Startup India is flagship initiative of the government. The purpose of Startup India is to build a strong eco-system for nurturing innovation. It will help to drive sustainable economic growth in the country as well as to generate employment opportunities on a large scale. This initiative aims to empower Startups to grow through design and innovation. The Government of India has announced the Action Plan to meet the objectives of the initiative and to addresses all aspects of the Startup ecosystem. The purpose of the Action Plan is to accelerate the popularization of the Startup movement for handholding and simplification, for the digital and technology sector to a wide array of sectors including education, healthcare, agriculture, social sector as well as manufacturing. It is for existing tier 1 tier 2 and tier 3 cities including rural areas and semi-urban areas.
Definition of Startup:
Startup means an entity, incorporated or registered in India up to ten years from the date of its incorporation or registration. The turnover of the entity shall not exceed Rs. 100 Crores for any of the financial years since incorporation or registration. The startup is working towards development, innovation or processes or improvement of products or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.
For Startups you will need • Incorporation/Registration Certificate • Director details • Proof of concept like website link or pitch deck or video (in case of an early traction or validation or start up scaling stage) respectively • Trademark and Patent details will be Optional • PAN Number
Documents not required: • Letter of Recommendations, Sanction Letters, Udyog Aadhar, Certificate of MSME, and Certificate of GST
For eligibility of tax benefits, the certification is required from the Inter-Ministerial Board for startup purpose.
Tax exemption period:
To stimulate the development of Startups in India as well as to provide them a competitive platform, the last three years’ profits of Startup initiatives shall exempt from income-tax.
Stages of Startup:
There are four stages of the life of a startup:
1. Research & Discovery:
At this stage, an entrepreneur tries to analyze the problem which they are focusing on. This stage typically involves a lot of reading, research, and discussion about the market conditions as well as anticipated demand that their solution could meet.
2.Validation of Product/Market Fit:
This is the stage where an entrepreneur works out, whether they are solving a problem or not. There are many ways to do find this. Entrepreneurs generally survey people, conduct a test pilot run to find out how the things are falling in place.
3.Efficiency & Process Improvement:
In stage three when an entrepreneur is focusing on scaling his business, he thinks about process improvement and efficiency. If the business model is inadequate, then it needs a serious overhaul. It may require refining the entire business model, removal of the extra practices, and adding more value for the customer by cutting costs or providing better services. This state inculcates introspection and enhancement to set a strong foundation for the business.
4. Scale/Growth:
In this final stage of the startup life, entrepreneurs find a suitable product-market fit, which works. Its time to move into the top gear and drive growth quickly, efficiently, and smartly.
Funding of Startup:
There are 5 phases of investment in startup:
Self-Funding: The first phase of the investment in startup is Self-funding. In this stage , founder invests his or her money to begin the startup journey. Some people also reach out to their friends and family members and ask them to put some money to back their ideas.
Seed Funding: The seed stage of investing is the second phase of raising funds besides capital. The funds in this round are sourced from professional, or semi-professional Angel Investors.
Growth/Early Stage: Early-Stage Investing is the first round into venture capital funding. Usually, this is referred to as series funding. It is generally sought after the company starts generating revenue, irrespective of the amount of profit.
Expansion: In this stage, the service or product has successfully penetrated the market. More funding is required by the company to scale up and increase the market share to support the development of assets and internal capabilities, necessary for strong sales growth.
Mezzanine: This round is the final stage before going public. At this point, the company may have several hundred employees and may be operating in more than one country. The company starts involving the investment banks and build the final bridge for an IPO (Initial Public Offering).
In the world, India has emerged as the fastest-growing startup ecosystem. The total number of startups presently in the country has crossed the 22000 plus mark.
Ramesh M. Hingu
AGM & Director, SBILD Aurangabad.
