth start-ups
– Innovation promotion via:-
- Institution of Innovation Awards. Three per State / Union Territory and Three National level.
- Launch of Grand Innovation Challenge Awards, for finding low cost solution ideas for all the pressing and intractable problems in India.
- Provision of support to State Innovation councils to create awareness and organise state level workshops /conferences.
- 31 centres of innovation, 35 Public-Private Incubators, 13 start-up centres and 18 technology Business Incubators will be established in national institutions.
- Setting up of 7 new Research Parks on the lines of the Research Park at IIT Madras, with an initial investment of Rs. 100 crores each.
- National and International start-up festivals to organized to provide visibility.
Who would be ELIGIBLE for the schemes launched at the event?
Many entrepreneurs have been very excited by the announcements made at the event, but then again, not all start-ups qualify.
Here’s a quick analysis of the eligibility criteria: -
- The company must either be incorporated as a:
- Private Limited Company
- Partnership firm
- Limited Liability Partnership
- The company must be less than FIVE YEARS old
- Its Annual turnover in any financial year must not exceed ₹25 crores
- The Start-up must either be working towards –
- Innovation or Development
- Deployment or Commercialisation of new products,
- Processes or Services driven by technology or intellectual property, etc…
- Or a significantly improvised existing product, service or process, that will create or add value to the current condition
- The Start-up must not just be engaged in:
- Development of products or services that do not have potential for commercialisation
- Products or Services with no or limited growth or progress
- The Start-up must not be formed by splitting up, or reconstruction, of a business already had / has an existence
- The Start-up has obtained certification from the Inter-Ministerial Board, setup by DIPP to validate the innovative nature of the business, and
- be supported by a recommendation from an incubator established in a post-graduate college in India
- be supported by a recommendation from an incubator recognized by GOI
- be supported by an incubator which is funded by GOI
- be funded by an Incubation Fund / Angel Fund / Private Equity Fund / Accelerator / Angel Network, that is registered with SEBI
- be funded by the Government of India as part of any specified scheme to promote innovation
- have a patent granted by the Indian Patent and Trademark Office
**DIPP has the power to publish a ‘NEGATIVE’ list of funds which are not eligible for this initiative.
What were / are the INITIATIVES taken by individual States?
In sync with the Start-up India Action Plan – the government has already launched PMMY (Pradhan Mantri Mudra Yojana), the MUDRA Bank. It is an institution that has been setup for development and refinancing activities of micro units with a Refinance Fund of Rs. 200 billion.
Additionally, with Prime Minister’s Start-up India initiative, Devendra Fadnavis (Chief Minister of Maharashtra) has also assured small business men and venture investors, that some new and necessary steps shall be taken soon, to make us the capital for start-ups.
But overall, majorly Southern States of the nation like Karnataka, Kerala, Andhra Pradesh and Telangana, have also shown far greater performance than the rest. In terms of their policies implementations in support of start-ups, these states have shown better results than the rest of the country. They have been focusing on improvising the infrastructure, mainly of the Tier-II cities.
Bangalore has become to be known as the Silicon Valley of India, while Kerala has built its name for its start-up policy called – “Kerala IT Mission“. This mission is focusing on getting Rs. 50 billion in investments for the State’s start-up ecosystem.
Telangana has also launched the largest incubation center in India called “T-Hub“, while Andhra Pradesh has allocated a 17000-sqft Technological Research and Innovation Park, as a Research and Development laboratory. They have also launched a fund for entrepreneurs of Rs. 100 crores called “Initial Innovation Fund“.
Lastly, Madhya Pradesh has collaborated with the Small Industries Development Bank of India (SIDBI) to create a fund of Rs. 200 crores, while Rajasthan has launched a “Start-up Oasis” scheme for all the aspirers.