Bengaluru: As the startup and VC community holds its breath for the launch of Prime Minister Modi’s Startup India Standup India initiative announcement on Saturday, entrepreneurs, investors and analysts’ expectations focus largely on government initiatives to promote entrepreneurship through clarity in policies. Government involvement in the startup sector should be limited to drafting policies for creating ease of business and should not extend to the idea of investing in startups and owning them, according to investors in the startup community.
“Six out of eight big startups in India have domiciled themselves outside India—in Singapore or U.S. A. The Indian government needs to make sure there are no policy handicaps for startup owners,” said T.V. Mohandas Pai, chairman of Manipal Global Education Services and Aarin Capital. Apart from pressure from foreign investors, friction points in regulation drives these startups to Singapore, says Mr. Pai. The government needs to recognize the pain areas that are driving entrepreneurs away and fix them, he said. Startups in India have largely remained focused on innovative ideas to solve problem areas of the nation.
With Flipkart’s success in ecommerce retail and Ola solving the problem of commute, before their respective global rivals Amazon and Uber turned their attention towards India, speaks volumes about the way India has picked up its startup growth. What lies ahead for startups is an interesting space to watch out for.
It is essential that government’s role is focused towards making policies simplified for entrepreneurs and not getting involved in the functioning of these ventures, said angel investor and former CEO of IIT-B’s business incubator society, Ajeet Khurana. “Government involvement in startups shouldn’t reach the point where the government starts acting like venture capitalists,” Mr. Khurana said. A lot of startups are also coming with ideas to improve governance by connecting local government bodies to people. The government should ensure that private entrepreneurs also have provisions to pitch these ideas to the government, said Mr. Pai.
Clarity on taxation policies, increase in Foreign Direct Investment (FDI) limits, the GST roll-out are some issues that the startup community expects the government to introduce. “Tax relief for investors on exits from start-ups should be a special provision that needs to be introduced in the blueprint,” said Neha Khanna, co-founder and director of Enablers and Valpro, a platform that connects investors with startups.
Start-ups could also benefit from relaxed FDI norms and easy listing norms, which in turn would encourage startups to be domiciled in India as opposed to other regulation-friendly countries such as Singapore, she said. Given the fact that the success rate of startups is fairly low, an important expectation from the campaign would be to see how the government introduces benefits that promises an eco-system with greater funding avenues in the form of tax exemptions for angels, easing working capital eligibility norms, deferral of tax on ESOP’s,” said Vivek Gupta, Partner, BMR Advisors. “This will perhaps ensure that budding entrepreneurs have sufficient time to experiment to come out with the right business model,” he said.
