RAKESH GUPTA
DISCUSSION ISSUES
Why some countries do far better in coming-up with new
ventures or disruptive innovations than others?
Why do some specific regions or cities are far more
successful in the above than many other regions within the
same country?
Why in the last 10 years or so far many start-ups have come
up in India than in the past?
How Entrepreneurship Contribute
Global experience indicates that new businesses create far more jobs than
established ones
Historically Indian economy was thriving with entrepreneurial spirit
accounting for 25% of world’s GDP some 350 years ago declining to 2% of
GDP in 1947 with a new low of 0.2% in early 1990’s
India with its current demographics need many job creators than job seekers
Start-up lead technological change & innovation to “Enhance Productivity”
“Entrepreneurship” is a PHENOMENON. Youth is re-imagining
India –1000s of new start-ups being launched with new ideas”
Entrepreneurship engine of growth in India, over the next decade,
has the potential to-
Create 2500 successful high growth venture.
Generate 10 million direct & 20-30 million indirect jobs.
Consequently, powering India’s economic progress with –
Inclusive economic development
Innovative products/services for India’s young population
First Generation Entrepreneurs enable “Job Creation” like
Infosys, Bharti, Sun Pharma, Kotak, Mindtree, IndiaBulls, Yes
Bank, Edelweiss, Adani Enterprises, Naukri, Makemytrip…
JustDial, Flipkart, Bharat Matrimony, Shaadi, SnapDeal,
Redbus, Bookmyshow, Zomato, Olacabs, Inmobi, MuSigma,
Quikr…
India an entrepreneurial nation where entrepreneurs struggle
to start and grow their businesses
CURRENT TRACK RECORD (MIXED BAG)
Though rate of new registration in India is low but India has the
2nd largest number of shadowy businesses after Indonesia
As per the Economic Survey of 2023-2024, 103,057 patents
were granted in India compared with 798,000 patents in China
Many significant roadblocks hold back and dampen entrepreneurial
activity. The eco-system for starting and running new ventures has many
gaps
India ranks lowly on many indicators like on innovation, entrepreneurial
eco-system and ease of doing business, which indicates the level of
difficulty in creating new businesses and growing them
BUT
Attracting investment flows and creating substantial wealth
This cycle has been set in motion over past few years with Emergence of
first generation entrepreneurs, increasing availability of capital, and
strengthening of the ecosystem.
India is rapidly emerging as leader in ‘frugal innovation’ with some
of the most innovative and entrepreneurial ventures emerging from
India
Number of incubators in India has risen from 120 in the year 2012
to 1100 within a decade
Ease of Doing Business in India
Parameters 2021 Rank 2019 Rank
Starting a Business 136 137
Dealing with Construction Permits 186 181
Getting Electricity 22 24
Registering Property 154 166
Getting Credit 25 22
Protecting Investors 14 17
Paying Taxes 161 121
Trading Across Borders 80 80
Enforcing Contracts 163 163
Resolving Insolvency 108 108
Ease of Starting a Business (India)
Indicator India South Asia OECD
Procedures (number) 12 7 5
Time (days) 27.0 16.2 11.1
Cost (% of income per
capita) 47.3 19.8 3.6
Paid-in Min. Capital (%
of income per capita) 124.4 15.8 10.4
Time Spent on Tax Issues
(Hours) 252 219 147
Cost of Firing (Wages in
Weeks) 56 51 43
Procedure Time to Complete Associated Costs
Obtain director identification number (DIN)
online 1 day INR 100
Obtain digital signature certificate online 1 day INR 400 to INR 2,650
Reserve the company name with the Registrar of
Companies (ROC) online 2 days INR 1000
Pay stamp duties online, file all incorporation
forms and documents online and obtain the
certificate of incorporation 3-7 days INR 24,800
Make a seal 1 day INR 350
Visit an authorized franchise or agent appointed
by National Securities Depository Services
Limited (NSDL) or Unit Trust of India (UTI)
Investors Services Ltd to obtain a Permanent INR 85 for Fee and INR 5 for Application Form, (if
Account Number (PAN) 7 days not downloaded)
Obtain a tax account number for income taxes
deducted at source from the Assessing Office in
the Mumbai Income Tax Department 7 days, simultaneous with previous procedure INR 55
Register with Office of Inspector, Mumbai Shops INR 2,400 (registration fee) + 3 times registration
and Establishment Act 2 days, simultaneous with previous procedure fee for Trade Refuse Charges (INR 7,200)
INR 500 (Registration Fee) + INR 25 (Stamp Duty)
Register for VAT online 10 days, simultaneous with previous procedure for compulsory VAT registration
Register for profession tax 2 days, simultaneous with with previous procedure no charge
Register with Employees' Provident Fund
Organization 12 days, simultaneous with with previous procedure no charge
Register for medical insurance (ESIC) 9 day, simultaneous with with previous procedure no charge
Exit Options
Importance of Closing a Company
Everyday 2 start-ups are set-up in India but by the end of 3 years 1 out of
10 survive and entrepreneurs need to close a venture to move on
As per Registrar of Companies, we have 13.6 lakh registered companies
in India out of which 5 lakh are dormant or defunct
Non-closure lock the Director’s to start again whereas successful closure
saves one from repeated tax demands and need to file tax returns, keeps
books clear and save entrepreneurs from future lawsuits
Govt. charges INR 5,000 for winding-up a registered private limited
company and it takes minimum of 18 months after shutting down
operations and INR 2-4 lakhs are liquidation charges and it takes
minimum of 36 months
India lags on both entrepreneurship and innovation
Source: The Global Entrepreneurship Development Index (GEDI) 2012 Report, Center for Entrepreneurship and Public Policy
The Global Innovation Index 2011 Report, INSEAD
Entrepreneurial Ecosystem
Role of Govt. & Regulatory Framework
Finance
Businesses as entrepreneurial hubs
Entrepreneurial Culture
Adequate Collaboration Forums
Catalytic Govt. Policy & Regulatory Framework
Cut Down Bureaucratic red-tape and make doing business in
India much easier
Facilitate Investment (Angel, VC & Impact Investing)
Enhance Incubation Network
Facilitate, deepen and fasten the learning curve by engaging
with international bodies and experiences
Access to Capital
Remove hurdles that inhibit domestic fund raising
Provide tax incentives to HNI’s, Corporates and institutions
that invest in early stage ventures
Create fund of funds (FOF)
Encourage financial institutions to develop debt offerings for
scaling-up ventures
Deepen the availability of funds to tap smaller areas and
marginalized sections
Businesses as Entrepreneurial Hubs
Tap Private sector players
Encourage industry bodies to play active role
Encourage M&A activity
Creating an Entrepreneurial Culture
Forge Links with Ent. Hubs like Silicon Valley/Tel Aviv for Knowledge
Sharing
Encourage educational institutions to develop and upgrade existing
programmes and focus on innovation
Promote strong connection between Industry & Academia
Provide platforms for interaction between established industry players, start-
ups, mentors and investors
Create a culture of innovation among educational institutions
Make entry and exit less cumbersome
Create an environment to promote more inclusive form of entrepreneurship
The Entrepreneurial ecosystem
Policy and regulatory environment End consumers
Central State government • Size, growth and structure of
government market
• Consumption pattern and taste
• Fiscal Policy – tax, etc for innovative products and
• Regulatory regime covering entry, ideas
operation and exit
• IP protection, contract enforcement,
etc.
Investors
Demand for funds Supply of funds
•Quality and number of entrepreneurs Government
•Size of funding required
•Stage
Hard in evolution of the enterprise
infrastructure Culture supporting Educational institutions
•Existence and reach of entrepreneurship •Foster entrepreneurship
physical infrastructure- •Entrepreneurial and •Availability of adequate
roads, communication, innovation spirit, tolerance number and sufficiently
energy and utilities, for failure, media support skilled labour
economic/ industrial zones and coverage •Mentoring
etc.
• Facilitate collaboration with overall ecosystem
- Funding of iLabs
Entrepreneurial - Participation in dialogue with all stakeholders to ensure consultative
ecosystem policy formation
• Facilitate effective provision of services by incubators
• Creation of accreditation frameworks for certifying start-ups
• Hard infrastructure development
• Procedural and regulatory reform for all stages of business
- Entry – single window clearance, information availability, industrial
Government and Entrepreneur clusters etc
- Operations – labour laws, IP laws etc
. regulatory
bodies - Exit mechanisms and modalities including paperwork and
restrictions
• Enabling venture capital funds, angel investors and business to
provide equity to entrepreneurs
- Fiscal policy initiatives
Capital - Regulatory reform affecting fund raising, operation & exit, especially
domestic capital raising
• Enabling banks and Fis to provide debt to entrepreneurs
- Regulatory reform for promoting credit to start-ups
- Creation of innovative products for providing non-collateralized debt
Political Factors Changing Policy Framework (New Start-up Policy)
More Focus on job creators than job seekers
Focus on changing mindset and overcoming cultural bottlenecks
Emerging & Growing Economy
Economic Factors Easier Access to of Risk Capital
Rising per capita disposable income and Increase in Double Income Families
Rising urbanization
Increasing Risk Appetite
Social Factors Fast Changing Socio-Cultural Factors
Young Population (Demographic Dividend)
Fast Expanding Educational Infrastructure
Increasing access to education
Technological Factors Increased internet penetration & Rise of e-commerce
Increasing Tele-density & Proliferation of smartphones
Increased Govt. Thrust on Digitization
Higher Adaptation and Diffusion of Technology
Start-Up Financing
Angel & Incubator Investment by Region (2024)
Region Rounds of Angel Rounds of Total
Investment Incubator
Investment
US 213 205 418
Europe 79 67 146
China 14 3 17
India 19 18 37
Israel 2 3 5
Canada 20 16 36
RECENT DEVELOPMENTS
Replicate Kerala Government Model
Start-up Village for 1000 local start-ups
Governments to Encourage Adoption of Productivity Enhancement Tools
Leverage automation in services of mass nature : taxi booking, bus ticket, tourist
ticketing, e-governance…
State Finance Corporations to Invest in VCFs/AIFs
Seek a commitment of double the sum invested by SFCs be allocated by the fund
for the businesses from the state.
NASSCOM 10,000 Start-Ups
Received 7,000 applications, shortlisted 332
These 332 start-ups pitched B-PLANS to 50 Angels, V.C’s
Over 100 made it to accelerator stage, received mentoring to
fine-tune their B-Plan and Scaling-up strategies
Key bottle-necks identified were how to start and early stage
support system was found to be fragile
Return of Natives
A broken system presents a land of opportunity
Likely Reasons to return are Huge Market size, massive talent
pool, rich demographics and Digital opportunity
Examples of start-ups; Healthkart. Exotel, Knowlarity, Savaari,
Voterite
Close to 30 start-ups in Bangalore, 34 in Delhi-NCR and 23 in
Mumbai were started by returnees in 2013.
Growing Interest to Engage with Start-up Ecosystem
Top Institutions and Firms across the world working to engage deeply
with start-up ecosystem in India.
STANFORD’s IGNITE (7 Week) programme now offered in 5 cities
across the world including Bangalore
Canada’s Ryerson University started their Accelerator Programme in
India, where they take 5-10% stake in exchange for $ 50,000
Google starting their highly successful 5 day programme called
GOOGLE LAUCHPAD from Nov.3-7 in Bangalore.
RELIANCE Industry partnering with MICROSOFT to incubate start-ups
with seed capital, mentoring and technology on the lines of YCombinator
RECENT ANNOUNCEMENTS
Govt. announced INR 10,000 cr. fund for early stage ventures
Working on entrepreneur friendly legal bankruptcy
framework
Plan to start network of Incubators and Accelerators to boost
innovation and new venture development
INR 200 cr. fund for Dalit entrepreneurs managed by IFCI
Many experts expect next decade to be golden era of
entrepreneurship in India
FUTURE CHALLENGES
Cultural shift, need to accept failure as a natural process of
entrepreneurship and view them as learning experience
Need to enrich and strengthen the Eco-System to catalyze
the start-ups and scale-up
Need to revisit the entire educational system to encourage
creative thinking, experimentation and innovate
Identify and encourage high impact entrepreneurship
Ease Process of Starting & Closing a Business
oCatch global headlines in May’2015 that India Improve its rank to
sub-100 from 179th Rank - Ease formation of a company by
leveraging India’s software competence for
oSingle Application with 24-hour Turnaround Time (SATTT) - Name
Search, DIN, Digital signatures, Incorporation certificate, and PAN.
oWhen the start-up decides the place of operation in SATTT -
Allocate Tax Account Number, register it under Shop &
Establishment and the MSME Act.
Allow flow of Long-Term Institutional Capital for Start-ups
RBI to encourage VC/Start-up investments by Banks under
“priority sector lending” norms.
Start-up Equity Funding thru SEBI Approved VCF/AIF Category
I to be at par with priority sector lending norms.
Vibrancy of start-ups is comparable to agriculture/farming in
having a positive spillover effect on the economy.
Endowment Fund worldwide invest in VC/PEs.
HOSTELFUND. COM: CATCH THEM
YOUNG
HostelFund (HF) was founded by Ankur Jain in December 2019
based out of Gurugram. It was set-up to support student start-ups
through intense mentoring and helping them in getting funding at
an early stage. The venture idea was based on Ankur’s personal
experience as a student entrepreneur and the challenges he
faced during those days. He refined the idea during his regular
interactions with students who were keen to start their
entrepreneurial ventures.
HOSTELFUND. COM: CATCH THEM YOUNG
The mentoring-heavy model and stiff filtering mechanism to shortlist
the mentees led to low conversion rate of mentee firms for HF thus
putting a question mark on the financial viability of the venture.
HF needed to address the issue to improve their conversion rate to
make the venture financially viable. Ankur was seriously thinking
whether to continue with their present approach or needed to look
for other alternatives before deciding the way forward.
