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Start Up India
- 1. The need forStartups !!! Disclaimer: This presentation is based on my internal research. It is notified that the presenter and any other person related to him shall be not responsible for any damage or loss of any action taken based on this presentation. It is suggested to seek professional advice before initiating any action. By Shweta Shah Company Secretary
- 2. Why this topic!!!! The word start-up is being used frequently in recent times It has become a part of layman’s vocabulary Is a recently opened shop a startup? Is any new entrepreneurial venture a startup? The world is going gaga about start-ups
- 3. In a layman’slanguage Start up is nothing but execution of their ideas and creativity. In ancient times it was just a dream to open up your own Company, and not many had that positions to make their dream come true. Start up is nothing but the power, today’s generation has got to make their dream come true as technology is in full support of today’s youth making it easy for them. These three questions are very essential to construct the base of one’s bridge: 1. What should we start doing? 2. What should we stop doing? 3. What should we keep doing?
- 5. YOU ARE ASTARTUP IF: • Incorporated as either a Private Limited or a Registered Partnership Firm or a Limited Liability Partnership • It is upto 5 years from the date of the incorporation or registration • Turnover for any Fiscal year as not exceeded INR 25 Crore • Formation of entity should not have been done by splitting up or reconstruction a business already in existence. • Working towards innovation, development, deployment or commercialization of new product, processes or services driven by technology or intellectual property.
- 6. WHY STARTUPS? There hasto be something very lucrative that people are moving towards start ups. From past few years the ratio of start ups are emerging and rising. But a thoughtful question comes here in mind that WHY STARTUP ONLY? HERE COMESTHE ANSWERS
- 7. MODIfying India “I seestartups, technology and innovation as exciting and effective instruments for India’s transformation.” Shri Narendra Modi Startup India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. Government through this initiative aims to empower Startups to grow through innovation and design. In order to meet the objectives of the initiative, Government of India is announcing this Action Plan that addresses all aspects of the Startup ecosystem. With this Action Plan the Government hopes to accelerate spreading of the Startup movement
- 8. BENIFITS The centralgovernment has issued a startup action plan and several policy initiatives directed towards providing for a facilitating ecosystem for startups to grow The state governments have also issued policy directives to provide a facilitating environments. The states brimming with activity are: Kerala, Karnataka, Andhra Pradesh, Rajasthan,Gujarat, Haryana, Uttar Pradesh, West Bengal have start up policies. SEBI has eased out the norms for listing of startups under the InstitutionalTrading Platform SIDBI has set up India Aspiration Fund to boost start fund-of- funds ecosystem in the country. SIDBI has launched SIDBI Make in India Loan For Enterprise (SMILE) scheme SEBI is contemplating sale of MFs on e-commerce platforms.
- 9. Schemes by Government Setting up fund-of-funds Government has set up a fund-of-funds with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years The fund will invest in SEBI registered Venture Funds which in turn will invest in startups Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds Credit Guarantee Scheme To provide debt to startups, Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years
- 10. Tax exemption –Section 80-IAC The FinanceAct, 2016 introduced Tax exemption to eligible startups for 100% of the profits for 3 consecutive out of 5 years; Eligible startups have been defined to mean company or LLP incorporated after 1st April, 2016 but before 1st April, 2019 and having obtained the certificate from Inter-Ministerial Board of Certification; The profits of startups will be liable to MAT
- 11. Tax exemption –Section 54GB Section 54GB provides tax exemption in case of capital gains arising out of sale of residential house if the net consideration is reinvested in a certain specified modes of investment. Subscription of shares of a MSME or eligible startup. The eligible startup shall within one year from the date of investment utilize the amount for purchase of new assets. New assets may include computers or computer software as well.
- 12. Tax exemption –Other Reforms New business engaged in manufacturing will be charged with tax rate of 25% instead of 30% provided the business does not claim other benefits (incl. accelerated depreciation) Exemption from applicability of section 56(viib) in case of issue of shares of a startup at a rate higher than the fair value of shares. Exemption from capital gains, if the gain is invested in units of the fund-of-funds established by the government
- 13. State of IndianStartups
- 14. Startups: Indian Perspective India is positioned 3rd in terms of number of startups globally, after U.S.A and the U.K. In 2015, India had a total of 4200 startups which is estimated to grow to 11500+ startups by 2020. Generated employment for 80,000-85,000 people and the number is expected to rise to 2,50,000 people by 2020. The industry was worth USD 5 billion in 2015, a growth of 125% since 2014 in quantum of funding. The FDI flow in first of 2015 attracted by startup was USD 31 bn., surpassing FDI flow in China and U.S.A during that period. More than 72% of the founders in the startup space are less than 25 years old making India home to the youngest entrepreneurs in the world. Bangalore is the 15th Best City, Globally to Startup, according to the World Startup Gnome Project Ranking.
- 15. Startups: Indian Perspective(Contd.) India is home to 5.7 per cent of the world’s Unicorns – startups that are valued at over $1 billion India’s Unicorns are Flipkart, Snapdeal, Ola, Paytm, Quikr, Zomato, Mu Sigma, Shop Clues, and InMobi In 2015 850 startups received USD 9 billion via 1,005 deals Eleven companies in the B2C commerce space received funding to the tune of $3.377 billion, which also means that over 33 per cent of the funding last year was in these companies over 50 per cent of these were Unicorns.
- 16. InvestmentVolume 56% 23% 21% Indian Foreign Co-funded 17% 24% 59% IndianForeign Co-funded Investors in Indian Startups (deals) Investors in Indian Startups (Volume) Source: YOUR STORY
- 17. Expected Growth Source: GrantThornton
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- 19. Important Definitions Accelerator= A center where start-ups are “incubated” through mentorship, space and sometimes cash. Business Incubator = Facility centers where start-ups are kept to survive, to adjust to their surroundings and become viable business propositions. Eg; BSE Institute Limited Boot-Strapping = Using “friends and family” cash to get going. Angel investors = Investors who invest in early stage startup companies in exchange of equity ownership. Venture Capitalist = Investor who provides capital to startup companies in return of equity interest. Unicorns = A startup valued over $ 1 Billion Seed funding = initial capital to start a business Funds of fund = A fund that invest in funds which in turn invests in start- ups Mezzanine financing = It is a form of debt financing, but it also includes embedded equity instruments or options
- 20. Sources of Funding Grants Equity Preference shares Debentures Convertible instruments Loans from banks and financial institutions Seed funding, venture capital, venture debt
- 21. Stages of EquityFunding? Seed funding Angel investment Venture Capital IPOs
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- 24. Sources of Funding The rise and fall of the Start-ups have become the sensational headlines of this era. History proves that most of the Start-ups had a glorious beginning in the past but soon enough due to various issues such as negative cash flows, cash crunch, funding issues and so on they are seen to be buried in the “valley of death.” Many Start-ups are essentially dead but they limb along for years in a Zombie-like fashion. To get a detailed view of such death we need to identify the reasons – Negative Cash Flows CashCrunch Funding Issues RapidTechnological Innovations Intense Competition Market Risks –Lack of sufficient demand
- 25. Here comes theProfessional
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- 27. Role of professionals Services to startups Incorporation— Assistance on setting up the entity Various Registrations– can help acquire the various registrations including obtaining PAN, TAN, VAT registrations, service tax registration, trademark, trade license, shops and establishment Tax consultation– Every business will need advisory on the applicability of direct and indirect taxes on various transactions that the entity undertakes including various filings to be carried out during a year. Accounting consultation– A startup also needs to have the books of accounts in order. Assistance will be required on preparation of financial statements. Secretarial matters– Any startup will have annual filings and trigger based filings to be carried out.
- 28. Role of professionals(Continued) Assistance to a startup Filings and compliances – From taxation, legal and regulatory perspective there will be several filings required to be undertaken. For instance compliance with FEMA regulations, in case the entity is intending to bring foreign funds in to the entity. Business plan preparation– For any startup to raise funding the business plan needs to be well presented. Financial Projections – A startup needs to create financial projections to reflect on the growth trajectory. Options of financing available – A startup has several financing options available. Loans from banks / financial institutions or private equity investments, the professional could assist considering the viable financing options with the startup and holistically advice on the implications of the options.
- 29. Role of professionals(Continued) Services to Incubators / Accelerators Services to incubatees – Professionals may collaborate with incubators / accelerators to provide services on book keeping, accounting, taxation, administrative, operations etc to facilitate incubatees to develop the product. Investment in equity in the incubatees – The incubators typically would take minimal fees for the services offered and would acquire equity stake in the incubatees. The professionals may assist the incubators to invest in equity and the documentation around it. Role of professionals –Role of professionals is that of hand holding the various stakeholders at various stages of growth.
- 30. ThankYou !!!! The needfor startups !!! A presentation by: Shweta Shah Associate Partner Mehta & Mehta Company Secretaries (M): +91-9773164401 (E): [email protected]