Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of startup businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower startups to grow through innovation and design. Several programs have been undertaken since the launch of the initiative on 16th of January, 2016 by Hon’ble Prime Minister, to contribute to his vision of transforming India into a country of job creators instead of job seekers. These programs have catalyzed the startup culture, with startups getting recognized through the Startup India initiative and many entrepreneurs availing the benefits of starting their own business in India. The 19-Point Startup India Action Plan envisages several incubation centres, easier patent filing, tax exemptions, ease of setting-up of business, a INR 10,000 Crore corpus fund, and a faster exit mechanism, among others. In order to meet the objectives of the initiative, Government of India is announcing this Action Plan that addresses all aspects of the Startup ecosystem. With this Action Plan the Government hopes to accelerate spreading of the Startup movement:
- From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.; and
- From existing tier 1 cities to tier 2 and tier 3 cities including semi-urban and rural areas. The Action Plan is divided across the following areas:
- Simplification and Handholding
- Funding Support and Incentives
- Industry-Academia Partnership and Incubation
Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore
To provide funding support for development and growth of innovation driven enterprises
One of key challenges faced by Startups in India has been access to finance. Often Startups, due to lack of collaterals or existing cash flows, fail to justify the loans. Besides, the high risk nature of Startups wherein a significant percentage fail to take-off, hampers their investment attractiveness.
In order to provide funding support to Startups, Government will set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) . The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.
Key features of the Fund of Funds are highlighted below:
- The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups
- Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
- The Fund of Funds shall contribute to a maximum of 50% of the stated daughter fund size. In order to be able to receive the contribution, the daughter fund should have already raised the balance 50% or more of the stated fund size as the case maybe. The Fund of Funds shall have representation on the governance structure/ board of the venture fund based on the contribution made.
- The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.
Benefits from Startup India
Startup India recognition benefits
- IPR Benefits
- Relaxation in public procurements norms
- Self-Certification under Labour & Environment laws
- Fund of funds for startups
- Faster exit for startups
- Tax Exemption for 3 years
- Tax Exemption on Investment above Fair Market Value
Startup India Hub
- Learning and Development Program
- Government Schemes
- State policies for startups
- Pro bono Services
- Knowledge Bank
- Tools and Templates
- Market Research Reports
- Networking & Forum Discussions
- Events and Competitions Facilitation and Handholding
- Definitions and terms
To know more about the benefits under Startup India, visit https://www.startupindia.gov.in/content/dam/invest-india/startup_kit.pdf.
What Qualifies as a ‘Startup’ Under The Startup India Scheme?
An entity shall be considered as a Startup:
- If it is incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India
- Up to seven years from the date of its incorporation/registration; however, in the case of startups in the biotechnology sector, the period shall be up to ten years from the date of its incorporation/registration
- If its turnover for any of the financial years since incorporation/registration has not exceeded INR 25 Crores
- If it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation
Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.
How Can I Register a profile on the Startup India website
Registering a profile on the Startup India website is a fairly simple process.
1. Simply click on ‘Register’ and fill in the details as required in the registration form. An OTP will be sent to your registered email address, post submitting which your profile will get created.
2. You will have an option to select your profile type. For ‘Individuals’, the profile goes live immediately, whereas for ‘Startups’, the profile goes under moderation for 24-48 Hrs, post which you will be able to avail all benefits on www.startupindia.gov.in.