In this blog post, Amala Haldar, a student pursuing a Diploma in Entrepreneurship Administration and Business Laws by NUJS, describes the procedure for application for recognition of a start-up as a start-up under the Startup India Program.
The improvement of start-up environment was an agenda of the new Government for long. The major step in this regard was taken on 16th January this year. This was the first time when the start-up industry had a direct talk with the Government.
Startups help a lot in the growth of the economy and also play a vital role in increasing the employment. The Government realised the importance and so, many steps were taken in this regard.
Startups are not only needed in urban areas but can also help a long way in rural areas. The steps taken for expansion in this regard include-
- Simplification of procedures
- Providing financial support to startups
- Any academic support
The Current State In India
According to the report of the Economic Survey, India currently has more than 19000 technology-enabled startups. Indian startups raised three and a half billion dollars in funding last years, and the number of active investors has also increased. In such a scenario the Government Pitching in with the schemes like Startup India would only provide mileage to the startup ecosystem.
What Is A Startup?
A Startup as the name suggests is starting a business in motion. In common parlance, a startup is a young company funded by its founders. Usually, a startup is innovating and establishing new ideas that usually involve technology.
Eligibility For Startup India Program
For applying any venture has to be eligible. The eligibility criteria are as follows:
- It must be an entity registered and incorporated as a Private Limited Company under the Companies Act 2013.
- A registered partnership firm under Indian Partnership Act 1932
- A Limited Liability Partnership under LLP Act 2008.
- Five years must not have elapsed from the date of incorporation.
- Annual turnover in any preceding financial year must not exceed 25 crores.
- The startup must be working toward innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
- Start up must aim to develop and commercialise-
- A new product or service or process.
- A significantly improved existing product or service or process that will create or add value to customers or workflow.
- The startup must not merely engage in-
- Developing products, services or processes which do not have the potential for commercialising.
- Undifferentiated products or services or processes.
- Products or services with no or limited incremental value for customers or workflow.
- The startup must not be formed by splitting up or reconstruction of a business already in existence.
- The startup has obtained certification from inter-ministerial board set up by Department of Industrial Policy and Promotion. To validate the innovative nature of the business and,
- Be supported by a recommendation in a format specified by Department of Industrial Policy and Promotion from an incubator established in a post-graduate college in India.
- Be supported by an incubator which is funded by Government of India as part of any specified scheme to promote innovation.
- Be supported by a recommendation in a format specified by Department of Industrial Policy and Promotion from an incubator recognised by Government of India.
- Be funded by an incubation fund or Angel fund a private equity fund or accelerator or Angel Network duly registered with SEBI that endorses innovative nature of the business.
- Be funded by Government of India as a part of any specified scheme to promote innovation.
- Has a patent granted by Indian Patent and Trademark Office in areas affiliated with the nature of the business being promoted?
The Procedure For Application
Once a venture is eligible for being a startup the procedure for application is very simple. The entire application is to be made online. The following information is to be provided during online application:
- Nature of entity or business
- Incorporation/ Registration Number
- Details of Authorized Representative
- Details of Director/Partner
- Supporting Documents and Self-Certification.
The letter of recommendation is also to be uploaded along with other documents.
On opening the online application portal, the details of the Entity, the authorised representative and the partner or director is to be given.
After this comes the uploading of documents. Then upon hitting the submit button, an entity is successful.
On successful registration, a certificate is generated which can be verified. Upon registering as a Startup, one can be eligible for the benefits under the Startup India schemes if one fits the other criteria too.
What Happens When An Entity Becomes A Startup Under The Startup India Program?
The startup India action plan has various proposals as to the enhancing the convenience of operation of various startups.
They are mentioned as under:
- Simplification of regulations: The rules and regulations of various labour and environmental laws are overwhelming to startups. The startup action plan aims at reducing the hindrances by introducing an app based self-clarification of the certificate. The entity would not be disturbed by random inspections for the first three years and would only be inspected if any complaint of violation of labour law is made.
- One access point: There would be a centralised access point for all startups for the frequent interchange of knowledge and financial help of entrepreneurs. It would be a kind of hub where entrepreneurs can talk about business models ask for government collaborations and organise mentorship programs.
- Mobile application: There is an online portal so that communication with Government becomes easier. The need for various compliances and licenses are laid down clearly in the portal and such information would leave no scope for ambiguity or confusion.
- Concern about intellectual property: As infringement of intellectual property increases so does the need for its protection. Thus the scheme for Intellectual Property Protection is introduced. This scheme shall help the process of trademark filing to be faster.
- Public procurement to be made easier: Usually, Government tenders require “prior experience” for participation. But this kind of criteria shall not be applicable for startups anymore. However, the standards of quality would remain the same.
- Provision of Funds: The Government would not invest directly but would provide finances to SEBI registered Venture funds.
- Tax: The Government is planning to encourage investment into Startups by giving tax exemptions on capital gains if they invest it in the fund created by the Government.
- Exemptions: The startup would enjoy a 3-year long tax exemption this would surely go a long way in benefitting the startups.
- Startup Fest: A unique initiative of the Government of improving startup ecosystem though fests. The fests would be held nationally as well as on a regional basis, and they would not only help in showcasing innovation and knowledge but also the proper interaction between leaders.
- Innovation Centers: For proper incubation, the Government has decided to have many centres of entrepreneurship at national institutes.
- Research Parks: The government will set up Research Parks in institutes with an investment of its own.
- Biotechnology: The government is also expecting startups at the biotechnology sector, and for the boosting of that, it is ready to undertake bio-incubators, seed funds and Equity Funding. A major step in this regard is the Bengaluru- Boston Gateway. This would encourage the exchange of knowledge between various institutes of Boston and Bengaluru.
- Various Programs: Various programs like the Innovation Core (for school kids), National Initiative for Developing and Harnessing Innovations and Uchhatar Avishkar Yojana shall be started. These programs would encourage invention and also provide funding for it at various levels including schools and colleges.
- Building Incubators: The building of world class incubators is also a step of the action plan which can be helpful. An investment of 10 crore rupees is to be made in 10 incubators which can be turned into world class.
- Atal Innovation Mission with Self-Employment and Talent Utilization Program: This scheme would encourage innovation through self-employment and talent utilisation wherein innovators would be mentored to be successful entrepreneurs. The mission would establish tinkering labs, strengthen incubation facilities and fund the growth of startups. It would promote entrepreneurship also through mentorship programs. Under the program innovation, awards would also be given to startups, and various steps shall be taken for awareness at the stage of innovation.
The boom in the startup industry has made the youth hopeful towards innovation and schemes like these are sure to go a long way in ensuring the growth continues. But for a technology-based startup to thrive it is not only enough to initiate the business it also has to have earnings, so only depending upon capitals from outsiders is not a solution. The help of investors and the government can only provide initial support, but the survival in the market is entire of the entrepreneur’s business model. Thus here’s wishing all the very best to Startups as we all know creating jobs is way better than getting one.
- The criteria for eligibility are provided as per the Government notifications.