INTRODUCTION
The startup ecosystem in India has witnessed remarkable growth in recent years, and the government has been actively supporting this wave of entrepreneurship through initiatives like the Startup India program. Team YLCC aims to provide a comprehensive understanding of the Startup India program and its significance for startup founders.
The Startup India program was launched by the Government of India in January 2016 to cultivate innovation, promote entrepreneurship, and create a conducive environment for startups to thrive and is a flagship initiative that aims to streamline the startup ecosystem, remove regulatory barriers, and provide various support mechanisms for startups across the country.
The Startup India program offers a range of benefits and support mechanisms that are crucial for the growth and success of startup founders. It provides access to a well-defined ecosystem that includes incubators, mentors, investors, and networking opportunities, all of which play a pivotal role in nurturing startups. One of the significant advantages of the program is the simplification of regulatory and compliance processes. Startup founders can avail themselves of various exemptions, relaxations, and fast-tracked procedures, reducing the bureaucratic hurdles that often deter entrepreneurs from venturing into new businesses.
The program offers several financial incentives that can be a game-changer for startups. The program also facilitates access to funding and investment opportunities through initiatives like the Fund of Funds for Startups (FFS). Under this scheme, the government has set up a corpus fund to invest in registered venture capital funds, thereby providing startups with the necessary financial resources to scale their operations.
It recognizes the significance of incubation and mentorship in shaping the growth of startups and establishes incubation centres and provides mentorship support through experienced professionals who guide startups in various aspects, including business strategy, product development, and market penetration. Furthermore, it enables startups to explore international markets and establish global connections. Events like the Startup India Global Venture Capital Summit provide a platform for startups to interact with international investors, industry experts, and potential partners, opening doors to collaboration and expansion beyond Indian borders.
THE OVERVIEW
Objectives and Goals of the Program
The Startup India program has been designed with specific objectives and goals to foster a conducive environment for startups in India.
Some of the key objectives include:
- Entrepreneurship: The program aims to encourage and promote entrepreneurship as a viable career option, inspiring more individuals to take the leap and start their own ventures.
- Ease of Doing Business: The program focuses on simplifying the regulatory and compliance processes, reducing bureaucratic hurdles, and creating a business-friendly environment for startups.
- Providing Financial Support: The program offers various financial incentives such as tax benefits, access to funding, and credit guarantee schemes to support the growth and sustainability of startups.
- Encouraging Innovation and R&D: The program aims to nurture innovation and research and development (R&D) activities by providing support for patent filing, intellectual property protection, and access to research facilities.
- Creating Employment Opportunities: By promoting the growth of startups, the program seeks to generate employment opportunities, particularly for the youth, and contribute to the overall economic development of the country.
Launch and Key Stakeholders Involved
The Startup India program was officially launched on January 16, 2016, by Prime Minister Narendra Modi. The launch event witnessed the presence of several key stakeholders, including government officials, industry leaders, venture capitalists, and successful entrepreneurs. The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, plays a crucial role in implementing and overseeing the program.
In addition to the government, various organizations and entities contribute to the success of the program. These include incubators, accelerators, industry associations, investment funds, educational institutions, and corporate entities. They actively participate in providing mentorship, funding, infrastructure, and networking opportunities to startups, thus strengthening the startup ecosystem in India.
You can view the Action Plan of the program here (see here).
THE BENEFITS & SUPPORT
Advantages
The Startup India program offers a range of benefits and support mechanisms to empower startups and foster their growth.
Here are some of the key advantages provided by the program:
- Startups registered under the Startup India program are eligible for income tax benefits for a specified period. They are exempted from paying income tax for the first three consecutive years, provided they meet certain criteria. This tax exemption frees up valuable resources for startups to reinvest in their business operations and expansion.
- The program provides relief from long-term capital gains tax for eligible startups. If startups invest their capital gains in specific funds or assets, they can avail themselves of exemptions from capital gains tax, allowing them to reinvest their profits and fuel further growth.
Simplified compliance procedures
The program aims to simplify regulatory and compliance procedures for startups, reducing bureaucratic hurdles and making it easier for entrepreneurs to focus on their core business activities. Some of the simplified compliance procedures include the self-certification of various labour and environmental laws, enabling startups to comply with regulations easily.
Access to funding and investment opportunities
- Fund of Funds for Startups (FFS): The government has established a Fund of Funds for Startups with a corpus of INR 10,000 crores. This fund invests in registered venture capital funds, which, in turn, provide financial support to startups.
- Credit Guarantee Fund: To facilitate easy access to credit for startups, the program has introduced the Credit Guarantee Fund. This fund provides collateral-free loans to startups, enabling them to meet their working capital requirements and scale their operations.
- SIDBI Fund of Funds: The Small Industries Development Bank of India (SIDBI) manages the SIDBI Fund of Funds, which invests in alternate investment funds that, in turn, provide funding to startups. Startups can benefit from the financial support and mentorship provided by the SIDBI Fund of Funds, which helps them overcome funding challenges.
Incubation and mentorship support
- Startup India Hub: The program offers access to the Startup India Hub, a single-point contact platform that assists startups in navigating the startup ecosystem. The hub provides information, connects startups with various stakeholders, and helps them avail themselves of the benefits and support offered by the program.
- Atal Incubation Centers (AICs): The program has set up Atal Incubation Centers across the country. These centres provide startups with incubation support, mentoring, infrastructure, and networking opportunities. Startups can benefit from the expertise of mentors and industry professionals associated with AICs, which helps them refine their business strategies and accelerate their growth.
Intellectual Property Rights (IPR) support
The Startup India program aims to protect and promote intellectual property rights (IPR) for startups. It provides startups with access to legal support and assistance in filing and managing patents, trademarks, and copyrights. This support helps safeguard the innovative ideas and technologies developed by startups and encourages them to focus on research and development.
Government procurement support
Startups registered under the Startup India program enjoy preferential treatment in government procurement processes. They can participate in government tenders without having to meet the prior turnover and experience requirements. This support opens up significant opportunities for startups to secure contracts and projects with government entities, providing them with a stable revenue stream and credibility.
International exposure and networking opportunities
- Startup India Global Venture Capital Summit: The program organizes the Startup India Global Venture Capital Summit, which brings together global venture capitalists, industry experts, and startups. This summit provides startups with a platform to showcase their ideas, connect with potential investors, and explore international funding opportunities.
- International collaborations and partnerships: The Startup India program encourages international collaborations and partnerships to promote knowledge exchange, innovation, and market access. Startups can explore strategic partnerships with global entities, leveraging their expertise, networks, and resources to expand their market reach and explore new avenues for growth.
ELIGIBILITY & REGISTRATION
Eligibility criteria
To avail of the benefits and support provided by the Startup India program, startups need to meet the eligibility criteria defined by the program. The following is the criteria:
The startup should be registered as a private limited company, partnership firm, limited liability partnership (LLP), or any other legal entity recognized under the Companies Act, 2013.
- The startup should not be more than 10 years old from the date of its incorporation. For biotechnology startups, the age limit is extended to 15 years.
- The annual turnover of the startup should not exceed INR 100 crores in any of the previous financial years.
- The startup should be working towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
Registration process and required documents
The registration process for the Startup India program involves the following steps:
- Startups need to visit the official Startup India website (www.startupindia.gov.in) and complete the online registration process. They are required to provide information about their business, directors/partners, and key activities.
- Along with the online registration form, certain documents need to be submitted, including:
- Incorporation/Registration Certificate of the entity.
- Brief description of the business highlighting the innovative nature of the product/service.
- Details of directors/partners.
- Ownership details of the entity.
- Pitch deck or presentation explaining the business model and the problem it solves.
- Letter of Recommendation or support from a recognized incubator/accelerator, industry association, or investor.
- Startups are required to self-certify compliance with the eligibility criteria mentioned above. This self-certification can be done online as a part of the registration process.
CONCLUSION
The Startup India program serves as a catalyst for the growth and success of startups in India. From tax benefits and simplified compliance procedures to funding opportunities, incubation support, intellectual property rights assistance, government procurement support, and international exposure, the program equips startups with the resources and opportunities needed to thrive. It is important for startup founders to recognize the implications and benefits of obtaining recognition as a startup under the program. While recognition is not mandatory, it provides an added advantage in terms of support, mentorship, and access to funding. Startups should carefully evaluate their eligibility and consider registering to leverage the resources and opportunities provided by the program.
As the program continues to evolve and address the challenges faced by startups, it is expected to further enhance the startup ecosystem, attract investments, and propel the growth of innovative ventures across various sectors. Startup founders should seize the opportunities provided by the Startup India program to propel their businesses towards sustainable growth and contribute to the country’s economic development.
This article has been written by Team YLCC. For any other queries, reach out to us at: queries.ylcc@gmail.com
