The central government in the next two weeks will be launching a new blueprint for startups called ‘Start Up India’ to make the process for setting-up businesses more lenient. The blue print of this policy may have a Startups and Entrepreneurship Law to make it easier for the startups to set up.
The government also is looking for adding a new category of business as ‘Innovative Start-ups’ to differ them from SME/MSME and large enterprises which are built on conventional models. Also, these startups will get special benefits including funding from the government. In these startups government through various domestic venture capital funds could take 25% stake. As these startups typically gains scale after 2 to 3 years, other investors including Private Equity (PE) and VC funds could buy back the government funds’ stake. This process will help create a revolving fund to such ventures.
Through this policy the government wants to resolve two key factors which are becoming difficult to India’s Start-Up ecosystem- first to implement ease of doing business as over 65% of successful startups are shifting outside the country mostly to Singapore because of extreme hassle in doing business. Second problem is that 90% startups funding at present comes from foreign VC and PE funds.
An official privy to the policy was quoted as saying, “There tends to be a bias among foreign funds for backing business models that have worked in the developed world or those that can be tried in India and replicated there. We feel that if Indian start-ups focus on the country’s unique problems, the models they build can be exported to the world”. The Start Up and Entrepreneurship law is set to roll out on January 16th and it will help startups to operate or close a business easily.
At present the India Aspiration Fund acts a fund which allots money to various domestic ventures those providing seed funds to entrepreneurs/businesses. However the central government is opting for a more broad set of methodology to identify ‘Innovative Start Ups’.
Source: The Hindu