What a year 2016 is turning out to be from the viewpoint of India’s Startup ecosystem! The year got off to a ‘Big-Bang’ start with the Prime Minister outlining the Startup India Action Plan, indicative of the significance his government has ascribed to startups as job creators and growth stimulators. With angel and venture capital investments recording the highest ever jump to cross a new milestone in the previous year, 2016 was all set to be the year to usher in more ‘unicorns’ with access to a torrent of investor funds and to celebrate the spirit of entrepreneurship through government led initiatives like ‘Startup India’ and ‘Digital India’ with an objective to make the country the startup capital of the world.
All the hoopla at Delhi’s Vigyan Bhawan on 16th January notwithstanding, the four months that followed have been characterized by a fairly tepid Union Budget for startups in general and tech startups in particular; investors tightening their purse strings limiting the torrent of easy money to a trickle; celebrated unicorns being marked down in their valuations and news stories of ecommerce and foodtech startups either scaling down operations or serving pink slips to their employees en masse.
While opinion pieces have been written dime a dozen across multitude media channels cogitating about whether or not the bubble in the world’s third largest startup ecosystem has burst, the focus of this article is to moot and analyze the role played by the government in bolstering this ecosystem.
Startup India – What Works, What Doesn’t
Defining a “Startup”- Too narrow in scope?
While the upshot of the initiative led to conjuring up a definition of a ‘startup’, the words “an entity working towards innovation, development of new products, or services driven by technology or intellectual property” restricts the scope to technology powered or internet run businesses and excludes those brick and mortar enterprises and social ventures with an offline business model. Small and Medium enterprises (SMEs) employ over 120 million people across India and including new ventures in this space under the aegis of startups would have been most prudent.
Regulatory Compliance – Too Cursory?
With an objective to improve the ease of doing business, launching the Mobile App and Portal to facilitate a single window registration of startups, stakeholder collaboration, self-certification for labor and environmental compliance are only too cosmetic. The real pain point however lies in the ambiguity of statutes that govern day to day operations which merit simplification.
The Companies Act of 2013 is a case in point which poses a challenge for companies to manage their daily business. The fund raising process, for instance, has been over-complicated and the penalties have been increased dramatically having a detrimental effect by scaring many entrepreneurs away. Regulations pertinent to the Reserve Bank of India (RBI), Labor laws as well as processes mandated by the Ministry of Corporate Affairs (MCA) need to be simplified. Once done, the government will have to perform a fine balancing act by giving these statutes enough teeth to deter any scope for fraudulent activities.