A Look Back At How Startup India Has Eased The Journey Of Startup And Investors

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It’s been two years since the fateful 2016 budget which recognised “Startups” as a separate breed of companies unto themselves, demanding bespoke treatment from the government and authorities. The clarity brought forth helped quell the nerves of both companies and investors, who had to otherwise resort to exotic exercises, supplementary structures, and platoons of professionals to keep their entrepreneurial dreams alive.

As we all await with bated breath for the slew of reforms expected of the Finance Minister, it behoves us to see how far we’ve come and how much further we need to proceed so that a billion dreams may become a reality.

This article is the first part of a two-part series which explores how Startup India has eased the friction in the Startup ecosystem so far, from an investor’s perspective with the second part talking about the next step of reforms which would have a multiplier effect on the ecosystem.

Flywheel of Funding

More often than not, any coverage about fundraising covers the journey of startups and entrepreneurs and the travails of raising their multimillion dollar rounds. But there exists another dimension to this story, that of fund managers raising their own funds. A large section of the investor community was elated that the government recognised this oft-ignored story and created the Rs 10,000 Cr (USD 1.5 billion) Fund of Funds managed by SIDBI which invests into SEBI registered AIFs and Venture Capital Funds.

This approach seeks to galvanise an ecosystem through a flywheel effect, instead of gardening it via direct intervention. The 10,000 Cr corpus can help seed AIFs worth Rs 60,000 Cr in India, which when fully deployed, is estimated to foment 18 lakh jobs and fund thousands of Indian startups. By contributing a maximum of 20% of the corpus of a fund, many fund managers can hasten they fundraise and concentrate more on helping their portfolio companies raise, instead of competing with them.

The Fund of Funds has invested into 88 AIFs so far, thus galvanising more than 5,600 Cr (USD 873 million) worth of investments into 472 Startups.

Bringing back tax breaks, not a back-breaking Tax

The Government’s support of Indian investors found its way into the Income Tax Act, with several measures to incentivise investments into the Indian Startup ecosystem, such as:

  • Insertion of Section 54 EE, which exempts Long-Term Capital Gains up to Rs 50 lakhs provided it has been invested in the units of a SEBI registered AIF
  • Insertion of section 54GB, which exempts Long-Term Capital Gains of up to Rs 50 lakhs provided it been invested into the shares of a Startup which qualifies for section 80IAC
  • Clarifying that the conversion of debentures or preference shares to equity shares will not be considered as a transfer and thus subject to capital gains at the point of conversion (the entire Venture Capital industry is based on convertible debentures and preference shares and this move has settled long-standing disputes regarding the instruments of investments)
  • Issuing a notification that the dreaded angel tax will not apply to shares issued at a premium to domestic investors by those startups who qualify under the DIPP scheme (although the scope of this needs to be extended to rid the spectre of angel tax that haunts various investors and entrepreneurs)
  • Clarifying that the stance of the assessee in categorising the sale of listed securities held for more than 1 year as Capital Gains or Income from Business can’t be questioned by the taxman
  • Changing the definition of a capital asset to include any securities held by a Foreign Portfolio Investor, thus removing the friction arising from asset classification (a similar provision is sorely needed for domestic hedge funds and Category III AIFs)

Capital without Borders

The Startup India scheme over the past few years has rolled out the red carpet to foreign investors while rolling back the red tape. The success of this is evidenced by the percentage of funding foreign capital represents in the Indian startup ecosystem, which is 9 times higher than domestic capital investment.

Some of the initiatives include:

  • Liberalising Foreign Direct Investment into most sectors including financial services, single brand retail, pharma, media and a host of other sectors up to 100% in most areas
  • Abolishment of the Foreign Investment Promotion Board
  • Relaxation of External Commercial Borrowings (ECBs) for Startups for up to USD 3 million
  • Allowing for issue of shares for non-cash consideration to non-residents under the automatic route
  • Marshalling foreign investment into Indian entities primarily for the purpose of investing in other Indian entities has been brought under the automatic route as opposed to the previous government approval route
  • Dismantling the approval mechanism for the transfer of securities by a Foreign Venture Capital fund to an Indian resident
  • Moving most of the filings (FCGPR, FCTRS, etc) to an online window managed by the RBI (ebiz.gov.in)

Well begun is half done

The government’s efforts to improve life for Startups in investors have begun to bear fruit in tangible ways as evidenced by the reduction in the number of companies seeking to have a Delaware entity with Indian operations. The recent leapfrog in the “Ease of Business” rankings also stands testament to this.

The Government must now seek to consolidate all these gains and clarify its stance and the stance of the tax department on long pending issues which have been a bane to all startups. While we have miles to go before we sleep, we must look back and take note of what we’ve achieved before we seek to scale greater heights.

This post has been authored by Siddarth Pai of 3one4 Capital

Build On IndiaStack – Venture Pitch Competition

Announcing ‘Venture Pitch Competition: #BuildOnIndiaStack’

Dalberg and iSPIRT invite applications from early-stage ventures that are tech-
based solutions leveraging the India Stack platform at the core of their business
model to bring financial or transactional services to the underserved in India.
Pitch to some of the leading investors and thinkers in the Indian start-up ecosystem,
including the Bharat Innovations Fund, Omidyar Network and Unitus Seed Fund.
Winners will spend an hour of 'Think Time' – a mentorship session with
technology evangelist Nandan Nilekani.

Who are we looking for?

We are open to all innovations that use the India Stack to unlock new business
models or reach previously underserved new customer segments across sectors
such as financial services, education, healthcare and others. Some core focus areas
for the competition may include digital lending and supporting activities, such as
alternative credit scoring; sector specific affordable digital finance services such as
health insurance or education loans; sector specific digital services such as skilling
and certification, property registration agreements, patient-centric healthcare
management; and SaaS platforms “as a service” that support the development of
other India Stack based innovations such as Digi-locker or e-sign providers.

 

Who is eligible?
All applicants should:
1. Meet the 3-point criteria: tech enabled, leveraging India Stack Platform and
serving the underservedBe

2. Be a part of two (minimum) to four (maximum) members team including the
founder of the companyBe early stage start-ups that have received only seed (or limited angel)

3. Be early stage start-ups that have received only seed (or limited angel)
funding, if at all

 
What is in it for you?
The investor group, comprising of Bharat Innovations Fund, Omidyar Network and
Unitus Seed Fund, is a network of investors and operators, entrepreneurs and
technologists, designers and engineers, academicians and policy makers, with the
singular mission to solve some of India’s toughest problems.

Through this event you have an opportunity to receive:

-Exclusive focus on tech innovations that leverage the India Stack platform
and have the potential to address the underservedFlexible

-Flexible, insight driven, funding of up to Rs. 8 lakhs for early stage, innovative
modelsStrategic

-Strategic business support, through their specialists to support investees in
their strategy and growthA chance to be a part of the India Stack ecosystem through partnerships,

-A chance to be a part of the India Stack ecosystem through partnerships,
pilots, workshops, conferences and network building exercises

Visit www.buildonindiastack.in and send your pitch now.

Innofest to Innonation

Evolving from a festival of innovation to a platform helping innovators to succeed…

Over the past 3 years, while volunteering for Innofest – the platform for hardware entrepreneurs – I realized two things:

  • Doing a hardware product in India is much tougher ….
  • … but there are several resources available across the country that can make it easier for hardware companies to succeed

What was needed is a way to connect those who need the assistance and advice to those who can help and are willing to help.

The goal of this group of 10-12 individuals who selflessly give their time in organising various initiatives and events under the Innofest umbrella is to make it easier for first-time entrepreneurs and to assist them in their journey. We deliberately chose to focus on startups and individuals who were using hardware and technology to solve meaningful problems. Because that is the most underserved section of the entrepreneurial eco-system.

The initial 2 years were invested in reaching out to hardware entrepreneurs and enablers who can assist them – maker spaces, companies, mentors, investors, etc., and bringing them together to interact with each other. As with many other sectors, in hardware led innovation too, resources were concentrated in 3-4 cities, while innovators were spread across the country. These innovators usually worked on their own, often spending time and energy and money on aspects that had already been solved by someone else. Getting together problem solvers and innovation enablers was a critical first step. And the community responded enthusiastically. Over 1800 innovators turned up at the inaugural in Bangalore. Since then we have taken the initiative to Hyderabad, Jaipur, Nagpur and other cities. In fact, Prathibha Sastry, the key volunteer driving Innofest took two ‘yatras’ – once driving from Bangalore to Delhi and once Bangalore to Assam – to find innovators in small towns and tier 2 cities across India.

What she unearthed was awe-inspiring – folks who were solving local problems with their frugal innovations. However, many of these enterprising folks did not consider themselves as entrepreneurs. For them, they were just using their ingenuity and creativity in addressing a problem that they or someone in their family or community faced. They were solving for Bharat. And that we feel is the real opportunity. To encourage these inspired, enterprising and creative problem solvers to get their innovations to solve problems at a much larger scale than they have currently envisaged. To help spread their innovations to places that can benefit from these innovations. I.e. find innovators and help them in their entrepreneurial journey.

To do that, it was important that we shift gears. And at Innofest, we have.

We now have extended the goals to not just curate and connect innovators and enablers, but to also undertake programs and initiatives that will increase the chances of success of these innovations. These include providing better access to resources like maker spaces, working with large corporates in helping drive their innovation programs, creating better access to capital and markets, creating a pool of mentors, etc.

Indeed, from being a festival or celebration of innovation, Innofest is now a platform for innovators to succeed in solving problems and making our country a better place. And hence, we have also taken the bold step to change our name from Innofest to Innonation, which means using innovation to improve the nation.

Whether you are an innovator, or want to volunteer, or a company that wants to support innovation or a co-working space or maker space, do connect with us at Innonation. We need a lot more people in making this volunteer-driven platform successful.

To get a ringside view of the innovation happening across India, join us at the flagship event in Bangalore on 26th August. If you are into solving a problem for Bharat, check the agenda to see what workshops and events are most relevant for you.

See you at Innonation. The country needs you to be there.

Prajakt Raut

Founder –  Applyifi

 

 

On Organizations and Lessons from the Industrial Revolution

The Industrial Revolution was possible because organizations could be built and managed effectively. Today too, problem #1 in business is creating the organization in the right way.

changing landscape, in the 19th century (photo credit: thomasgenweb.com)

The first time I saw this chart below, a light bulb went off in my head.

It shows the world’s average GDP per capita over the past thousand years. It is basically represents an average human’s economic productivity over time. Note: this is on a log scale.

source: http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html

I mainly want to talk about the last couple of hundred years in this chart, but let’s get a couple of things out of the way upfront. Firstly, the GDP estimates go back a million years, but most of human history is rather uneventful from an economic perspective. Secondly, the dip around 1300 AD is due to the “Black Death” plague that killed nearly a third of the world’s population, most devastatingly in Europe.

After the plague, productivity recovered with the population, and started improving as we kept getting a little better at what we did. But what made the line shoot up so drastically in the 19th century?

The Industrial Revolution happened.

Firstly, technology.

There were newer, more sophisticated machines that made large scale manufacturing possible, and there was power available to run these machines.

The textile industry is everyone’s favorite example. Historically, production of cloth used to be largely a domestic enterprise and sometimes a cottage industry. Farmers’ wives would spin the cotton at home, and the men would then weave it into cloth. It would take four to eight spinners to supply one handloom weaver. Enter the Industrial Revolution: at the time the textile industry was inventing the Flying Shuttle and the Power Loom, the steam engine was also being invented. And very quickly, the two came together to enable large factories where steam-powered machines would do the work of hundreds of people.

Secondly, people formed organizations.

The most important part (in my mind) of the Industrial Revolution was the rise of the business organization and of management as a function.

While the initial spurts of technological advancement led to the creation of many businesses, they were still run by one or a few owners or partners trying to do everything, and that could not scale. You could draw an analogy with startups today, but it wouldn’t be accurate as we do have access to management tools. Back then, it just didn’t exist. The railroad companies spearheaded the science and practice of management, being one of the largest organizations and requiring large numbers of people across different aspects of the entire operation to act as one unit. They realized they could organize into departments and appoint managers who planned tasks and supervised the workers that carried out those tasks.

Organizations of an unprecedented size and scale could exist because of this, kicking off many self-fueling virtuous cycles, and not just enabling co-ordination across a large enterprise but also dramatically improving processes and workforce utilization. This is what made the right side of the chart possible.

While it seems like a blip in history, this took time: nearly two hundred years. It completely elevated what we as a species are capable of, but also came at a great societal cost (large scale unemployment and severe exploitation of those that were employed).

And it hasn’t ended: that line is only going up (and perhaps with different kinds of costs).


Now, based on all this, I’m going to posit:

Now, based on all this, I’m going to posit:

The key to all progress lies in creating scalable organizations.

Misallocating Entrepreneurship

There is an interesting example that elucidates this point. This article — India is a much more Entrepreneurial Society than the United States (and that’s a problem) — talks about the problems when a society cannot scale its organizations:

India is a much more entrepreneurial society than the United States. That may seem surprising since India is poor and we typically associate entrepreneurship with being rich but it’s clearly true. Only ~15% of Indians work for a firm compared to approximately 90% of US workers.

It digs into why it can be a problem.

Entrepreneurship in India isn’t a choice, it’s a requirement. Indian entrepreneurship is a consequence of India’s failed economy. The problem with developing countries is not that they lack entrepreneurs but that entrepreneurs cannot grow their firms large enough to become major employers.

Entrepreneurship, like other factors of production, can be misallocated. India has great entrepreneurs but their hard work, creativity, and risk taking is being wasted building tiny, stunted firms.

Entrepreneurship, like other factors of production, can be misallocated.

But our culture is becoming more individualistic, in all aspects of society. In business, everyone wants to be the entrepreneur, and is looking for “non-entrepreneurs” to recruit to their cause. And it has never been easier to start a company — limited liability and easy access to capital, distribution and technology have made sure of that.

Perhaps the optimal size of the firm will change in response to these forces, but I don’t see evidence of that yet — quite the opposite, if anything. Perhaps this chart above will sober up for a bit, or perhaps technology (general AI?) will render people irrelevant in the scheme of things. Until then, building high-functioning, scalable organizations that fit into the cultural mood will have to be the foremost problem company-builders need to solve.

(Huge thanks to Michael Dearing for showing me this chart for the first time, and opening up the first principles of management for me. I highly recommend his General Management course.)

Diversity with Collaboration Unlocks Innovation and Drives Business Growth

“Diversity is an intellect multiplier, especially when the diverse groups can collaborate well” – Mark Sareff

This year the International Women’s day was a different experience for me, no panels stating gender diversity facts most people are painfully aware of. Instead I had the proud privilege of being invited to do a fireside chat and explore new dimensions of diversity and its impact on innovation and business growth.

We are familiar with dimensions of diversity we are born with — gender, age, race etc. but less familiar with the dimensions we acquire in our lifetime — culture, life experiences, domains worked in, education background etc. These interesting dimensions set your thinking patterns, beliefs and problem-solving approaches.

Diversity is an intellect multiplier but, only when diverse groups can collaborate. We need a common language that helps diverse groups come together and collaborate. We need an inclusive environment that fosters diverse perspectives without judgment… here’s where design thinking comes in!

Design thinking in its application celebrates diversity, when done well allows you to go broad try many, diverse approaches before narrowing down to one solution. It can also change how people work together for the better, introducing a deeper level of collaboration, appreciation of diversity and creativity.

Sharing a few key tools to help you create an inclusive environment that fosters diverse perspectives and hence innovative solutions:

1.   Don’t brainstorm; think Independently, together While we are not against brainstorming, we believe brainstorming can lead to HiPPO decisions (Highest Paid Person’s Opinion) and can exclude out-of-the-box thinking because the facilitator or the group naturally judges all ideas being generated. Instead have everyone think independently and write down their ideas individually and review every single idea. Similar ideas get grouped together, no idea gets left behind or judged right away. Instead we build on existing ideas to make them more diverse and disruptive. It is a powerful process that celebrates diversity and creates an inclusive environment for disruptive ideas to form and persist.

2.   Narrow ideas using clear criteria – The 2×2 tool is a narrowing tool, allows you to choose ideas that the team will filter down to. The team identifies 2 key criteria to narrow ideas (ideally, customer benefits) that would make massive impact on the business. Ideas are then plotted against those dimensions relative to the benefits it brings to the organization versus making Caesar-like decisions. Again allowing diverse teams and ideas to collaborate well hence leading to innovation and business growth.

3.   Facilitating large group dialogues – The World Café is a structured tool intended to facilitate collaboration, initially in small groups and then linking ideas within a larger group to access the collaborative and collective wisdom in the group. Each person interprets the world differently, based on his/her perception. Sharing the viewpoints of others is essential for understanding alternatives and adapting strategies to deal with environments. Environments that recognize the contribution of all will foster a strong commitment to achieve common goals.

Diversity offers different experiences and novel perspectives, leading to better decision making and problem solving. It opens up new conversations pushing the boundaries on unrestrained thinking which enables breakthrough innovations.

At Pensaar, one of the things we celebrate is the differences we all bring to the table. Each of us comes with unique experiences having worked in varied industries and lived very different lives. It allows us to recognize each other’s strengths and learn from each other while also being sympathetic to each other’s weaknesses. Our different experiences and perspectives help us foster innovation to beat and not just meet the needs of our increasingly diverse customer base.

So much has already been written about this amazing topic, go here to read more:

·   To Make Diversity Work You Need Design Thinking

·   HBR’s How Diversity Can Drive Innovation

·   10 Companies Around the World That Are Embracing Diversity in a BIG Way

·   Why diversity matters

 

Dear founder, have you got your contracts right?

Most probably a bad contract is at the heart of the Stayzilla (SZ) and Jigsaw Advertising (Jigsaw) dispute that’s a hot topic of discussion for the members of India’s fast growing startup ecosystem. Jigsaw supplied advertising related services, SZ did not pay. SZ announced intention to “reboot” and Jigsaw used its might to register cheating case against SZ. Cheating is a criminal offence as opposed to a payment dispute that routinely falls under civil law. I have raised several ethical dilemmas in this situation in my last post. Here I wish to focus on contracts and enforcing contracts.

Indeed “enforcing contracts” in India is an uphill fruitless endeavor. In the 2017 World Bank report on “Ease of Doing Business”, India ranks 172 out of 191 countries on “enforcing contracts”. A quick comparison with China (a frequent object of our obsession) on “enforcing contracts”, put things in stark contrast.

Dispute resolution time: India (47.3 months) vs. China (13.5 months)

Dispute resolution cost: India (40% of claim amt.) vs. China (15% of claim amt.) – though the amount varies by states in India

Quality of judicial processes index: India (9) vs. China (14.5) – higher number is better

Evidently, we are far from the frontier on this measure of doing business. India also ranks such low on other important measures like (number in bracket is India’s rank out of 191 countries reported) – paying taxes (172), trading across borders (143), and resolving insolvency (136).

Small startups in the initial stage of testing market to entering growth phase have little wherewithal to divert precious little resources to fight legal cases that proceed at snail’s pace and hog bulk of managerial and financial resources of a startup. While overhauling the justice delivery system is very long term project, the minimum startups can do is to create and govern contracts in a more deterministic manner.

Common problems with contracts

A mistake in a contract can undermine its legality and affect your ability to enforce it. The party more adversely affected by the mistake would almost always seek to repeal or cancel the contract. Overall, a problematic contract results in poor outcomes like – business delays and waste of resources.

Relying on an oral contract

Promises are part of the business life. But promises can be easily broken, such is the human nature. You put in superhuman effort to build your business so you would want to be assured that your business is protected against failed promises of your co-founders, employees, suppliers and partners. Only a written contract is enforceable under law. Writing a contract also forces you to think through issues that would instinctively not come to your mind.

Another side effect of not having a contract is the risk of losing whatever IP your company possess. Probably only valuable thing startup has in early stage is some form of IP. Consider the scenario – a few part-time founders without any written contract are burning mid-night oil to get a product on the market. Soon one of the founder changes mind about entrepreneurship or gets interested in some other idea. He or she decides to walk away – without assigning the rights to his work. You are stuck without the IP and literally without your company. I have seen this happen a few times and those startups just shut shop without even going to market. Without a contract, there is no negotiating ground or legal recourse.

Not capturing the negotiated terms in final contract

Negotiation is usually an iterative process with multiple revised proposals and discussions. So, when the final contract is in sight three things happen: One, even if there is lack of clarity on some point, that is allowed to linger hoping it will somehow go away. Two, in case of a missing term or incorrect data in last proposal, it is not corrected or rewritten and signed with the contract. Three, even when somethings are orally agreed they do find a place in final written contract. These “minor” indiscretions cause major pain when a contract dispute goes before a judge. One it is almost impossible to prove oral agreements in absence of concrete evidence. Two, in case of an essential missing term, the judge is likely to impose some “reasonable” terms that might be far from what one party had envisaged in the original contract.

Unclear contracts: contracts that do not spell out clearly –

what constitutes performance failure or a breach of contract?

what are the ways to terminate the contract for both the parties?

what will be the dispute resolution mechanisms (before you decide to file a legal suit)?

what happens if a startup is taken over or gets merged with another. Do the contracts get assigned to the new entity?

Creating a legal enforceable contract

What is a contract:

a contract is an agreement between at least two parties, each of which promises to do or not to do something.  Contracts can take the form of either written agreements or oral contracts, although some types of contracts must be in writing to be legally enforceable.  Additionally, parties often have trouble proving aspects of oral contracts, which makes them difficult to enforce. 

What a contract is NOT:
A handshake or verbal deal, non-binding Letter of Intent (LOI), non-binding Memorandum of Agreement (MOA) or Memorandum of Understanding (MOU), Terms and Conditions on the back of invoices without reference / incorporation, RFP’s or RFQ’s, Proposals, Schedules or Orders with no terms and conditions.

What is a basic enforceable contract:

At the most basic level, a contract requires a seller to make an offer to a buyer, acceptance of the terms by the seller, and consideration where each party gives up something of value. E.g., a seller usually gives up a good or a service and in return, a buyer usually gives up money. In addition to these elements, courts will also look at several other considerations when determining the enforceability of contracts, for example, mutual assent, capacity and consent and legality.

Mutual assent: Often called the “meeting of the minds,” mutual assent requires that both parties understand what the contract covers. The goods and / or services being contracted must be described unambiguously so there can be only one understanding in the minds of the two contracting parties.

Capacity and consent: Capacity requires that the parties in the contract be legally capable and competent enough to enter into the agreement.  For example, a mentally disabled individual cannot contract, and while minors can agree to a contract, in most cases they can void the contract before reaching the majority age. Consent means that both parties entered the contract freely and without duress or undue influence.

Legality: To be enforceable, a contract must cover legal activities and not violate public policy.  In other words, two parties cannot form a contract requiring one party to complete an illegal act nor can either party recover damages for breach of such a contract.

Other basic clauses in a contract:

Price, quantity, and delivery date

Payment terms, interest, and penalties for late payments

Warranties, remedies for defects, and returns

Indemnification, liability, and disclaimers

Lead-times and changes in orders

Governing law

Waivers

Know the Indian Contract Act of 1872

This act governs the enforcement of contracts in India.  If either party fails to perform their part of the contract, these laws provide the basis for enforcing contracts and providing damages to wronged parties. The act was passed by British Indian government in 1872. This law is based on British common law. It determines the circumstances in which promises made by the parties to a contract shall be legally binding and the enforcement of these rights and duties.

Or Consult a lawyer

If you are not well versed with the legal issues, drafting your business contract can be risky leading to much grief later. For most tech founders, law is like Greek and Latin – difficult to learn or understand. The law is made of multiple statues enacted by the legislature and is layered by the “case law” developed by the judicial system. It is complex. Therefore, it makes sense to get a lawyer to create legally enforceable templates for the different types of contracts.

Startups – new problems of governance and ethics

On March 14,2017, Chennai police arrested an Indian startup founder and CEO on charges of defrauding a supplier of Rs.17.2 million. The available information revealed that the startup had not paid one of its suppliers for its advertising services for over 1-1/2 years. When the startup announced plans to shut down (CEO called it “rebooting”), the supplier filed a “criminal complaint” against the founder CEO as well as co-founder with Chennai Police. The police was still on the look out for the co-founder who appeared to have gone underground.

The news of arrest fueled by electronic media news and blogs spread like wildfire in the startup ecosystem. Most of the opinion and claims based on half-truths, blamed the supplier for the overkill. It was believed that supplier used its political and police connections to escalate the dispute from “civil” to “criminal” in nature thereby resulting in the immediate arrest of the startup CEO. The doubts were also raised on the legality of the arrest process in view of the person arrested being CEO of a “limited liability” business. The supplier’s camp had pointed out the startup was well funded having raised its “C” round of $13.5 million only in May 2016. It was believed the startup had money but was not paying its dues – amounting to intention to cheat.

More than a hundred Indian startup CEOs across India, including the biggest startup poster boys and unicorns petitioned India’s Home Minister. They submitted a jointly signed statement pointing to the impact of such arrests and asking for fair and speedy trial. They specially talked about the dampening effect on the morale of majority of startups who anyway operated in a “not very conducive” business environment – almost bordering on being hostile. A website (help-yogi.com) was setup where the well-wishers can show some love for the CEO.

Meanwhile, the arrested CEO had been twice denied bail while his co-founder is still missing. It appeared a long haul for the CEO as the law in India took its own sweet time to dispense justice, if at all. Meanwhile a few questions arise that we must find good answers to.

One, what was wrong with the startup actions if any? There was no documentary evidence suggesting the startup disputed payment because of any performance deficiency on part of supplier. The startup CEO had only three weeks before acknowledged availability of funds and his intention to use it in new avatar after current operations were shut down (referred to as “rebooting”). Were investor VCs aware of the problem (thru their periodic reviews) and advised the CEO on it? Do VCs have a role at all in guiding the investee on corporate governance or business ethics?

Two, was the police action beyond reproach? What guided them to register a “criminal case” where most of the times payment disputes fall under “civil law”. Was there undue influence on police to take such action?

Three, were supplier’s actions proper? Was it fair to use the contacts in government machinery (as alleged) to escalate the matter and get the CEO arrested? What can frustrated small suppliers do when payments are not made to them in time as agreed or are delayed forever? Does the lax justice delivery system in India justify supplier’s unconstitutional actions – like using local politician to mediate or indulge in laughable activity of sending across voodoo dolls (as alleged)?

Finally how can we create a better business environment within the startup ecosystem despite the business and legal environment that we know exists in India? Some suggestions have been made recently such as – a credit rating agency for startups, mandatory external supervisory boards for every startup (of certain size? Only the funded ones?) and more transparency and standardization in startup operations (employment conditions, shutting down ops, sexual harassment at workplace etc.)

If you have still not got it, the situation mentioned in this blog relates to Stayzilla and Jigsaw Advertising.

Inadequate liquidity for Indian Startups

Recently was having a conversation with a Private Equity friend and was trying to explain the challenge that has captured my imagination and full attention, ie exits for software product startups in India. He felt that the data about the exit structural deficit that I was trying to point out felt too bearish to be true. My counter argument was that my intent is not to sound bearish but instead be a realist, after all acknowledgement of a problem is first step to solving one.  Post that conversation I thought should put this data out publicly so that through crowdsourcing can at the very least improve my understanding if it is off by wide margins.

2012-2016 VC vs M&A

India VC vs Exits 

India VC vs M&A


India Software Products VC  (in $m)

2012 2013 2014 2015 2016*
$801.00 $1,021.00 $4,883.00 $6,526.00 $2,419.00 $15,650.00
147 123 173 330 223 996

India Software Product M&A  (in $m)

2012 2013 2014 2015 2016*
$205.00 $308.00 $799.00 $1,350.00 $1,339.00 $4,001.00
43 39 59 137 113 391

Source iSPIRT M&A Report https://www.slideshare.net/ProductNation/india-technology-product-ma-industry-monitor-an-ispirt-signalhill-report?ref=http://startupbridgeindia.com/

Israel VC vs Exits 


Israel Software Product VC  (in $m)

2012 2013 2014 2015 2016*
$1,878.00 $2,404.00 $3,422.00 $4,307.00 $4,775.00 $16,786.00
567 667 684 706 659 3283

Israel Software Product M&A (in $m)

2012 2013 2014 2015 2016*
$8,149.00 $3,704.00 $4,493.00 $6,462.00 $6,782.00 $29,590.00
74 81 109 98 86 448

Source IVC Report, http://www.ivc-online.com/Portals/0/RC/Survey/IVC_Q4-16%20Capital%20Raising_Survey-Final.pdf

Above data indicates that Israel was able to generate 1.8X of the money that went in while in India in the same period it was 0.2X. The right comparison is exits from 2012-2016 with VC investments from 2005-2009, iSPIRT report does that comparison but results are even less encouraging.

Exits follow a power law distribution, however in India it seems like a power law’s power law.

Not only is the volume of exit a challenge but also the structure, any ecosystem exits follow a typical power law. For every $1 bn exit, there are ten $100m deal, for every $100m there are hundred $10m deals.

Top 7 deals in India account for ~$2.5b of the $4b in exit. About 250 of 391 deals total a deal volume of $97m which means the size of an acqui hire i.e in long tail is about 0.5m, which is inadequate even for an angel investor (in other ecosystem long tail is >$10 m, hence being referred to as power’s law power law). Lack of many $10-100m deal means there is a missing middle of the long tail.

Source iSPIRT M&A Report https://www.slideshare.net/ProductNation/india-technology-product-ma-industry-monitor-an-ispirt-signalhill-report?ref=http://startupbridgeindia.com/

Anything in the data above that does not feel kosher  ?

 

iSPIRT M&A Connect program takes a multiyear view to design interventions that can address the middle and long tail of the market coordination challenge.

Innofest Nagpur, March 2017

TiE Nagpur and iSPIRT – two iconic initiatives, committed to building a great startup ecosystem for startups in India, came together to create magic at the Nagpur Innofest on the 5th of March 2017. Innofest is a platform where innovators can connect with enablers, experts, mentors to build, create, connect, improvise & explore. It’s a movement on ‘Innovation’ in India.

The first Innofest of 2017 was held at Nagpur, with over 150 slated to attend the event. However, the organisers were pleasantly surprised to cater to over 250 people that eventually attended the event. The keynote addresses were made by Sharad Sharma, Co-Founder iSPIRT and Nagaprakasham, who is an investor. There were multiple workshops during the entire day.

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Over 10 interesting hardware products were showcased at the event. Right from a 3D printing machine, collision-detecting devices, IoT based tracking devices, ultrasonic sensors, drone technology to the very unique e-funnel.

Nagaprakasham talked about the trend of creating copycat technologies and emphasized how innovation must ensure that newer technologies are able to touch more and more Indian lives. India’s strength lies in its humongous manpower, ample farmers, cheap labour and last but not the least, its vast natural beauty. And they all must be leveraged for innovation.

Subinder Khurana, held a session on Product innovation, where he talked about the essential ingredients of innovation. He pointed out that every venture must have a story of its own that is inspiring enough for not only the customers, but also family, friends, investors and other collateral stakeholders.

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On the concept of disruption, he clarified that breaking something is easy, but it must be done creatively. Has some new technology being leveraged? Is there a good story around it? Is some equilibrium being challenged, which will add value to the customers?

Sharad Sharma spoke about IndiaStack and why it will be a critical step in helping creating new innovations for Bharath, he also explained about the building blocks as part of IndiaStack which include Aadhaar. He also spoke about how SAAS will be for India as Cyber Security is for Israel. He spoke so passionately that later during an audience interaction, Shashikant Choudhary, TiE Nagpur President felt that the entire stage was shaking and the podium would fall off. We had Radhesh Kanumury, Country Lead, Global Entrepreneur Program, IBM India Ltd having a fire side chat with Prajakt Raut. Radhesh spoke on the various technology trends giving good insights about them along with examples of innovative Startups working on those areas.

Another session, led by Prajakt Raut was on creating Business Plans. According to him b-plans are critical indicators of the real status of the business as it gives us a framework for assessing the business. The plans give us early warning signals of something that is not going right. It is important for every Founder to know the answers to these questions: What problem or opportunity are we addressing? (The market/ target audience). How are we addressing it?

How are we planning to do it? (Organisations & operations planning) what skills are required? (What are the competencies that are required to handle the business). Why are you doing it?

We also held the iKen Workshop which was facilitated by Rakesh Debur and Kavita Arora of Bangalore Makerspaces joined us to mentor the innovators. This entire activity was possible because of the support of TiE Nagpur and the people of Nagpur who joined us on a Sunday.

Some of the innovations showcased…

Traxafe is an advanced, tiny IOT based tracking device for kids, elders and cars. It’s based on GPS, GSM and BEACON technology connected with a user-friendly app to keep track of your loved ones.

E-Funnel is an electronic fluid gauging device. It measures any quantum of fluid flowing through it. All the information information of every fluid filling can be accessed through a mobile app or through our website on your desktop. It will be available for different variants of diesel generators, trucks and buses.

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ISCREAM is a device which can perform numerous operations from detecting vehicle

collision to analysing the vehicle analytics.i-Scream is assisted with our IoT-based crash sensor and emergency response software which helps us to both keep a track on you and make you feel safe at the same time.

 

 

 

 

 

 

 

 

 

 

How Indian millennials live, work and play

“Normal is not something to aspire to; it is something to get away from”

In today’s age, almost all of you would have heard about the generation of millennials. Most of the people tend to identify them based on their years of birth, but frankly speaking it is their lifestyle that speaks much louder. Well, are you ready to go on a short tour de reconnaissance? Let me help you in decoding and simplifying how do these people (especially in India) live, work and play. But before we delve into that trinity, it is pertinent to reflect on their background and how did they evolve.

The count of Indian millennials in total would come out to be around 0.6 billion (depending on whichever approach that you take for calculating), so the question of not taking notice goes out of the window! There are a lot of factors (both internal and external) that have shaped the millennials into who they are –

They were the first ones to get personal laptops as they matured into their school days and entered college campuses

Owning personal electronic gadgets allowed them to experience and perceive the peers of other geographies via TV series like Friends, The Big Bang Theory and more.

Social networking seems to come naturally to them but in actuality, they have lived through the full spectrum starting from the basic ones like Orkut to the more mature ones like Facebook and now the downright crazy ones like Snapchat.

Living

Thanks to the low cost android smartphone boom and the perennial 3G/4G connections in the Indian urban economy, literally every one of them owns one and can’t imagine a moment without it.

This has perpetuated all parts of their daily life – from tuning the body clock to phone alarms, to booking the first cab to office, to ordering their lunches online, to casually browsing through shopping portals, to listening to music all day long, to finally ending the day with of chatting and posting.

And no surprises, that in order to save cost (primary reason), 82% of them still live in their parents’ home.

Working

Since their life is social, why should work be any different? And that is why we see almost of the organizations adopting the tools like Slack, Workspace, Skype and more.

Not only that, but most of the people are working completely on these networks alone! Their business would shut down if that social platform goes for a toss.

Another interesting fact is that they are hungry and broke a lot. And I really mean a lot. For many of the younger ones, foregoing food for a fancy purchase seems like a no-brainer affirmative. Since they have a lifestyle to portray to the society and the aspirations are pretty high, so short term urges like sleep are easily forgotten.

Playing

Since embracing the screen age, the problem of finding ‘friends’ is pretty much over. It is a different thing altogether that they may not even know the name of the person living next door.

This has also changed the spending and purchasing behavior. Around 55% of them never feel the need to own a vehicle, and in fact are counting on technology to replace the whole notion of owning a car. This goes in line with the point that earlier, young college kids (US culture) mostly bought a car in order to show off to their friends, and now those friends are mostly virtual or online.

How Indian Millennials live & spend

If you carefully observe the trends and how the age is evolving, you can see that we have now clearly entered the age of social commerce. An age where shopping and spending money is not a solitary activity (albeit in a few utility cases), but it becomes a collaborative affair. An age where peer pressure determines to a lot of extent, where we eat, drink, party, travel or live. An age where social network and payments mingle and become indistinguishable for most of the cases.

The wheels are in motion, and like we all know, the evolution cannot stop or reverse. It is bound to happen and it will be a mixture of aspects that you may come to appreciate and some that you may not.

P.S. Disclosure, I am a millennial myself, building a company in the domain of ‘Social P2P Payments’ for this generation of Indian millennials. 

Cheers, Rohit Taneja

Indian E-commerce: Moving on from GMV

It has been a nervous month for the professionals working for internet and e-commerce companies in India. Shutdowns and layoffs have been the flavour of the month, and business models have come under scrutiny. The effects of recent events at Stayzilla and Snapdeal have not been limited to job losses only. Weighed down by these developments in the sector, Rakuten, the Japanese e-tailer, has puts its India plans on the back-burner.

Stayzilla, an alternate and homestay aggregator, has shut operations. Investors including Nexus Venture Partners and Matrix Partners have invested USD 33 million across multiple rounds in the company. The founders have promised to bounce back ‘with a different business model’.

Snapdeal, announced that it will lay-off about 600 employees from the company including from its Vulcan (logistics) and Freecharge (payments) business divisions. The company has so far raised USD 1.75 billion from investors which include global heavyweights such as Softbank, Kalaari Capital, Temasek, Alibaba Group and eBay. However, Snapdeal reportedly is left with less than enough cash to survive the next 12 months. The merger talks with Paytm, facilitated by the common investor Alibaba, are not murmurs anymore and seem to be the logical next step in many ways. A very honest and important insight on the business model emerged from this episode, in which the founders admitted to ‘doing too many things’ and ‘diversifying and starting new projects while we still hadn’t perfected the first or made it profitable’.

The above incidents highlight the fact that Indian e-commerce in 2016 has been significantly different from its ‘glory days’ in 2015. GMV growth in 2016 was flat, even though long term prospects remain intact for now. The year-end sales were also impacted due to the demonetisation exercise carried out by the government. The cash on delivery (CoD) transactions, which account for approximately 50% of total GMV, were severely impacted due to the lack of availability of the new currency notes.

Figure 1: India e-tailing GMV (USD mn)

Source: Company data, IAMAI, Euromonitor, Credit Suisse

AHHHGMV, as the supreme emperor of metrics, has lost its sheen and the challengers which have come to the fore include revenue per customer (function of number of orders per year, value per order and commission), net promoter score (a measure of customer satisfaction) and overall user monetisation (including alternative sources such as advertising as well as new service offerings such as hyperlocal services).

The sustainability of business model is back in focus as a tool to evaluate potential winners and losers. Throwing money at the customers as discounts has not worked out very well for a lot of players. There has been a definite move towards trying to find other means of retaining customers. Going forward, winners are most likely to be companies that provide a differentiated customer experience. An obvious example is Amazon Prime which now brings more personalized experience to the company’s customers. Flipkart (Flipkart Assured) and Snapdeal (Snapdeal Gold) have similar offerings to enhance the stickiness of their customers. While ‘Flipkart Assured’ has seen limited success so far, Amazon Prime, launched at a very attractive price point of INR 499 per year, seems to be more suited for success going forward. Amazon has also clubbed its Netflix challenge – Prime Video offering with Amazon Prime subscription. With these offerings, the companies are trying to take focus away from discounts and towards customisation, quick delivery, consistency and reliability of shopping experience.

The control over supply side is a key element of constructing an enhanced and consistent experience for customers. Logistics is one of most prominent cost items for ecommerce firms, and depending on the category and value of the goods being delivered, could be 10% to 20% of GMV.

In India, the number of Amazon fulfilment centres has grown to 27 by the end of 2016. Shipping from stores is less efficient than from dedicated fulfilment centres. Amazon is looking to replicate their success in North America where they have invested billions in network of fulfilment centres. It has more than 75 such centres in North America, covering 25 US states. This gives Amazon an easy two-day reach over the entire US. Snapdeal has opened 6 logistics hub during 2016, with an estimated investment of USD 300 million. Paytm, flush with a USD 200 million funding from Alibaba, is reportedly firming up plans for a significant strategic investment in a logistics firm to improve its deliveries process.

The key growth drivers for e-commerce in India remain in place. There is a large aspirational population, faster and wider internet access, a never before push on digital payments and an opportunity to further penetrate the offline organised retail market. Nevertheless, the year 2016 has been a reality check. The Indian players have had to review their business models and take some tough calls to focus on sustainability. While the market may continue to be volatile in the short term, with more potential shutdowns and/or consolidation in the offing, we can now be more confident that the firms that do survive will turn profitable soon.

arvind-yadav

This is a guest post by Arvind Yadav,

Principal at Aurum Equity Partners LLP.

 

Going Digital – A simple framework

Today, everyone talks about going Digital. Renowned strategy and customer experience consulting firms have renewed themselves as Digital Transformation agency. Softskill trainers have become Digital marketing consultants. Large industrial conglomerates have become Digital industrial company by a creating a platform for Digital aficionados to develop custom apps.

New roles such as Chief Digital Office, Data scientist, Experience designer, Digital evangelist and many more. What are these roles to do with? Where should I start my Digital journey?

Here is a very simple framework!

Going Digital

Remember!

To keep up the Brand promise,always deliver

Speed (Adopt Agile & DevOps)

Accuracy & Authenticity ( Create Cognitive / Sentient Systems)

Codify ‘Trust’

Courtesy

1. Book titled ‘Disrupting Digital Business’ – Ray ‘R’ Wang
2. Book titled ‘Leading Digital’ – Didier Bonnet
3. eBook titled ‘Digitally Remastered’ – CA Technologies

Guest Post by R Ragavendra Prasath, a volunteer for iSPIRT. An avid reader, wannabe entrepreneur and Digital enthusiast…! He tweets @ragavendra1

How limited access to paid tools as a startup made me realize the need for a community

When I started out as an entrepreneur the journey was fueled by big dreams that were perhaps a bit too daring. It wasn’t smooth sailing and early days were tough. Life in a startup is dotted with challenges that can be overcome only by sacrifice.

Bootstrapping required a lot of restraint – both professionally and personally. Leaving a good-paying job at Zoho and trying to build a company meant cutting a lot of corners. We had to forgo luxuries, back out from family & vacation time, self-inflict pay cuts and moved into an apartment-turned office.  

However, the biggest gripe was lack of access to the tools and services we loved. From basic necessities like Mail or CRM solution to universally used tools like Photoshop and Invision seem like a luxury when bootstrapping. As the saying goes ‘Nothing good comes for free’. We were pushed to try and find open-source alternatives. But they were nothing but painful compromises! It hurt us a lot – we couldn’t get things done in the same timescale as we could’ve.

A lot of products, tools and services do have offers but there were none tailor-made for the struggling startups. We had to make do with the free stuff and somehow managed to get our product out! Our product attracted funding and things slowly started to change and got to a better place. However, we still remember the struggles of our startup life!

Here is a small tribute to startups and the struggles we face: 

Somewhere amidst the mad rush of shifting to our new office and redesigning our logo, I realized that it’s time I gave back to the startup community. The easiest option was to provide a free trial extension for startups but it rather made sense to initiate a change!

Every solution, product or service a startup requires is most likely what another startup is working on and if we are able to set up a mutual sharing, we can surge ahead as a single startup ecosystem!

This is the idea behind #RespectStartups, powered by Zarget, for the startup community. It is an opportunity for every startup, no matter how small, to make an impact and reach out in a big way. I personally urge every entrepreneur to look at this as an opportune moment to give back to the community.

Share your offers and claim the ones you need at www.respectstartups.com

Voice your opinions about the movement with #RespectStartups on social media.

Let’s say “No!” to startup sacrifices! Let’s march ahead as a startup ecosystem…

Guest Post by Arvind Parthiban, Co-founder & CEO of Zarget. He loves travelling, is a foodie and is crazy about football, a Chelsea fanatic. With 12 years of experience in the SaaS industry, now into startup life.

Are AI and Automation dirty words for some?

Man being replaced by machines has been a topic very well documented in our academic and social history. While, designing machines that can replicate human intelligence is ‘the dream’ for many, the idea has seen its fair share of resistance from anxious workers afraid to lose their livelihood. It would be a mistake to think that the phenomenon is only very recent. The Luddite movement, which began in Nottingham in 1811, was named after a disgruntled weaver who broke two stocking frames in a fit of rage. Destruction of machinery, as a form of protest, was carried out throughout England by groups of English textile workers and self-employed weavers. Since then, the term ‘Luddite’ has become a reference to someone opposed to industrialisation, automation, computerisation or new technologies in general.

Back to the 21st Century, Infosys’s human resources head Krishnamurthy Shankar has revealed that the company had “released” 8,000-9,000 employees in the last 12 months due to automation of lower-end jobs. The employees are not necessarily jobless and have been retrained and absorbed to carry out ‘more advanced projects’. The company also reduced its hiring in the Jan to December 2016 period to 5,700 compared to 17,000 in the first nine months of previous fiscal year. Infosys is not alone in their journey towards automation. Most Indian and global IT services companies are investing in automation of processes in their core businesses such as Application Management, Infrastructure Management and Business Process Management (BPM).

India’s IT giants are leaving no stones unturned to fill the gaps in their digital portfolio of products and services. The subjects of Internet of Things, Cloud, Artificial Intelligence and Automation figure high on each company’s organic strategy and also in their shopping list for inorganic growth (Table 1).

Table 1: Select Digital Acquisitions by Indian IT majors

Acquirer Target Value

(USD mn)

Brief
Infosys Panaya 200 Provider of automation technology for large scale enterprise software management
Wipro Healthplan Services 460 A technology and Business Process as a Service (BPaaS) provider in the U.S. Health Insurance market
Wipro Appiro 500 A services company that helps customers create next-generation Worker and Customer Experience using the latest cloud technologies
Infosys Skava 120 A provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients
Tech Mahindra The BIO Agency 52 UK-based digital transformation firm
Tech Mahindra Target Group 164 A provider of business process outsourcing and software solutions

Automation is heralding the age of Industry 4.0 which is characterised by a diminishing boundary between the cyber and physical systems. In October 2016, World Bank research announced that Automation threatens 69 % of the jobs in India, while 77% in China. Google’s AI research lab, Google Brain is working on building AI software that can build more AI software. I wouldn’t blame anyone if they started thinking about the Skynet from Terminator or the writings of James Barrat – Our Final Invention: Artificial Intelligence and the End of the Human Era.

As per research by Gartner, IT process automation (ITPA) is very underpenetrated (only 15-20%) and will move towards maturity over the next 5-10 years. Most leading vendors in the IT services space have launched an automation platform to boost delivery efficiency.

Table 2: Automation/ AI Platforms of Indian IT Players

Company Platform Offerings
Wipro Holmes An artificial-intelligence platform built on opensource computing aimed at optimising resource utilisation and reducing costs
Infosys Aikido Enables creation of intelligent robots that can resolve incident related to customer orders
TCS Ignio An Artificial intelligence-based automation platform which automates and optimizes IT processes within an organisation.
Tech Mahindra Carexa Uno Customer care, with agent virtualisation, analytics, assisted

interactions and digital channels.

HCL Technologies DryIce A digital service exchange platform enabled by ServiceNOW

Source: NASSCOM, Edelweiss

Platforms based on novel technologies will minimise the human effort required. Are the coders coding away their jobs then? Thankfully, there are learned people who believe otherwise. As per NASSCOM, the future may not be as dire. There is a distinct possibility that repetitive and labour intensive jobs such as data entry and testing may get completely automated, but there will be augmentation of cognitive jobs. New roles will emerge which will focus on training, learning and maintenance requirements of AI systems. Indian companies will also need to invest in re-training its employees or importing talent in the short term. In the long term, a joint effort with technology schools such as IITs and IISc will be needed to build a supply chain of talent. 65% of Google DeepMind’s hires were directly from academia.

The Indian IT services sector is worth approximately USD 150 billion, and it is largely export dependent. The Indian players need to enhance their digital capabilities to compete globally. Automation is a key area of this digital growth and so is the evolution of skilled workforce and their job profiles. The fear of technology destroying all the jobs is as unreasonable now as it was in the 18th century. Also, it is evident from history that technology has always led to creation of more jobs than it has destroyed.

The workforce engaged in IT services by nature is flexible and open to evolving work profiles. Workers in some other sectors may not have that option, especially at the jobs requiring less complexity. HDFC bank just announced that it has witnessed a head count reduction of 4,500 due to efficiency improvements and attritions in the last quarter alone. The Bank is planning to install up to 20 humanoids named “Íra” at its branches in the two years to assist customers. Ira has been developed by Kochi-based Asimov Robotics and the company has already received queries from airports, hospitality industry and retail chains to deploy similar humanoids. It would be a good move for all professionals in all sectors to ask themselves – “Can a Robot do my job?”, and upgrade their professional skills accordingly.

arvind-yadav

 

This is a guest post by Arvind Yadav,

Principal at Aurum Equity Partners LLP.

 

 

 

 

 

Union Budget 2017 : How’s it Set to Impact These #5 Key Domains in India

Union-Budget-2017---How’s-it-Set-to-Impact-These-#5-Key-Domains-in-India

Alright, before I take the plunge into revealing what I expect from the impending budget, let’s take a quick glance at numbers on how the Government has fared since its inception:

  • Modi’s flagship Make in India initiative launched to create employment & self-employment saw huge traction with India’s gross FDI flow jumping by 27% a.k.a $45 billion in 2015-16, an all-time high.
  • Jan Dhan Yojana witnessed 11.5 crore Indians opening bank accounts, that’s getting 99.74% households bankable.
  • Under the Swachch Bharat initiative, a total of 31.83 lakh toilets have been built between April 2014 and January 2015, 25.4% of the target. World bank has also invested $1 Bn in PM’s pet project.
    In Feb 2016 alone, under the Skill India initiative, 3,222 training centres were opened, more than 55 lakh people trained and 50% placed.
  • Nasscom had launched the “10,000 Startups programme” in 2013 in which 700 tech-driven startups were set up. After the launch of the Startup India, Stand up India initiative by 2015, the number had increased by 70% to around 1200. It is expected, there will be a 75% increase in the number to 2100 by 2020.

All said and done, looks like NDA government has fared decently in their term thus far and as the run up to the elections in 2019 rapidly advances, this year’s budget is going to be epic!

For starters this is going to be the first time that a Union Budget will be passed in February. The reason is concrete! When a budget is declared in March, it gets passed by both the houses only by mid-May thus delaying the entire process. By having a budget in Feb, the govt is making sure that it’s passed and ready to be implemented before the start of the new financial calendar.

Secondly, thanks to the demonetization move, digital commerce has been given a massive push. Furthermore, a year after PM Modi launched the visionary ‘Startup India Campaign’, there’s a lot of heat building up in the startup community which is expecting a series of initiatives that will be in their favor. 2017 is surely poised to be an exciting year.

1. For Startups

Widening of tax-free regime from the current 3 years to 5 years along with easier procedural clearances. Considering startups take a while to register profits, this move will promote entrepreneurship and innovation.
The government may also make regulations on FDI and ease institutional investment while also reducing governmental charges and taxes on it. In the long run, this will help in solving the capital need for startups since, majority of funding for startups come from venture capital funds that rely heavily on foreign investments.
With the Start-up initiative at the fore, we can see a new set of concessions on employee stock options, unlisted securities and convertible instruments.

2. Womenpreneurs: Easy access to funds

When it comes to women entrepreneurs, though, the government has been supportive in promoting women entrepreneurship, what most of us need is an easy access to funds. Additionally, since the implementation of GST will be on table for this budget, the government will come up with the new rationalized tax structure. We, women entrepreneurs, should definitely be a part of consideration in corporate taxes and loans.

3. Definitive SOPs, tax rebates, indirect taxes

The sole goal of demonetization was to put India on the path towards a cashless economy. Keeping this in mind, the Budget should include definitive SOPs and tax rebates to encourage and boost e-payments. Moreover, to achieve the goal of financial inclusion, the government should also rationalize indirect taxes and charges levied with respect to digital payment transactions and further incentivize companies operating within this space. To adapt to the need of time, government should also rationalize income tax provisions including provisions related to employee tax benefits such that payments/documents in the digital medium are treated at par with physical instruments.

4. Corporate taxes

I’m even looking at the reduction of corporate tax rate from 35 to 25% percent for startups and companies in the digital payments ecosystem. Transactions worth trillions are done in India yearly. Of these, hardly 10% are on digital platforms. The government must take more concrete steps to make digital payments ubiquitous. This budget should announce measures to upgrade digital infrastructure across the country. Steps should be taken to promote digital literacy and connect cities, towns and villages with high-speed internet networks.

5. Digital payment

While, the government has pushed for digitalization, post the demonetization move, I believe a lot still needs to be done on promoting digital payments. For instance, the government needs to reconcile and even reduce all indirect taxes on digital payments to nil. The government needs to work on a concerted effort to cut the payment gateway and bank charges on online transactions. Only then would people be truly incentivized to pay online.

The sector wants more tax concessions for customers and shopkeepers who go digital. The incentives can come in the form of income tax, service tax etc. What the budget can offer is extend the nuggets of sops on e-payments through UPI, add a dash of income tax rebates on e-payments and facilitate retailer-rebates on grocery bills, LPG payments, bus or metro card recharges and so on. The government has already introduced waiver of service tax on debit and credit card transactions of up to Rs 2,000.

In conclusion…

2016 had witnessed several markdowns in India’s ecosystem and I’m definitely looking forward to the budget and what it has in store.

Guest Post by Dr. Som Singh, Entrepreneur, Investor and founder of Unspun Consulting. This post was written for the Entrepreneur India magazine.