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Strengthening our Startup Ecosystems (16 January 2021)

Strengthening our Startup Ecosystems (16 January 2021)

Context:

Prime Minister Narendra Modi addressed the Startup India international summit, Prarambh on Saturday. Under the initiative, the government has taken several steps to promote young entrepreneurs in the country.

Background:

The two-day global summits that began on Friday, marks 5 years of the Startup India campaign that was first announced by Prime Minister Narendra Modi during his Independence Day address in 2015, and launched on January 16th, 2016.

Currently, with over 42,000 recognized startups, India has transformed into the third largest startup ecosystem supplementing employability as well as enhancing our self-reliance.

Startup India has also played a pivotal role in strengthening the key pillars identified for our startup economy.

Summary of the Debate

Startup Ecosystems in India:

  • In 2011, there was only one unicorn, the Unicorn is having a valuation of more than $ 1 billion, and by 2016, there was 8 unicorns, when this stratup India was launched in the year.
  • From 2011 to 2016, it grew from 1 to 8 unicorns and in last three years, 30 unicorns added and it is now 38 unicorns.
  • India is the world’s third largest country in the field of startups, it is ahead of countries Germany and UK.
  • There is jump of around 1800 new startups in the covid year.
  • India has added 11 unicorns in a year where the other industries were actually being devasted by the impact of disease as well as lockdown.
  • Today, the total valuation of startups in India is over $ 129 billion.
  • As the NASSCOM report suggests that they are tracking the investment that are going into various startups and the startups which have received more than half of one billion injection of capital.
  • These startups are not concentrated in one or two sectors, they are growing across different sectors and they particularly given the boost to digital economy during the pandemic.
  • Almost one-fourth of the startups are employing very high degree of technology, Artificial Intelligence, robotics, drones and blockchains.

                          Startup Ecosystems Ranking of States for 2019 – West Bengal not in the  vicinity | IBG News

How conducive environment is India providing for investing in the country?

  • Angel Tax: There was a big issue of angel tax for the investors, which was a provision enacted for a different purpose like money laundering. But, when it came to hit the startup ecosystem in July 2019, the government took a bold step to address those concerns and since then investment has got a big boost to them.
  • States' Startup Ranking: The Department for Promotion of Industry and Internal Trade (DPIIT) conduct the the States' Startup Ranking Exercise to foster competitiveness and propel States and Union Territories to work proactively towards uplifting the startup ecosystem.
  • Procurement Systems: From both, the public Procurement side and Private Procurement side, the startups are and that is reflected in the growing number of unicorns.
  • EMD exemption: Tender sets free of cost and exemption from payment of earnest money to registered MSEs.
  • Government role: This country has seen a remarkable resurgence of growth in the number of startups in a short space of time shows that both on the side of the innovation potential of Indian entrepreneurs as well as the manners in which the government has provide a helping hand, both have played a role.
  • Support provider: The government not playing too much of an interfering or interventionist role but rather playing the role of a support provider.

Challenges that new startups still face:

  • Getting plot from the government and the local people.
  • Ever after registered in many government portals, the new startups take time to get work order from the government side.
  • The other challenge is to make sure that digital backbone, the infrastructure is also strengthened.
  • Having private player as a client, there would be value in the startup, but if the government is a client, they won’t value.
  • There is issue of late payment when the government purchase the products from the new startups. So, the startup should be given a certain advantage like within one month or two months, there would be a disbursement of payments.
  • There are more than 500 active accelerators and incubators which can support more than 5000 startups annually. But many of these incubators and accelerators themselves require a capacity building support.

Way Forward:

  • It will be important to create a good financial support system, because right now, there are large number of startups who are probably looking out for venture capital funds.
  • We need to create necessary conditions within the country where there are more venture capitalists willing to put their money in the fortunes of these innovative enterprising young people who can actually not just see their valuation go up but convert that valuation into a wealth not only for themselves but for their large number of employees and their stakeholders.
  • There must be a separate forum to avoid any project delay from the government side.
  • To make government as a client, there must be some fast-track committee like new entrepreneurs could show them innovation.
  • IT model of growth is probably what is needed for the startup model.
  • To sustain the growth of the startups space, it will be important to create a facilitating system but not interference. There is a subtle difference between interference and intervention and support by creating an environment which is conducive to growth.
  • In terms of a facilitating part, the capacity building of accelerators and incubators and their resource base like providing co-working spaces and all that goes to handholds in the initial phase, there government can focus on and improvise their performance.

Important points made by the Guests

Anurag Soni, Founder, Adverto Technologies Private Ltd     

  • We developed a face mask recognition system and with that we came up with the idea that why not build a kiosk out of it. Since, we were already in the industry of digital out of home advertising. So, we used our kiosk and let them detect face mask with the help of camera.
  • So, we developed our own algorithm and again, there was a wave of making everything contactless, then the wave of hand sanitization came, So, we embedded that contactless hand sanitization system in our kiosk.
  • At the same time, everybody was concerned for the people who are entering their premises like whether are they having fever or not. Since, it was new for everyone, nobody knew that what should be the proper compliances to have any stranger, any visitor in to their organization.
  • So, we combined all functionalities in a single kiosk, we made it a three-in-one kiosk and the kiosk was able to display the adverts related to covid crisis as well.

Dr. Subhash Chandra Pandey, Former Financial Advisor, Ministry of Commerce and Industry, GoI     

  • According to the latest NASSCOM report 2020, last year, there was more than 600 deals and investment worth of $ 3.5 billion and this is a massive scaling up just reflecting the broader trend of investor interest.
  • Government’s regulations are still neutral to the size of the company and there is a scope in company law to provide for a special class of treatment for investors in startups.
  • As far as getting business and turnover is concerned, the government has not laid down any preference in terms of procurement and procurement quota, but what has been done is removing the disabilities vis-à-vis established suppliers.
  • So, ministries are being encouraged to even place orders on experimental basis on products and technologies that have not yet been widely tested and not really impose criteria of having sufficient experience or financial capacity or asking for earnest money deposits and things like that.

A.K. Bhattacharya, Editorial Director, Business Standard

  • To strengthen education as well as education infrastructure by which we can keep providing the kind of personnel that the startup ecosystem will require going forward.
  • It requires the kind of support because it is still at its infancy stage.
  • We need to sustain the new startups to make sure that the wonderful valuation these unicorns have so far got, should get converted in to bottom line so the wealth is become real instead of just remaining a sparkle in the eyes of the venture capitalist.

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