Entrepreneurial spirit boost in Kerala as nearly 5,000 startup applications received by government after new policy

Kerala government’s startup policy, aimed at promoting entrepreneurship among youth, has received a good response with more than 800 ventures being launched at the Startup Techno Park business incubator at Kochi.

According to PTI, since the policy was initiated two years back at the ‘Emerging Kerala’ Summit, nearly 5,000 applications were received and 800 ventures began functioning.

Speaking to reporters after a cabinet meeting, Chief Minister Oommen Chandy said the cabinet had approved the Kerala Technology Start-Up policy, 2014.

Kochin’s ‘startup village’ is an ambitious plan to incubate 1,000 product startups, mostly by students over the next 10 years. It is a Public Private Partnership initiative with The National Science and Technology Entrepreneurship Development Board, The Department of Science and Technology of the Government of India, Technopark and MobME Wireless being the stakeholders. The startup village is modeled on technology startup incubators in Silicon Valley, and is envisioned to provide all the facilities and services required to support student entrepreneurs.

“Startup Village initiative has been well accepted by the youth of the state”, he said.

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Startup Jharkhand to get Rs 50 cr from state govt as a part of Startup India campaign

On the pattern of Central government’s Startup India campaign, the Jharkhand government has introduced Start-Up Jharkhand , earmarking Rs 50 crore to encourage entrepreneurs in different sectors, Chief Minister Raghubar Das said at a meeting at Ranchi.

Innovation and Incubation Centres were being set up at a cost of Rs 10 crore and entrepreneurs were being encouraged in the sectors like Information Technology, Health, Tourism, Agriculture, Biotechnology and alternative energy, he said, adding an innovation lab would also be set up with the help of IIM Ahmedabad.

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Also read : Jharkhand to focus on IT growth and entrepreneurship

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Informing this at the Think India 2016 Convention , Das said a policy on Startup Jharkhand would be coming up soon. Think India has been hosting National level convention every year – a conglomerate gathering of students, researchers, faculty members, alumni of finest of institutes of India and social icons from various walks of life. Some of the premiere institutions like IISc Bengaluru, IIM Ahmedabad has been the host for this pan India convention since its inception.

This year’s convention was held at Ranchi. This convention envisages deliberation on the research environment and plans to hold interactions with innovators and young startup geeks along with thematic sessions how well do we understand India in this 21st century, while meeting the real life role models who have been contributing at the grass root levels of the society.

On the lines of the Startup India campaign which is based on an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage start ups with jobs creation. The campaign was first announced by Prime Minister Narendra Modi in his 15th August, address from the Red Fort. It is focused on to restrict role of States in policy domain and to get rid of “license raj” and hindrances like in land permissions, foreign investment proposal, environmental clearances. It was organized by Department of Industrial Policy and Promotion (DIPP)

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Why should startups care about the Budget

Trying to raise money for your startup?

The Uphill Task Of Raising Money

Trying to raise money for your startup? A lot of startups die at the inception stage itself. There is definitely a need for that capital and getting it is a Herculean task. Easier said than done, but a lot of startups are unable to sell their value proposition to investors effectively. Moreover, with investors being very few in number, the challenge becomes bigger in terms of how to get that share of the pie from the limited pool. Hence, fund raising can be a daunting task, and entrepreneurs need to be thoroughly prepared before they meet investors to raise money. Here are some of the key questions early stage entrepreneurs should ask themselves to be better prepared to meet the challenges that await them in the funding game.

Is it too early to get funded?

Investors are looking at getting bang for their buck. Hence, they typically look at a growth period of 12-18 months to give themselves enough confidence before they invest. This does become a considerable challenge when you have just started your venture and are looking at getting funded. The problem is compounded by the unrealistic net present value (NPV) assigned to the venture, as the numbers are often unrealistically high. NPV measures the value of the project at the present, which is based on IRR and future cash flows. The projections are not reflective of reality, as they are usually over stated, making it questionable for investors. The recommended practice would be to follow a bottom-up forecasting approach, and stay conservative on the numbers.

The other recommended approach is aim for being bootstrapped. Chances are if you are bootstrapped for 12-15 months and have raised a certain value for your business, you are more likely to get the investor eyeballs.

Is your paperwork ready?

Completed documentation is important to raise investor confidence in terms of how organised you are about your business. A lot is dependent on the perception built and poor documentation leads to a poor image. Documents such as mutual NDA, HR policy documents, employee offer letters, invention agreement, conflict of interest, confidentiality agreement, service agreement, company loan agreement, and investor pitch deck have to be in place before approaching any investor.

How many investors in your network?

Raising money is a matter of raising investor confidence. If you don’t know anyone and no one knows you or your business, the chances of getting immediate acceptance is less. The entrepreneur’s network clout speaks for his/her awareness levels, grip on the industry, ability to take the business forward, and often serves as proof of thorough groundwork. Considering networking is powerful in many ways, it is important to attend startup events and startup conferences and build rapport with the investors and funding companies. The skill to introduce yourself and your business idea during these events most often leads to contact building, idea exchange, and nuggets of advice that may prove useful for improving your business. Most importantly, when you approach a lead investor, it helps your case if you make the investor aware that you are already in the inner circle and well connected.

Maybe there is nothing wrong and you still come back empty handed.

Do you have the ability to not give up and keep working on your startup without an iota of self-doubt?

While all may be right, it still may not click through. All your documents, plans, and network may be in place, but that does not necessarily guarantee that the funding will come through. It may take a bit more perseverance and luck. Hence, accept the fact that trying to get funding is a process of trial and error, and hits and misses. Paul Graham is an English computer scientist, venture capitalist, and essayist. He is known for his work on Lisp, for co-founding Viaweb, and for co-founding the Y Combinator seed capital firm. He says “Investors are very random. All investors, including us, are by ordinary standards, incompetent. We constantly have to make decisions about things we don’t understand, and more often than not, we’re wrong.”

These questions are just a guide to better preparing yourself as an entrepreneur who is looking for funding. The idea is to do your own due diligence; have a robust business and communication plan; and the readiness to run it with sheer optimism, despite the obstacles that come along. While there may be viewpoints on how to approach it, what remains constant is the conviction you have for your business model, and how far are you willing to go for it?

This blog was originally published on Your Story as Trying to raise money for your startup? What can go wrong? Sukirti Sharma

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Start Up : Finally Defined by the Government

define ‘startups’. There were many points that were consistent from the speech given by Prime Minister Narendra Modi during the unveiling of the ‘Startup India, Standup India’ policy. According to the government notification, an entity will be identified as a startup.

1. Till up to five years from the date of incorporation.
2. If its turnover does not exceed 25 crores in the last five financial years.
3. It is working towards innovation, development, deployment, and commercialisation of new products, processes, or services driven by technology or intellectual property.

If you are planning to structure a part of your business into a separate entity, it won’t be called a startup as it already forms a part of a registered entity.

In order to obtain tax benefits, one has to obtain a certificate from the Inter-Ministerial Board of certification. The board consists of the following:

1. Joint Secretary, Department of Industrial Policy and Promotion.
2. Representative of Department of Science and Technology.
3. Representative of Department of Biotechnology.

The notification describes the word entity as a private limited company, or a registered partnership, or a limited liability partnership firm. However, there is no mention of sole proprietorship or a one person company to be qualified as a startup.

Another observation leads to the fact that an entity shall be considered a startup only if it aims to develop and commercialise – a new product or a service or a process or significantly improves on a product or service or process which will add significant value for customers or workflow.

This also leads to the fact that there is no chance for me-too products. If you are creating another e-commerce firm, you are not liable to get the tax benefits as you will not be defined as a startup unless there is some innovation in your product or process or services.

That being said, the process of registering yourself as a startup is quite simple as one needs to register through a mobile app (which is not yet launched) or the portal of DIPP (Department of Industrial Policy and Promotion). The startups will have to submit an application along with ‘any’ of the following documents.

1. A recommendation in a format specified by DIPP from an incubator established in a post-graduate college in the country.
2. A letter of support from any central or state government funded incubator to promote innovation.
3. A recommendation in a format specified by DIPP (with regard to innovative nature of business) from any incubator recognised by the Central Government.
4. A letter of funding of not less than 20 per cent in equity by any incubation or angel fund/PE fund/accelerator or angel network duly registered with Securities and Exchange Board of India that endorses its innovative nature of business.
5. A letter of funding by the Central or State government as part of any scheme to promote innovation.
6. A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Until such app or portal is launched, DIPP will make alternative arrangements to recognise a startup. Once the application is uploaded, a recognition number will be issued to the startup in real time. If the number is found to be obtained without uploading the documents, or uploading the forged documents, a fine on the applicant will be levied, which shall be 50 per cent of the paid-up capital of the startup and not less than Rs 25,000.

The word innovation has been mentioned quite frequently and has come up many times in the notification. However, the definition of the word startup has been loosely coined and thus reflecting ambiguity on the same scale. The involvement from government and the fact that the incubators should be funded or recognised by the governments creates a huge scope for corruption.

You can access the government notification here.

Source: Yourstory.com

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Defence Procurement Procedure are set to boost Startup India, Make in India

Defence Minister Manohar Parrikar has unveiled the much-awaited Defence Procurement Procedure, saying it will ensure transparency and speed in acquisition process and boost the Make in India initiative to reduce dependence on imports (rpt) imports.

The Defence Procurement Procedure (DPP) can push the agenda of Make in India and India’s target of achieving defence industry network. With the new DPP, it will be ensured that there is greater transparency and faster clearances, Parrikar said at the inauguration of four-day Defence Expo in Betul-Naqueri village, about 50 kms from Panaji.

The DPP have been loaded online on the Defence Ministry’s website and would be made available in hard copy format after 15 days. Parrikar said certain concerns of foreign companies which were expressed in the past, would be addressed through this policy in next three to four months. The new policy has introduced an Indian Designed, Developed and Manufactured (IDDM)category which will benefit the local units, he added.

WE HAVE INCREASED THE FOREIGN DIRECT INVESTMENT (IN DEFENCE SECTOR) TO 49 PER CENT WHICH WILL BE THROUGH AUTOMATIC ROUTE. DEFENCE EXPORT CLEARANCES WILL BE GRANTED ONLINE AND THE POLICY WILL ALSO INCLUDE ‘START-UP INDIA’ INITIATIVE. TECHNOLOGY IS CHANGING EVERY YEAR AND INDIA HAS THE CAPABILITY TO USE IT IN DEFENCE PRODUCTION.WE EXPECT THAT NEW POLICY WILL MAKE THE WORLD TAKE ADVANTAGE OF TECHNOLOGICAL REVOLUTION ACROSS INDIA, HE ADDED.

Railways Minister Suresh Prabhu, AYUSH Minister Shripad Naik, Minister of State for Defence Rao Inderjit Singh and Goa Chief Minister Laxmikant Parsekar were present at the function.

The new DPP would help India reduce its dependency on foreign countries and source defence equipment within the country, Singh said.

ALL DEFENCE PROCUREMENT, THE CAPITAL SIDE OF IT, IS FROM ABROAD. IN THE YEARS TO COME WE WILL BE ABLE TO SOURCE IT WITHIN INDIA, EITHER AS A PARTNERSHIP WITH FOREIGN COMPANIES OR THROUGH OUR OWN DOMESTIC INDUSTRIAL BASE WHICH SO FAR HAS BEEN KEPT AWAY FROM THE DEFENCE SPECTRUM,” HE ADDED

Meanwhile, the ninth edition of DefExpo India, a biennial exhibition of land, naval and internal homeland security systems, being organised by the Defence Ministry, kicked-off in Goa. More than 1,000 companies from 47 countries are participating in the DefExpo. Parrikar had earlier said the new blacklisting policy will also be issued separately next month and made it clear that there will be “no relaxation” for those who have already been blacklisted and “bribe givers” will be punished. However, the existing blacklisted firms will be allowed to appeal before a vigilance committee of the Defence Ministry for delisting under the new policy.

The new category IDDM will be the first category of preference under new DPP, which will guide how India buys its arms and equipment for its armed forces. The new DPP also allows the Defence Acquisition Council to take the “fast-track” route to acquire weapons.There is an impression that fast track can only be done in the event of a war but this is not the case, Parrikar said.

Noting that all earlier DPP was procedure driven, Parrikar had said the new document has a preamble, that will be a fall back option in case of any problem, like single vendor situation among others. In a bid to cut down on the time taken for acquisition process, the new DPP mandates that all AONs (Acceptance of Necessity) of a particular platform will be valid only for six months as against the 12 months deadline now. Also, no AON will be notified until it is accompanied by a finalised RFP (Request for Proposal or tender). This means that the time taken for an RFP is cut down drastically.

Source: Yourstory

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Misconceptions about startup revolution

No, it is not the clichéd philosophy of life and death that we are ranting about, it is about major league players in the context of “Make in India.”

The Government of India announced the “Startup India” initiative to create a dynamic, convenient, and conducive environment for Indian startups to find success. Or in their words: “Wings anyone?”

As reported, India has the world’s fastest-growing startup ecosystem and is expected to become the next “tech hotbed”, with over $5 billion in investments in 2015. The question is, “is the government to provide benefits to everyone, or will certain elements make ‘some’ distinct from ‘everybody’?

But first, who is “Everybody”?

This includes the creators, inventors, game changers, visionary leaders, designers, prime movers, and anybody who Dreams big and Dares to fail. However, there are definite terms and conditions that make an entity eligible to get its wings.

So, who gets wings?

Contemporary businesses and companies are always looking forward to the “Startup Revolution” due to existing misconceptions. But, sadly, these wings are not for all. By the end of this article, I hope you will have a better understanding and a different perspective of startups, and that it will dispel any myths/misconceptions you may have.

1. All new Companies are Startups

It is a myth that all new companies are startups because they are not. The Government of India has a clear definition of what a “Startup” is:

• The company should not be more than five years old, from its date of incorporation. If you have been in business for more than six years, you are not eligible to be a startup
• The turnover in the last five financial years should not be more than Rs 25 crore
• The company should be working towards innovation, development, and commercialisation of new products, processes, or services based on technology and intellectual property
• There are certain other criteria for a company to be termed as a startup, they are as follows:

To have wings, you need to be a bird first.

2. The Startup India App will register the companies.

There is a misconception that the Startup India app will register all new businesses in the market. The app will only clear eligible startups and register them for the purpose of benefit. It is not the same as registering a company. For a startup to be eligible for benefits, it needs to be registered with the Ministry of Corporate Affairs under the Companies or the LLP (Limited Liability Partnership) Act.

If your business meets the startup criteria, and you haven’t registered yet, leave everything and register as you may just get your wings.

To have wings, you need to make your existence felt.

3. Corporation of all sectors creating innovative products will get startup benefits:

As of now, the government has restricted benefits to technological and intellectual innovations and any company will be considered working towards inventions only if:

• It associates with a new product or service or process
• It shows a distinct improvement in its existing products
• It develops a product, service, or process that adds value to the customer or workflow

This excludes:

• Products that do not have potential for commercialisation
• Non-distinctive goods and services
• Products that do not have value for the customers

To have wings, your flight needs to be unique

4. Same benefits for all companies

The benefits are to be decided by the Department of Industrial Policy and Promotion (DIPP) based on the product and its potential in the market. It also depends on its value vis-a vis consumers/customers; so the benefits are not same for all companies

Hence, the size of your wings will depend on how Big you can be.

To end misconceptions: The Government of India clearly states that once you are recognised as a startup through the App (launching on 1 April), there are certain benefits that will be delivered based on the turnover. These benefits are to be decided by the DIPP. Some of these are:

• For the first three years, no income tax needs to be paid
• 80 per cent deduction on filing a patent application
• Fast-track mechanism for a patent application.
• No tax on capital gain
• Compliance regime based on self-certification
• No inspection for three years
• Easier norms for startups to exit within 90 days. Bill will be introduced in the Parliament
• Relaxed rules on public procurement for startups. There would be no requirement of turnover or experience
• The government will set up a fund with an initial corpus of Rs. 2, 500 crore and total corpus of Rs. 10, 000 crore over a period of four years. However, any spend will be depend solely on the product

I know it seems the wings will really help you scale heights effortlessly; but then again, everybody wants to fly, but only a few get wings!

About The Author

Titly Chatterjee

Titly Chatterjee is Content head at QuickCompany.in a Leading Website to register Company and Trademark in India

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How startups should look at the Union Budget

When Finance Minister Arun Jaitley enters the Parliament on Monday, the briefcase in his hand will hold the economic fate of the nation for the coming year. A set of financial documents explaining revenue, taxes, and expenditure by the Central government, Union Budget 2016 is the centre of attention in the country, including the startup world. Of course, startup founders and investors got a major boost when Prime Minister Narendra Modi announced the ‘Startup India Stand up India’ campaign on January 16. The Budget can determine the growth of economy and support for startup ecosystem in the country. Ganesh Prasad, partner at Khaitan and Company, said: “Startups and investors are hopeful that further measures encouraging startups, and investments in startups, will be implemented by the Ministry of Finance in the upcoming budget.”

Startups: Look at the budget and watch for the following terms

• Taxation of consideration above Fair Market Value: The SIAP has improved on the erstwhile policy of the government by proposing that investments by incubators in startups are exempted from consideration paid above FMV of securities being treated as “income from other sources.” The exemption was previously available to venture capital funds. As startups are typically invested in by angel investors and other early-stage investors, this exemption should be made available to them as well.
• Taxation of unlisted securities: Startups are increasingly incorporating companies in tax havens to allow investors to avoid high taxation of capital gains on transfers of securities affected, less than three years, from the date of investment. Similar to taxation of capital gains on transfer of securities in listed companies, the rate of taxation of securities of unlisted companies should be lower than 15 percent or nil.
• Taxation on conversion: Presently, conversion of preference shares into equity shares is considered to be a transfer, and capital gains tax is payable on conversion, although monies are not realised at such time. This should be considered as a transfer and the calculation of holding period for categorisation into short-term or long-term capital gains should include the period of holding of the preference shares prior to conversion.
• Taxation of ESOPs as perquisite: ESOPs can be a useful tool to retain employees, but are not considered attractive as they are considered perquisites, and the holder is subject to tax at the time of exercise of the option. Therefore, tax is payable even before the employee has sold the shares. Consequently, the notional (but not realised) gain between the acquisition price of the share and the FMV of the shares at the time of exercise of the option is taxed. Tax should be payable only at the time of transfer of the shares by the employee, and not at the time of exercise of the option.
• Alignment of angel investment framework with global practices: Globally, angel investments are encouraged to invest in startups by being provided with tax incentives such as high tax credits and usage of LLPs as tax pass through investment vehicles. India should adopt these tax incentives too.
• Dividends from foreign subsidiaries: Holding companies are taxed on dividends although the subsidiary company is liable to pay dividend distribution tax, as a direct consequence of which startups are increasingly incorporating holding companies in tax havens. This double taxation of dividend should either be removed, or the rate of taxation on dividend payable by the holding company should be significantly reduced from the current rate of 15 percent.
• Pass through status: While the Finance Act 2015 provided ‘pass through’ status for Category-I, such as venture capital funds, and Category II (such as private equity funds), alternate investment funds do not enjoy the ‘pass through’ status. Category III alternative investment funds, having extremely high investing potential, should also be provided ‘pass through’ status to encourage investments.
• Taxation of entire consideration, although deferred: Existing shareholders pay tax on capital gains on the entire consideration, although a substantial portion of the consideration may be deferred. Tax on capital gains should be payable on consideration received from time to time and not on the entire consideration at the time of payment of the first tranche.
• Parity in treatment: Typically, startups raise monies from foreign investors, who are encouraged by favourable tax jurisdictions that provide certain tax exemptions. Domestic investors should also be encouraged to invest in startups by being provided with tax exceptions such as not being subject to tax on capital gains.
• No capital gains reinvestment: Domestic investors are taxed on capital gains on transfer of shares, irrespective of whether the realised monies are utilised for further investments in startups. Investors should be liable to tax on capital gains if the realised monies have been reinvented in startups within a certain short period.
• Reduction of withholding tax: Startups have significant cash outflows on account of the 10 percent withholding tax payable on payments and commissions received. The withholding tax is typically claimed as refund by the startups. There should be reduction in withholding tax payable on payments/commissions to startups for a period of at least three years.

YourStory asked our readers what they want from the Budget. Out of the 1,000 participants – which included entrepreneurs, startup employees, and investors – 79 per cent stated that reduction in capital gains tax will ensure more investments in startups.  With goods and services tax (GST) having more significance than ever before, 71.3 percent of our respondents hoped that it will be introduced in this Budget session.  In case GST is not passed, 74.4 percent said service tax should be reduced.

According to the economic survey, Indian GDP has been growing at a rate of 7-7.5 percent in 2015-16, and is expected to stay the same in 2016-17. However, it is essential that the government executes policies to bring in more workforces and thereby reduce unemployment, in order to create a stable economy.

YourStory Budget Survey Responses 2016

Source: Yourstory

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