The recent Startup India event has generated considerable excitement and energy amongst entrepreneurs and the supporting ecosystem. The sound and light around the event has been amazing. As the week rolls over, and the marketing euphoria settles down, the focus must shift to the real impact that this event and announcements around it may make.
First things first – I would not discount the positive impact that can be had just from the focus and status that has been accorded to startups through this initiative. Such focus can help channelize energy from all elements of the ecosystem – from entrepreneurs to investors, and from mentors to academia. That by itself is a credible achievement.
In my view, the singular achievement of the set of specific announcements that have been made will be in making entrepreneurship more inclusive. I had emphasized earlier on the need for the startup narrative to evolve beyond Gurgaon and Bangalore, and beyond the hot-new-Internet-startup that got funded for $100M. The Startup India Action Plan seeks to achieve that.
The proposed Compliance Regime based on Self-Certification, for example, will be highly impactful in startups in “old economy” sectors, even as some of the labor law compliances are more broadly applicable. Similarly, relaxation of norms for public procurement is a great move to reduce the go-to-market hurdle for manufacturing startups, as also a means to expose public buyers to upcoming innovation. The Rs 10,000 crore fund-of-funds, as well as the credit guarantee scheme, are being designed to target a broad mix of sectors such as manufacturing, agriculture, healthcare and education. Launch of Grand Innovation Challenges around the nation’s pressing problems would be helpful in channelizing energy towards these problems.
The theme of inclusion has also been carried through to geographical diversity of startups. Provisioning of Tinker Labs, Startup Centers and Technology Business Incubators, if managed well, can help expand the footprint of startup activity to next tier cities. At the same time, Research Parks in IITs/ IISc will provide the necessary research concentration and support to drive the research innovation agenda – the success of such a model has already been demonstrated in IIT Chennai. Fostering a culture of innovation by reaching out to students through 5 lakh schools will ensure that we create a whole generation of entrepreneurs in next 10-20 years.
Another emphasis which in my mind changes the narrative around startups is in providing Legal Support and Fast-Tracking Patent Examinations. In my view, Indian startups have not emphasized enough on IP creation and protection. Reducing the friction in the process, as well as enabling guidance and facilitation, can help us create and defend high-impact innovations. As we look at solving a million problems, it is important that we provide the right incentives for innovators to leverage the commercial potential of those innovations – the emphasis on Intellectual Property will serve to do that.
I believe that these items around broad-basing entrepreneurship, aligning it with national interest, and putting innovation at the center of startups, are the major achievements of the Startup India Action Plan. Some of the other initiatives like Faster Bankruptcy Settlement and Tax Exemptions are interesting signals, but perhaps not game changers by themselves. Yet others like the Startup Hub, Mobile App for Collaboration amongst ecosystem partners and Startup Fests belong to the set of items that I would rather see the ecosystem solve.
One big miss in the Startup India Action Plan has been the silence around Angel Tax. While incubator investments have been excluded out of this tax, premium over FMV in individual angel investment still seem to continue to be taxable in hands of startups. While the challenges in defining genuine angel investments are well appreciated, we must find a way to undo this regressive move. Or is the finance minister saving this one for the budget!?
This article has also been published here.