Startup India: All You Need To Know To Get Advantage Of It

Prime Minister Narendra Modi on
Saturday launched the "Start-Up
India Action Plan" that aims to
enable an eco-system to promote
and nurse entrepreneurship across the country. What exactly is the plan and the details of the scheme?
So what exactly is Startup India?
Startup India in an action plan to
develop an ecosystem to promote
and nurture entrepreneurship
across the country. This is based on an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage startups with jobs creation. The campaign was first announced by Prime Minister Modi in his 15 August 2015 address from the Red Fort.

*What is a startup?

A startup is an entity, private,
partnership or limited liability
partnership (LLP) firm that is
headquartered in India, which was
opened less than five years ago and have an annual turnover less than Rs25 crore. To be eligible for
considering as startup, the entity
should not be formed by splitting
up or reconstruction and its
turnover should not have crossed
Rs25 crore during its existence.

*What are the advantages?

Under the Scheme, no inspection
would be carried out on start-ups
for three years regarding labour
laws. In addition, environment law
compliance is required only post-
self certification.

*Are there financial benefits?

In patent costs, the startups can
claim an 80% rebate. That means, if a startup applies for a patent, the government will fund the defence of the patent, and give rebate of 80% in the fees. The government will also pay fees of the facilitator for helping the startup obtain the patent. Faster patent registration and protection for Intellectual Property Rights (IPRs) is provided under the Scheme. Patent filing procedures to be simplified.Significant reduction in fees for filing Patents.

*What are the advantages for
startups regarding registration?

The government is launching a
mobile app on 1 April 2016 and a
portal that will allow companies to
register in a day. In addition, there would be a single point of contact for Start-up India hub. In addition, there will be single window clearance for clearances, approvals,and registrations.

*What is the government’s role in
boosting start ups?

The Ministry of Human Resource
Development (HRD) and the
Department of Science and
Technology have agreed to partner
in an initiative to set up over 75
startup support hubs in the
National Institutes of Technology
(NITs), the Indian Institutes of
Information Technology (IIITs), the
Indian Institutes of Science
Education and Research (IISERs)
and National Institutes of
Pharmaceutical Education and
Research (NIPERs).

*What are the special benefits for
startups in public procurement?
Startups in the manufacturing
sector are exempted from the
criteria of prior ‘experience/
turnover’ without any relaxation in
quality standards or technical
parameters in public procurement
(by government).

*How much funding is available
for this scheme?
Rs10,000-crore fund for new
enterprises, equal opportunity in
government procurement, a Rs500- crore credit guarantee scheme and easier exit norms. Japanese Softbank, which had already invested $2 billion in Indian startups, has pledged total
investments of $10 billion.

*What are benefits under the
provision on Income Tax?

Under the Scheme, Income Tax
exemption is available for first
three years. However, the startup
will be eligible for tax benefits only after obtaining certificate from the Inter-Ministerial Board, setup for this purpose.

*Is there any exemption in capital
gains tax?

Yes. If the money is invested in
fund of funds recognised by the
government, the investor can claim capital gains tax exemptions. In addition, existing capital gain tax exemption for investment in newly formed MSMEs by individuals shall be extended to all startups.

*What is the eligibility for
startups?

To become eligible as a startup and get a green signal from the Inter- Ministerial Board, the entity should be the one which aims to develop and commercialise, a new product
or service or process or a
significantly improved existing
product or service or process that
will create or add value for
customers or workflow. Products,
services or process, which do not have potential for commercialisation or is undifferentiated or have no or
limited incremental value will not
be considered under the Scheme.
To be considered as eligible as
startup the entity, should be
supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post- graduate college in India an incubator, which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI or be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/Accelerator Angel Network duly registered with SEBI that endorses innovative nature of the business or be funded by GoI as part of any
specified scheme to promote
innovation or have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

Top 10 Reasons Small Businesses Fail

One of the least understood aspects of entrepreneurship
is why small businesses fail, and
there’s a simple reason for the
confusion: Most of the evidence
comes from the entrepreneurs
themselves.
I have had a close-up view of numerous business failures —
including a few start-ups of my
own. And from my observation, the reasons for failure cited by the
owners are frequently off point,
which kind of makes sense when
you think about it. If the owners
really knew what they were doing
wrong, they might have been able
to fix the problem. Often, it’s
simply a matter of denial or of not
knowing what you don’t know.
In many cases, the customers — or, I should say, ex-customers — have a better understanding than the owners of what wasn’t working.
The usual suspects that the owners
tend to blame are the bank, the
government or the idiot partner.
Rarely does the owner’s finger
point at the owner. Of course, there are cases where something out of the owner’s control has gone terribly wrong, but I have found those instances to be in the
minority. What follows, based on
my own experiences and
observations, are the top 10 reasons small businesses fail. The list is not pretty, it is not simple, and it does not contain any of those usual suspects (although they might come in at Nos. 11, 12 and 13).

1. The math just doesn’t work.

There is not enough demand for
the product or service at a price
that will produce a profit for the
company. This, for example, would
include a start-up trying to compete against Best Buy and its economies of scale.

2. Owners who cannot get out of
their own way.
They may be stubborn, risk averse, conflict averse — meaning they need to be liked by everyone (even employees
and vendors who can’t do their
jobs). They may be perfectionist,
greedy, self-righteous, paranoid,
indignant or insecure. You get the
idea. Sometimes, you can even tell these owners the problem, and they will recognize that you are right — but continue to make the same mistakes over and over.

3. Out-of-control growth.
This one might be the saddest of all reasons for failure — a successful business that is ruined by over-expansion.
This would include moving into markets that are not as profitable,
experiencing growing pains that
damage the business, or borrowing too much money in an attempt to keep growth at a particular rate. Sometimes less is more.

4. Poor accounting.
You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time. Why? For one thing, it is a common — and
disastrous — misconception that an outside accounting firm hired
primarily to do the taxes will keep
watch over the business. In reality,
that is the job of the chief financial
officer, one of the many hats an
entrepreneur has to wear until a
real one is hired.

5. Lack of a cash cushion.
If we have learned anything from this recession (I know it’s “over” but my customers don’t seem to have gotten the memo), it’s that business is cyclical and that bad things can and will happen over time — the loss of an important customer or critical employee, the arrival of a new competitor, the filing of  lawsuit. These things can all stress the finances of a company. If that company is already out of cash (and borrowing potential), it may not be able to recover.

6. Operational mediocrity.
I have never met a business owner who described his or her operation as mediocre. But we can’t all be above average. Repeat and referral business is critical for most businesses, as is some degree of marketing (depending on the business).

7. Operational inefficiencies.

Paying too much for rent, labor, and materials. Now more than ever, the lean companies are at an
advantage. Not having the tenacity
or stomach to negotiate terms that are reflective of today’s economy may leave a company uncompetitive.

8. Dysfunctional management.

Lack of focus, vision, planning, standards and everything else that goes into good management. Throw fighting partners or unhappy relatives into the mix and you have a disaster.

9. The lack of a succession plan.

We’re talking nepotism, power
struggles, significant players being
replaced by people who are in over their heads — all reasons many family businesses do not make it to the next generation.

10. A declining market.
Book stores, music stores, printing businesses and many others are dealing with changes in technology, consumer demand, and competition from huge companies with more buying
power and advertising dollars.
In life, you may have forgiving
friends and relatives, but
entrepreneurship is rarely
forgiving. Eventually, everything
shows up in the soup. If people
don’t like the soup, employees stop working for you, and customers stop doing business with you. And that is why businesses fail.