Why I am excited about #StartupIndia

This article was first published in opinion section of The Hindu Business Line

The #StartupIndia initiative — which first found its mention in Prime Minister Narendra Modi’s Independence Day speech — saw itself being manifested last weekend in Vigyan Bhavan, Delhi. The event had a slew of inspiring leaders, ministers, department secretaries and CEOs addressing various topics related to startups.

I also attended the event. And here I am putting down why I feel so buoyant after attending it:

Intent and inclusiveness

Announcing schemes and initiatives is one thing, but following them up with concrete steps is sealing the deal for me. Perhaps, I come from a time when a lot has been promised and little delivered. So I was happy to see the PM, ministers and secretaries attending this event, taking questions head on and making a start with the policy changes. I am sure this will be followed up with many more as this year progresses.

Secondly, this event was an example of inclusiveness. There were close to 1,200 entrepreneurs in that room (although 1.5 lakh wanted a pass) to hear what we all had to say, and start work towards it is leading by example.

For the first time have I heard bureaucrats saying “We may not know a lot of things but are open to learning from you and making necessary changes.” This definitely bears significance. I am not stating that miracles will start happening immediately but it’s a start I am willing to work with.

Massive changes

Like in any company undergoing a drastic transformation, it is the CEO and his senior team that has to step up, enter the arena and share the gameplan. Exactly that happened in this event. The PM his team took questions and opened themselves up for a dialogue. In fact, one of the Global CEOs observed that having all top cabinet secretaries on single stage taking questions from entrepreneurs is something he had never seen in any country.

There were several steps that have been taken by the departments already. For instance, MSME secretary and his team have reduced a 22-page form to a single page for an easier registration process. Corporate affairs secretary and his team are already working towards simplifying registration process of companies with the goal of making it possible to get it done in one day!

They were aware that they had to make changes to their current system and had already set goals and started work towards it. I am sure we will see several announcements during the course of 2016

Addressing difficult questions

A lot of serious issues and tough questions were openly discussed and relevant people were questioned for it. One of the secretaries was asked on how and when will his department will stop the trend of startups moving to Singapore as their headquarters (Companies such as Flipkart had moved to Singapore to avoid asset transfer tax regulation, an area where government has already started making changes).

There was a question on how can a startup that doesn’t have a requisite minimum turnover or years of experience, work with government directly and yet be eligible to win tenders purely on their capabilities.

Another query was on the service tax, which is currently being levied on billing and not on receipt of funds. This is creating a cash crunch of 14.5 per cent for the entrepreneur who anyway has a cash flow problem at the initial stage of his venture

The ?10,000 crore fund

I have heard a lot of criticism over this. First one being government should refrain becoming a venture capitalist and the second one is that it is too risky to use public money for VC type funding.

I disagree on both these points. Firstly, from what I have heard, government isn’t going to directly get involved with investment but will set up funds run by professionals who will follow the due diligence to carry out the exercise. Secondly, as we all know a lot of private VC money is going into technology and tech related apps and products.

Very little money trickles down to innovations in the agri-space, biotech or sustainable energy solutions. There are a lot of individuals who have ideas and would be keen to start-up in these areas and might have gestation period as they develop their products. Who is going to fund them? Clearly, I see this fund coming to use.

The second issue was of risk. Well, there is a high amount of risk that government and private banks undertake when they lend to established business houses too for their new projects and expansion plans. The RBI governor Raghuram Rajan has been repeatedly tightening banks to reduce their NPAs that have got accumulated by giving out loans to large, established companies. The recent numbers show the NPAs of just the public sector banks stood at ?2.76 lakh crore. So there is no way to know that funding in startups is any riskier than established businesses. Also, as any entrepreneur whose firm has been invested in knows money comes to them in tranches and there is more than enough due diligence done at every stage before the next round of fund comes in

Tax benefits

I would like to begin with the clear assumption that no self-respecting entrepreneur will shy or run away from paying tax. Having said that at the initial stage when one is bootstrapping, maintaining a positive cash flow is one of the biggest challenges.

Any new product or service has a gestation time and customer acceptance time which the entrepreneur has to sail through. It’s the classic S curve and one has to hold on till the venture moves into a growth stage. At that time, a tax saving scheme can give the entrepreneur the most precious resource - cash. Cash required to survive and invest back in his or her company. Once the growth momentum kicks in, revenues flow in and it gives breathing space to the venture. Three years is a good average time for any venture to sail through the initial challenging space post which tax can be charged to that venture

Ease of doing business

Providing funds, giving out tax benefits, faster IPR rights, free legal service centres, quick registration of company, etc., are steps that will free up a lot of time from non-core activities to growth driving ones. It will allow them to spend their time and money to innovate more or drive more growth both of which are going to improve the macroeconomic parameters of our country.

Also, as an aside, our country’s ranking in the global ease of doing business will get a big boost

I feel this is a start. And, a good one at that. One that is simply not all promises and talk but of action. A start where I was made to feel a part of it as an entrepreneur. A start where I feel the onus of driving growth is also on me now, given the support the government will extend to startups.