Detailed presentation on start up India initiative undertaken by the current Government.It includes;
- Need for start ups
- Funding statistics
- Benefits
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Start Up India
1. The need for Startups !!!
Disclaimer: This presentation is based on my internal research. It is notified that the presenter
and any other person related to him shall be not responsible for any damage or loss of any action
taken based on this presentation. It is suggested to seek professional advice before initiating any
action.
By
Shweta Shah
Company Secretary
2. Why this topic !!!!
The word start-up is being used frequently in
recent times
It has become a part of layman’s vocabulary
Is a recently opened shop a startup?
Is any new entrepreneurial venture a startup?
The world is going gaga about start-ups
3. In a layman’s language Start up is nothing but execution of their ideas and
creativity. In ancient times it was just a dream to open up your own
Company, and not many had that positions to make their dream come true.
Start up is nothing but the power, today’s generation has got to make their
dream come true as technology is in full support of today’s youth making it
easy for them.
These three questions are very essential to construct the base of one’s bridge:
1. What should we start doing?
2. What should we stop doing?
3. What should we keep doing?
4.
5. YOU ARE A STARTUP IF:
• Incorporated as either a Private Limited or a Registered Partnership Firm or
a Limited Liability Partnership
• It is upto 5 years from the date of the incorporation or registration
• Turnover for any Fiscal year as not exceeded INR 25 Crore
• Formation of entity should not have been done by splitting up or
reconstruction a business already in existence.
• Working towards innovation, development, deployment or
commercialization of new product, processes or services driven by
technology or intellectual property.
6. WHY STARTUPS?
There has to be something very lucrative that people are moving towards
start ups.
From past few years the ratio of start ups are emerging and rising. But a thoughtful
question comes here in mind that WHY STARTUP ONLY?
HERE COMESTHE ANSWERS
7. MODIfying India
“I see startups, technology and innovation as exciting and effective
instruments for India’s transformation.” Shri Narendra Modi
Startup India is a flagship initiative of the Government of India, intended
to build a strong eco-system for nurturing innovation and Startups in the
country that will drive sustainable economic growth and generate large
scale employment opportunities.
Government through this initiative aims to empower Startups to grow
through innovation and design.
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
8. BENIFITS
The central government has issued a startup action plan
and several policy initiatives directed towards providing
for a facilitating ecosystem for startups to grow
The state governments have also issued policy directives to
provide a facilitating environments. The states brimming with
activity are:
Kerala, Karnataka, Andhra Pradesh, Rajasthan,Gujarat, Haryana,
Uttar Pradesh, West Bengal have start up policies.
SEBI has eased out the norms for listing of startups under the
InstitutionalTrading Platform
SIDBI has set up India Aspiration Fund to boost start fund-of-
funds ecosystem in the country.
SIDBI has launched SIDBI Make in India Loan For Enterprise
(SMILE) scheme
SEBI is contemplating sale of MFs on e-commerce platforms.
9. Schemes by Government
Setting up fund-of-funds
Government has set up a fund-of-funds with an initial
corpus of INR 2,500 crore and a total corpus of INR 10,000
crore over a period 4 years
The fund will invest in SEBI registered Venture Funds which
in turn will invest in startups
Life Insurance Corporation (LIC) shall be a co-investor in
the Fund of Funds
Credit Guarantee Scheme
To provide debt to startups, Credit guarantee mechanism
through National Credit Guarantee Trust Company
(NCGTC)/ SIDBI is being envisaged with a budgetary
Corpus of INR 500 crore per year for the next four years
10. Tax exemption – Section 80-IAC
The FinanceAct, 2016 introduced
Tax exemption to eligible startups for 100% of the
profits for 3 consecutive out of 5 years;
Eligible startups have been defined to mean company
or LLP incorporated after 1st April, 2016 but before 1st
April, 2019 and having obtained the certificate from
Inter-Ministerial Board of Certification;
The profits of startups will be liable to MAT
11. Tax exemption – Section 54GB
Section 54GB provides tax exemption in case of
capital gains arising out of sale of residential
house if
the net consideration is reinvested in a certain
specified modes of investment.
Subscription of shares of a MSME or eligible startup.
The eligible startup shall within one year from the
date of investment utilize the amount for purchase
of new assets.
New assets may include computers or computer
software as well.
12. Tax exemption – Other Reforms
New business engaged in manufacturing will be
charged with tax rate of 25% instead of 30%
provided the business does not claim other
benefits (incl. accelerated depreciation)
Exemption from applicability of section 56(viib) in
case of issue of shares of a startup at a rate higher
than the fair value of shares.
Exemption from capital gains, if the gain is
invested in units of the fund-of-funds established
by the government
14. Startups: Indian Perspective
India is positioned 3rd in terms of number of startups globally, after
U.S.A and the U.K.
In 2015, India had a total of 4200 startups which is estimated to grow to
11500+ startups by 2020.
Generated employment for 80,000-85,000 people and the number is
expected to rise to 2,50,000 people by 2020.
The industry was worth USD 5 billion in 2015, a growth of 125% since
2014 in quantum of funding.
The FDI flow in first of 2015 attracted by startup was USD 31 bn.,
surpassing FDI flow in China and U.S.A during that period.
More than 72% of the founders in the startup space are less than 25
years old making India home to the youngest entrepreneurs in the
world.
Bangalore is the 15th Best City, Globally to Startup, according to the
World Startup Gnome Project Ranking.
15. Startups: Indian Perspective (Contd.)
India is home to 5.7 per cent of the world’s Unicorns –
startups that are valued at over $1 billion
India’s Unicorns are
Flipkart, Snapdeal, Ola, Paytm, Quikr, Zomato, Mu Sigma, Shop
Clues, and InMobi
In 2015
850 startups received USD 9 billion via 1,005 deals
Eleven companies in the B2C commerce space received funding
to the tune of $3.377 billion, which also means that over 33 per
cent of the funding last year was in these companies
over 50 per cent of these were Unicorns.
19. Important Definitions
Accelerator = A center where start-ups are “incubated” through
mentorship, space and sometimes cash.
Business Incubator = Facility centers where start-ups are kept to survive,
to adjust to their surroundings and become viable business propositions.
Eg; BSE Institute Limited
Boot-Strapping = Using “friends and family” cash to get going.
Angel investors = Investors who invest in early stage startup companies
in exchange of equity ownership.
Venture Capitalist = Investor who provides capital to startup companies
in return of equity interest.
Unicorns = A startup valued over $ 1 Billion
Seed funding = initial capital to start a business
Funds of fund = A fund that invest in funds which in turn invests in start-
ups
Mezzanine financing = It is a form of debt financing, but it also includes
embedded equity instruments or options
20. Sources of Funding
Grants
Equity
Preference shares
Debentures
Convertible instruments
Loans from banks and financial institutions
Seed funding, venture capital, venture debt
21. Stages of Equity Funding?
Seed
funding
Angel
investment
Venture
Capital
IPOs
24. Sources of Funding
The rise and fall of the Start-ups have become the sensational headlines
of this era.
History proves that most of the Start-ups had a glorious beginning in the
past but soon enough due to various issues such as negative cash flows,
cash crunch, funding issues and so on they are seen to be buried in the
“valley of death.”
Many Start-ups are essentially dead but they limb along for years in a
Zombie-like fashion. To get a detailed view of such death we need to
identify the reasons –
Negative Cash Flows
CashCrunch
Funding Issues
RapidTechnological Innovations
Intense Competition
Market Risks –Lack of sufficient demand
27. Role of professionals
Services to startups
Incorporation—
Assistance on setting up the entity
Various Registrations–
can help acquire the various registrations including obtaining PAN, TAN,
VAT registrations, service tax registration, trademark, trade license, shops
and establishment
Tax consultation–
Every business will need advisory on the applicability of direct and indirect
taxes on various transactions that the entity undertakes including various
filings to be carried out during a year.
Accounting consultation–
A startup also needs to have the books of accounts in order. Assistance
will be required on preparation of financial statements.
Secretarial matters–
Any startup will have annual filings and trigger based filings to be carried
out.
28. Role of professionals (Continued)
Assistance to a startup
Filings and compliances –
From taxation, legal and regulatory perspective there will be several
filings required to be undertaken.
For instance compliance with FEMA regulations, in case the entity is
intending to bring foreign funds in to the entity.
Business plan preparation–
For any startup to raise funding the business plan needs to be well
presented.
Financial Projections –
A startup needs to create financial projections to reflect on the growth
trajectory.
Options of financing available –
A startup has several financing options available.
Loans from banks / financial institutions or private equity investments, the
professional could assist considering the viable financing options with the
startup and holistically advice on the implications of the options.
29. Role of professionals (Continued)
Services to Incubators / Accelerators
Services to incubatees – Professionals may collaborate with
incubators / accelerators to provide services on book keeping,
accounting, taxation, administrative, operations etc to facilitate
incubatees to develop the product.
Investment in equity in the incubatees – The incubators typically
would take minimal fees for the services offered and would acquire
equity stake in the incubatees. The professionals may assist the
incubators to invest in equity and the documentation around it.
Role of professionals –Role of professionals is that of hand
holding the various stakeholders at various stages of growth.
30. ThankYou !!!!
The need for startups !!!
A presentation by:
Shweta Shah
Associate Partner
Mehta & Mehta
Company Secretaries
(M): +91-9773164401
(E): shweta@mehta-mehta.com
