The largest startup conference for entrepreneurs was concluded by PM Narendra Modi with his action plan that included new policies and initiatives that would make it easier for the investors and startup founders to incubate their ventures in the country. Various startup founders who had expressed their wishes in the run up to the event are likely to find many game changers in the new policies announced in the plan. Here’s a brief synopsis of what changed in the Indian startup ecosystem.
1) A fund for Rs 10,000 crore for startups
A fund would be set up by the government with an initial corpus of Rs. 2,500 crore and a total corpus of Rs 10,000 crore over a period of four years. The fund would be managed by a board with private professionals drawn from industry bodies, academia, and successful startups. The fund would participate in the capital of SEBI registered venture funds and invest in sectors such as manufacturing, agriculture, health and education.
2) A single registration point for startups
A mobile app and a portal would launched by the government on April 1 that would enable the startups to register their company in a day. Apart from that the portal would also serve as a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the startup India Action Plan.
3) A regulatory regime that is simplified and based on self-certification
The government in order to reduce the regulatory burden for startups will allow startups to self-certify compliance on nine labour and environment laws through the startup mobile app. For a period of three years no inspection would be done in case of labour laws.
4) Filing patent applications through a fast track mechanism
Launched on a pilot basis for a year, it would be the central government that would bear the cost of patents, trademarks and designs for a startup, with an 80% rebate to encourage the creation and protection of its intellectual property.
5) Startups would have a credit guarantee fund
There would be a credit guarantee mechanism to help startups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI that has an annual corpus of Rs. 500 crore for the next four years.
6) Tax exemption for three years along with capital gains
Startups would be exempted from income-tax to help them facilitate growth and retain capital. The exemption would be available subject to non-distribution of dividend by the startup. In order to augment the funds available to various VCs and alternative investment funds, the capital gains invested in SEBI registered ventire funds will be exempt from tax.
7) A startup India Hub for collaboration
The startup India hub would serve as a single point of contact for ecosystem players and would function in a hub and spoke model with central and state governments, Indian and Foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions. The hub would assist startups in obtaining financing, and organize mentorship programs in order to encourage knowledge exchange.
8) Public procurement through relaxed norms
The startups would be exempted by the Central Government, State Government and PSUs in the manufacturing sector from the criteria of “prior experience/turnover” as long as they have their own manufacturing facility in India as well as the requisite capabilities and are able to fulfil the project requirements.
9) Exits made faster for startups
Startups can be wound up within a period of 90 days from the making of the application for winding up on a fast track basis, as per the recently tabled Insolvency and Bankruptcy Bill 2015 that has provisions for voluntary closure of business. The process would respect the concept of limited liability.
10) Atal innovation mission that would encourage entrepreneurship and innovation
In order to promote entrepreneurship, provide pre-incubation training and a seed fund for high growth startups, The Atal Innovation Mission would establish sector specific incubators and 500 tinkering labs. Also three innovation awards would be given per state and union territory, along with three national awards and a Grand Innovation Challenge Award for finding ultra-low cost solutions for India.
11) Innovation focused programs for students
An innovation core program targeted at school kids aims to source 10 lakh innovations from five lakh schools out of which the best 100 will be shortlisted and showcased at the Annual Festival of Innovations to be held in Rashtrapati Bhavan. Institution of a Grand Challenge program called NIDHI (National Initiative for Developing and Harnessing Innovations) through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student innovations. A joint MHRD-DST scheme Uchhattar Avishkar Yojana has earmarked Rs 250 crore annually in order to foster “very high quality” research amongst IIT students.
12) An annual incubator grand challenge
Ten incubators would be identified and selected by the government based on the pre-defined Key Performance Indicators (KPIs) as having the potential to become world class and would be given Rs. 10 crore each to ramp up their infrastructure.