What's a startup? Awaiting an answer

The eyes of the startup community is now set on the likely unveiling of rules in January that would, they hope, make it easy for young ventures to do business in India.

November 29, 2015 11:45 pm | Updated November 28, 2021 07:40 am IST

The word 'startups' made its way explicitly in to the Indian budget lexicon only last year. And then, Prime Minister Narendra Modi in his >Independence Day speech announced a new campaign — >Startup India; Stand up India — to promote entrepreneurship. The eyes of the startup community is now set on the likely unveiling of rules in January that would, they hope, make it easy for young ventures to do business in India.

An enabling environment for startups is a long-standing demand of the community. This year, 75 per cent of young tech ventures that are funded have domiciled in Singapore, the U.S and the U.K., because of better regulatory environment.

It isn't just the Government at the Centre that is talking startups. Recently, Telangana >launched what is called the T-Hub , India's >largest technology incubator . The facility is >almost completely booked , having attracted over 130 startups from across India. It has also tied-up with 20 venture capitalists, and is in talks with the University of Texas, MIT Media Lab, Incubio of Spain, and laboratories and academic institutions in India for collaboration.

In October, Congress Vice-President Rahul Gandhi met >with over twenty startup founders (including those of online grocery retailer BigBasket, home healthcare firm Portea and Stayzilla, an online marketplace providing hotel stays) to understand the issues faced by them in Karnataka. In order to maintain Bengaluru's edge as the startup capital of India, Karnataka is coming up with incentives for startups in the form of tax-breaks and easy access to venture capital.

But the upcoming policies of the Centre should matter the most. It aims to spur innovation by creating incubation facilities and encouraging students to take up entrepreneurship. Experts say the government wants to make a difference not only to new-age firms but small companies as well to create jobs. The initiatives are likely to include tax write-offs, relaxation of rules for venture capital flows and rules that make it easy for startups to shut down. Also, the government is planning to streamline the patent process and set up incubation centres.

“It would be very important if it stops exodus of startups and our innovation index improves,” says Sharad Sharma, cofounder of software product think tank iSpirt. “Only time will tell whether it will matter.”

The previous government in 2011 had announced the >India Inclusive Innovation Fund , headed by telecom czar Sam Pitroda. Its aim was to provide capital to new ventures that serve the needs of India's low-income communities. But the fund, whose eventual size was envisaged at more than Rs 5,000 crore, is >still in the process of conceptualisation, design and development.

When the rules are out in January, India will be likely emulating a model followed by countries such as US, Israel and China, where the government is an active supporter of the country's startups with funds and friendly policies

The starting point will be something far more basic, though. “To begin with, it will come up with the definition of a startup,” said a person who is helping the government in this initiative and who does not want to be quoted. For the government, all the small firms are ‘startups” including new-age tech companies, small traditional companies as well as millions of self-employed people who are running their business. The definition is important so that someone opening a “flour mill” cannot claim benefits. So, what's a startup? We will know soon.

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