RBI relaxes FVCI norms

RBI relaxes Foreign Venture Capital Investor (FVCI) norms for Startup investment

One more announcement to the stay-in-India check list has come from RBI with respect to registered under SEBI (FVCI) Regulations, 2000.

RBI has announced amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time (Principal Regulations).

Sanjay Khan Nagra, iSPIRT volunteer talks about this announcement in the video embedded. Below. Also the main provisions and text is described in this blog below. Those interested in the original regulation may visit this page here.

As per the amendment notification referred to above, any FVCI which has obtained registration under the Securities and Exchange Board of India (FVCI) Regulations, 2000, will not require any approval from Reserve Bank of India and can invest in:

1. Equity or equity linked instrument or debt instrument issued by an Indian company whose shares are not listed on a recognised stock exchange at the time of issue of the said securities/instruments and engaged in any of the following sectors:

(i) Biotechnology

(ii) IT related to hardware and software development

(iii) Nanotechnology

(iv) Seed research and development

(v) Research and development of new chemical entities in pharmaceutical sector

(vi) Dairy industry

(vii) Poultry industry

(viii) Production of bio-fuels

(ix) Hotel-cum-convention centres with seating capacity of more than three thousand

(x) Infrastructure sector (This will include activities included within the scope of the definition of infrastructure under the External Commercial Borrowing guidelines / policies notified under the extant FEMA Regulations as amended from time to time).

2. Equity or equity linked instrument or debt instrument issued by an Indian ‘startup’ irrespective of the sector in which the startup is engaged. A startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding INR 25 Crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property and satisfying certain conditions given in the Regulations.

3. Units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) (registered under the SEBI (AIF) Regulations, 2012) or units of a Scheme or of a fund set up by a VCF or by a Cat-I AIF.

iSPIRT believes these announcements have made Govt. Recognize the importance of opening up investment to promote innovative startups. Right now these announcements are limited to Startups recognized by DIPP. However, we hope in future they may be opened for all startups and an easy investment regime in Indian from foreign funding source.

8 Personal Finance tips for Bootstrapping Entrepreneurs

Starting up is hard, make no mistake about it, while media romanticizes startups and mostly talks about the glorious success stories, what goes behind is months and years of toil, frustration, fighting all kinds of odds. Cliched as it might sound but overnight success is the culmination of years of hard work.


Bootstrapping a startup is even tougher, apart from challenges of building right product, right team, right marketing plans and dealing with daily operational chaos, you additionally need to worry about money and  cash flows and hence constantly innovate to compete, there are no easy paths, what you need is undivided focus and continued perseverance.

Now with all these challenges last thing a bootstrapping entrepreneur needs are fresh challenges on personal finance front. It can be distracting to least and can even have a debilitating impact on your business, when all your energy and time should be focused on getting your business to move to the next orbit, unforeseen issues on personal finance side can sap your precious energy.

While we cannot mitigate all risks in business, but with a better financial planner you can reduce distractions and also some legitimate business risks, here are few tips that can help you manage your personal finances better.

1. Keep your personal fixed expenses low

As you bootstrap, start with a review of your personal expenses see if you can lower your expenses especially the fixed ones, there are always expenses which can be cut, like a costly dish TV subscription with all the channels you never watch or suboptimal phone bill plans when you can get a better offer or the weekly outings where you splurge or non-healthy junk food, or the gym membership where you never go, maybe a jog in nearby park can be better. Cut expenses wherever you can and migrate to a leaner personal expense structure.

2. Track your expenses and do active budgeting

Last thing you want when you are running a startup is surprises every month on your expenses which can be due to faulty planning. Plan your expenses to the last tee, do active budgeting. If required, use budgeting software. If not, pick up a simple excel sheet. There are a lot of pre-formatted excel workbooks available which can help you plan your budget.

You can use the following sheet for expense planning.

Screen Shot 2016-09-05 at 2.37.32 pm

3. Before you bootstrap plan for the worst

Create multiple cash flow scenarios. A lot of assumptions go bad when you are starting up as there are too many unknowns in a startup environment. Slipping product timelines, fundraising plans going awry, growth not taking off as you expected there are simply too many moving parts. So for any plan you create do a thorough analysis. Hope for the best but always have a plan ready for the worst.

4. Get a good health Insurance for you and your family

One of the major unplanned expense that can hit you is unforeseen health. Cost of health in general has skyrocketed in India. So before you bootstrap, ensure that you have a good health insurance cover for you and your family, the cover should be adequate and should reflect your lifestyle.

5. Do not park money in savings account, Invest in liquid funds

Your day to day money requirements should be parked in instruments which give higher returns. Every additional rupee matters. Therefore, do not keep your money in savings account but invest in short-term liquid funds. They provide 2-3 % higher returns than saving accounts and are almost as liquid as savings account, so you can use your money anytime and also earn higher from your savings.

Let’s say you maintain 5 lakhs rupees balance in your liquid account, this is an account for your emergency funds. Below chart explains what will be your account balance at the end of 3 years, if you see liquid funds will give you 4.3 % and 8.3 % higher return vis-à-vis Fixed deposits and savings accounts respectively.


6. Avoid speculative investments like daily stock trading

As an entrepreneur, you are already grappling with ambiguities and surprises. The last thing you would want is surprises on your personal finance front. So start avoiding any risky investment you are making and stay away from stuff like daily stock trading or other speculative investments in the stock market or otherwise.

The below infographic explains why day trading is not a good idea 🙂


(Source: Zerohedge)

7. Create a personal financial plan

You must have created a proper business plan for your startup but what is also equally important is that you create a financial plan for yourself. Look at how your cash flows are going to be like what are your projected expense, both recurring and non-recurring, sources of income, how much savings you have, short term and long term liabilities. Finance planning helps you create a detailed view of what to expect on money front in next few years, here is a simple step by step guide to create a financial plan


8. Ensure your loan liabilities are taken care off.

Having large loan (personal or home loan ) commitments is not a good idea if you are planning to bootstrap. If you have such commitments relook at them and figure out a way to manage risks arising out of these liabilities. Set up a viable payment plan for all of these liabilities.

Article Credit : Sarabdeep Singh, co-founder of Bodhik.


Scalability Vs Sustainability – What should come first for a startup?

In the highly competitive market today, it seems like a trick question on whether a startup should focus on scalability, which seemed to be a trend until last year, or sustainability. Though one might toss for scalability at the very outset, facts speak otherwise.

This year, a lot has been written on the high “cash burn rates” of the star online startups and predictions of doom in the areas of growth or funding. This is in stark contrast to last year which was dominated by high valuations, wide ranging expansions, hyper sales and big hiring packages. These high cash burn rates were partly due to investor pressure to scale up, gain market share from the rivals and clock high GMV’s (Is it the right metric anyway?). There was a furious race to achieve this among the top funded companies and a lot of “me too” startups hoping to cash in on the investor gold rush.

However, now this unbridled growth has reached a plateau due to coffers running dry and wavering customer loyalties. So, this frenzy for rapid scalability seems to have come at a cost. The way these companies have been spending cash has raised a big question mark over their long term sustainability. So the moot question is whether it is wise to scale up so fast if it puts your very survival at risk?

A leading Indian brokerage firm made a study of the 22 top Indian e-commerce startups during the financial year 2015 – 16. The prognosis by them was quite grim. In that period, the combined losses grew by 293% to Rs. 7,884 crores on a combined earning of Rs. 16,199 crores. Only one start up, Practo, in the healthcare tech sector, was making more revenues than expenses.

Inspite of the hectic pace of growth, the losses were brought about by ‘below cost’ discount sales to attract customers, big advertising spends across all media, and rapid expansion into smaller cities to achieve scalability. Also, there was a dearth of original ideas or products. Most of them were copycats of each other with similar product offerings. One can’t but be reminded of the egg selling scheme of Milo Minderbinder in Catch 22 of buying high and selling low!

In fact, the first five months of 2016 have witnessed over 18 startups wrapping up operations. Atleast 15 of these startups were funded and just one startup went beyond Series A stage. Not surprisingly, 4 startups were from the food tech space, 4 in the hyper local category and 2 in fashion. They were all crowded landscapes already. Going by a Goldman Sachs report, private equity investments in startups has declined by a whopping 25% as compared to last year. So obviously, focusing on scalability over sustainability may have been a flawed strategy.

High cash burn for scalability and a dependence on investors is not the right survival strategy anymore for Indian startups. Investors too have shifted their focus to startups that have the potential to sustain in the long run rather than those with just high valuations and no ‘real’ returns.

In a way, this year will be the best learning for startups as they are slowly realising the pitfalls of only focusing on scalability. Pepper Tap, the grocery delivery app, had to shut shop in six cities, including the major metros, and still couldn’t survive as it had scaled too fast and were not really prepared with the correct logistics framework to service its customers. It did not spend enough time to gain a stronghold in an already existing market and diversified too fast. Even Grofers, Housing.com, Food Panda and Zomato have scaled down their operations significantly and have shut down or scaled back operations in non- performing cities.

There are quite a few startups like Urban Ladder and Carat Lane that are building world class products and are competing with the top brands in the world. They have managed to organise fragmented markets to create “online” brands with positive unit economics. Oyo rooms and BookMyShow, are examples of such startups which can effectively fill a need in the market and have managed to innovate and grow their market share.

Since 2005, MU Sigma a leading Indian business application software company has been making waves in its respective domain too. It has quietly made a mark in the world without any high valuations or spending sprees because their business has value.


Many lessons have been learnt from startups that have gone bust in the past. Clearly, it is high time that startups start focusing on sustainability first because once a sustainable business model is in place, scalability will automatically follow.

Going forward, only sustainable businesses which are value-driven, with a respect for the bottom line, will draw the attention of the now cautious investors and yield better returns on their investments in the long run as compared to valuation-driven startups. Moreover, only the sustainable business models will be able to scale successfully and prove their real mettle rather than becoming just ‘one-time wonders’. In fact, brick and mortar or e-commerce, the fundamentals don’t change!





An article by Mahesh Nair

Founder at Picsdream

Domestic venture debt

In this session on Domestic venture  debt, we talk about a recent announcement by Government of India, that relaxed the provision on raising debt from domestic non-banking sources of funds. Sanjay Khan speaks on the subject in below embedded video.

What is the problem, that this new announcement on domestic venture debt solves?

Private companies can raise debt funds in a restricted manner only. They could raise debt from some allowed sources. These could be like company directors, their relatives and other companies etc. But, not from sources like angel funds, domestic VCs who are not companies. A debt raised from such sources fell under deposits category.

To accept ‘deposits’, companies need to follow number of conditions, which are quite tedious.

What is the new announcement?

As per sub-clause (iii) of Clause 68 of Section 2 of Companies Act, 2013 definition of Private Company, “means a Company which by its articles prohibits any invitation to the public to subscribe for any securities of the Company”.

The new announcements open up some new avenues of raising debt funds from domestic markets.

These new sources of funds, added to this non-public funds category are funds registered and operating under SEBI’s regulated regime. Following are these three new sources

1. Alternative Investment Funds (AIFs)

2. Domestic Venture Capital funds

3. Mutual Funds

Prior to this announcements funding from these sources was treated as deposits and not loan.

What are the limits of announcements?

Whereas this announcement opens up these three highly potential sources of domestic debt funding, it is limited to Rs. 25 Lakhs only.

So the announcement is likely to benefit startups in their early phase.

The other good part is that, this is not limited to recognised Startups or startups registered under StartupIndia with DIPP. It is open to any private company hence it can apply to any startup.

The announcement adds up to efforts made by Government of India in creating better environment for funding. It is a step forward in the direction.

iSPIRT believes and is further taking up with the Government to not limit this provision to Rs. 25 lakhs.

The video below covers this topic with Sanjay Khan, the expert who was instrumental in building up the stay-in-india checklist of iSPIRT.

Calling Startups and Young Entrepreneurs to connect with leaders of the Ecosystem-YESSS

iSPIRT is happy to collaborate with and encourage YESSS – Young Entrepreneurs & Startups in Soaring Spirits.

08 to 10 December, 2015 ,The Lalit Ashok, Bengaluru,

YESSS is designed in association with various Startup networks. At YESSS, select startups  – with great business ideas offering unique technologies, products or services –  will be given an opportunity to pitch to potential investors. We are on the lookout for razor sharp minds, financial hawks and techie wizards and we will be testing their talent, tenacity, and the team work!!

YESSS invites applications from 

  • Technology Entrepreneurs in the early stage of business (0-3years)
  • Innovative Business Ideas that have a wide impact on society
  • Startups requiring mentoring, incubation and investment to shape and grow their business

Who will attend 

Companies looking for innovative business ideas and technology solutions , IP firms, IT industry captains, angel investors and VCs, government funding agencies and  financial institutions.

How to Participate
If you are a tech entrepreneur with an innovative idea or a budding entrepreneur with a simple business plan, send your application/abstract on or before 3rd December , 2015.

The abstracts would be reviewed by an Expert Committee and you may be invited to make a presentation. The Expert Committee will choose 8 finalists, who would be offered an opportunity to make a presentation during the YESSS session at Bangalore ITE.biz 2015

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For Registration and Participation opportunities, kindly contact Prabha – 

Mobile: +91-9916785005 | Tel: 080-41131912 -13

Email: [email protected], [email protected]

CLICK HERE to know more…