investment in Indian startups

The new DIPP is serious when he takes the initiative of encouraging the budding startups in the country. Every aspiring entrepreneur waits with bated breath to know what the whole fuss is about. We have almost all details covered for you about the startup scene in India.

Ramesh Abhishek succeeded DIPP Amitabh Kant as the latter went on to become the CEO of Niti Aayog. Startup India is the current Prime Minister’s on-going project in which he aims to give a boost to Indian entrepreneurs in order to encourage them to succeed and build upon their innovative ideas.

“The government is very keen to promote the startup sector. A lot of good things are already happening without government intervention, and what the government is doing is stepping startup to provide a much better enabling environment for startups. Much of what was announced this January is already underway” Abhishek.

“Taxation and incentives (for startups) were the big areas. Startups registered and incorporated from 1st April 2016 are eligible for tax incentives,” he adds.

The Government in order to continue with their initiatives has provisions of tax exemptions for startups which register from 1st April, 201- 31st March, 2019. The startups can also avail tax benefits and capital gains tax benefits for entrepreneurs who are willing to invest in the fund of funds which is to be set up by the government. Work is in full swing and SIDBI is aiming to set up an Rs 1,100 crore worth of fund of funds. The DIPP also proudly mentions that they’ve received over 571 applications. Since, this scheme is an extremely new and complicated one, Startup India Hub is also providing help in form of support and guidance to people who are aspiring to register to the scheme.

To make things easier, all aspiring entrepreneurs who want to register can call on 1800-11-5565 or mail the DIPP at dipp-startups@nic.in or get in touch with him on Twitter. This helpline is working because they’ve received over 10,000 calls which have been attended to. The startup hub is constantly tracking data and is open to suggestions. They are also looking to add more new features which will probably have training modules and financial tool modules in the market. The DIPP claims that the government’s job is to encourage entrepreneurship and like in many countries, the government has played a critical role, they want to do the same in India.

Seven proposals for research parks and 16 proposals for technology business incubators and startup centers have been recommended by the National Expert Advisory Committee which the Startup Hub is looking at. Also, they are fast tracking the patent applications and have set up 250 expert panels which are supposed to provide consultation. Procurement norms have also been relaxed for startups who want to register. The DIPP requests the people to have faith in the government because they want this scheme to be successful so that startups can be the new game-changers in the Indian market.

Because the Hub is not overly optimistic and know that all ventures will not succeed, the government has come up with the idea of Insolvency and Bankruptcy Bill 2015 to help business that aren’t doing very well a chance to wrap up in three months.

“We want to build a solid environment and infrastructure for entrepreneurship, focus on improving the ease of doing business, so that startups have no reason to register in Singapore, for example. We are working to remove all the bottlenecks,” Abhishek promises.

This looks to be a promising initiative and is definitely going to give a boost to all startups which are aspiring to make their innovative ideas work. If you have an idea and entrepreneurial qualities, this is the time to test them.

Venture capital (VC) and private equity (PE) firms cut investments in Indian start-ups by almost a quarter on a sequential basis in the three months to March, the second consecutive quarter they did so, as investors starved of exits and fearful of souring bets hold back cash.

Investors infused some $1.15 billion into Indian start-ups in the first quarter of this year, down as much as 24% from the December quarter, which itself had seen a slump in investments of 48% from the preceding three months, according to a joint report by KPMG and CB Insights.

The $1.15 billion reported by KPMG includes at least $150 million of secondary share sales that went from one set of investors in Snapdeal (Jasper Infotech Pvt. Ltd) to another.

The number of start-up deals fell 4% to 116 in the quarter, the report said.

The largest deals in the January quarter included $150 million received by online grocer BigBasket; $150 million raised by online marketplace Shopclues; and $50 million raised by Snapdeal, India’s second most valuable e-commerce firm.

“With mounting investor hesitation and concerns of overvaluation, Indian investment continued to decline in the first quarter,” KPMG and CB Insights said in the report.

After pumping more than $9 billion into Indian start-ups since the beginning of 2014, investors started pulling back late last year because of a mix of global macroeconomic factors such as a growth slowdown in China, as well as concerns over massive losses incurred by start-ups.

This year, investor caution has increased manifold, resulting in an acute slowdown in funding, fall in valuations and delayed deal closures.

“We have not been in contact with investors to raise funds but the sense we are getting is that there is a wait-and-watch situation that is going on,” said Ashish Goel, chief executive at online furniture retailer UrbanLadder. “There is definitely lesser investment in early-stage start-ups when compared to the last 4-5 months and (the number of) deals have certainly reduced.”

Even India’s top start-ups are struggling to raise cash at their current valuations.

Mint reported on 14 April that Flipkart Ltd and Snapdeal have held funding talks with several investors over the past six months, all of whom have refused to invest in the companies at their preferred valuations of $15 billion and $6.5 billion, respectively.

Both denied that they have been trying to raise fresh funds.

There are two main reasons why companies are struggling to raise money, said Aseem Khare, co-founder of home services start-up Taskbob, which raised Rs.28 crore in February.

“First, companies have been using investor money for giving away discounts that have beefed up top-line numbers but have not been able to create brand loyalty. Due to this, the percentage of revenue that comes through discounts is very high and has put doubts on the business model. The second reason is that of unit economics. There are businesses that are solving a problem, but the margins are too low for them to be sustainable or operationally profitable,” Khare said. By unit economics, Khare’s reference is to the cost and revenue from one transaction—say, a food delivery order taken online, and fulfilled.

The funding slowdown is not restricted to Indian start-ups alone, said Varun Khaitan, chief executive at home service app UrbanClap.

“The US has much bigger problems. And since some of the biggest investors are US-based, this problem has flowed into India. But if a company is doing well, then irrespective of the environment, it will attract investors,” he said.

The report by KPMG and CB Insights confirmed Khaitan’s views and said start-up deals in the US were much lower in the first quarter compared with the peak levels seen in 2015.

This article was originally published in Live Mint

Image credit: www.bitlanders.com

Tag: investment in Indian startups

A report on Startup India: DIPP secretary Ramesh Abhishek

Investments in Indian start-ups decline 24%