S

2016

Start Up Definition

Recognition Process

Ease of Starting Business

Resolving the Chakravyuha Challenge

Government initiatives

Major Tax Benefits

FEMA Relaxation for StartUps

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2

3

5

6

8

9

Content

SEBI EMERGE ITP for StartUps 10

StartUp Current India Scenario 13

Start Up Definition:

An entity shall be

Considered as a ‘startup’-

a) Up to five years from the date of its incorporation/registration,

b) If its turnover for any of the financial years has not exceeded Rupees 25 crore, and

c) It is working towards innovation, development, deployment or commercialization of new

products, processes or services driven by technology or intellectual property;

But, any such entity formed by splitting up or reconstruction of a business already in existence

shall not be considered a ‘startup’.

An entity would not consider start up under the definition of point c if its

Products or services or processes which do not have potential for commercialization, or

Undifferentiated products or services or processes, or

Products or services or processes with no or limited incremental value for customers or

workflow

Provided further that in order to obtain tax benefits a startup so identified under the above

definition shall be required to obtain a certificate of an eligible business from the Inter-

Ministerial Board of Certification consisting of:

a) Joint Secretary, Department of Industrial Policy and Promotion,

b) Representative of Department of Science and Technology, and

c) Representative of Department of Biotechnology.

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StartUp India 2016

Recommendation Letter

Funding Details

A Patent

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Recognition Process

Recommendation Letter can be obtained from

From any Incubator established in a postgraduate college in India.

By any incubator which is funded from Govt of India or any State Govt.

Any Incubator recognized by Government of India.

A Letter of funding can be

Funding of not less than 20 per cent in equity by any Incubation Fund/Angel

Fund/Private Equity fund/Accelerator/Angel Network duly registered with Securities

and Exchange Board of India that endorses innovative nature of the business.

a letter of funding by Government of India or any State Government as part of any

specified Scheme to promote innovation

A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with

the nature of business being promoted.

“Startups will be required to submit a simple application with any of the abovedocuments.”

StartUp India 2016

Ease of Starting Business

To reduce the regulatory burden on Startups thereby allowing them to focus on their

core business and keep compliance cost low.

Startups shall be allowed to self-certify compliance (through the Startup mobile app)

with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will

be conducted for a period of 3 years.

In case of environment laws, Startups which fall under the ‘white category’ (as defined

by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and

only random checks would be carried out in such cases.

White Category Industry1 Air coolers /conditioners 13 Electrical and electronic item 25 Shoe brush and wire brush

2 Bicycles ,baby carriages 14 Engineering fabrication units 26 Medical oxygen

3 Bailing of waste papers 15 Flavored betel nuts 27 Organic and inorganic nutrients

4 Bio fertilizer /bio-pesticides 16 Fly ash bricks! block 28 Organic manure

5 Biscuits trays 17 Fountain pen 29 Packing of powdered milk

6 Blending / packing of tea 18 Glass ampules 30 Paper pins and u clips

7 Block making of printing 19 Glass putty and sealant 31 Repairing of electric motors /generators

8 Chalk making 20 Ground nut decorticating 32 Rope (plastic and cotton)

9 Compressed oxygen gas 21 Handloom carpet weaving 33 Scientific and mathematical instrument

10 Cotton and woolen hosiers 22 Leather cutting and stitching 34 Solar module NC energy apparatus

11 Diesel pump repairing 23 Coir items from coconut husks 35 NC Energy power plant less thank 25MW

12 Electric lamp (bulb) and CFL 24 Metal caps containers etc 36 Surgical and medical products assembling

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StartUp India 2016

Days required to starting a

business in India

34

Days

29

Days

2015 2016

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Startup India Hub

Government to set up a Startup India Hub which will be a single-point of contact forStartups.

Such hub will enable knowledge exchange by collaborating with various stakeholders

such as the Central and State Governments, legal partners, consultants, universities,

R&D institutions and assist in the funding process.

Rolling-out of Mobile App and Portal

To serve as the single platform for Startups for interacting with Government and Regulatory

Institutions for all business needs and information exchange among various stakeholders.

The Government shall introduce a Mobile App to provide on-the-go accessibility for:

• Registering Startups with relevant agencies of the Government

• Tracking the status of the registration application and anytime downloading of the RC.

• Filing for compliances and obtaining information on various clearances or approvals.

• Collaborating with various Startup ecosystem partners.

• Applying for various schemes being undertaken under the Startup India Action Plan

Relaxed Norms of Public Procurement for Startups

At present, effective April 1, 2015 Central Government, State Government and PSUs have to

mandatorily procure at least 20% from the Micro Small and Medium Enterprise (MSME).

In order to promote Startups, Government shall exempt Startups (in the manufacturing sector)

from the criteria of “prior experience/ turnover” as an eligibility criteria for any tender.

StartUp India 2016

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Insolvency Bankrupt Bill 2015 –Easing the Chakravyuha Challenge

India has made great strides in removing the

barriers to the entry of firms, talent, and technology

into the Indian economy. Less progress has been

made in relation to exit. Thus, over the course of six

decades, the Indian economy moved from

‘socialism with limited entry to “marketism”.

The Charkravyuha legend from the Mahabharata

describes the ability to enter but not exit, with

seriously adverse consequences. It is a metaphor for

the workings of the Indian economy in the 21st

century, the legacy of several decades of economic

policy making.

The Insolvency Bankrupt Bill 2015 tabled in Lok Sabha has provisions for fast track exit or

voluntary closure of businesses.

The Insolvency and Bankruptcy Bill 2015 (“IBB”), will allow fast track and / or

voluntary closure of businesses.

Startups satisfying the specified conditions of the IBB will be allowed to be wound up in

90 days on a fast track basis.

Such a wind up will be carried out by an Insolvency Professional who will be in charge of

the company and oversee the liquidation process.

StartUp India 2016

In order to augment incubation and

R&D efforts, 31 centers of Innovation

and entrepreneurship will be set-up/

scaled up for providing facilities to

over 1,200 Startups, at national

institutes.

Improving Ease of Starting aBusiness.

To create Ebiz portal forReducing approvals required tostart a business.

To complete tax registration in 2days

Government policies and initiatives are aimedtowards improving the overall start-up ecosystem

Funding

Government to set up a Fundwith an initial corpus of Rs.2,500crore and a total corpus ofRs.10,000 crore over a period of4 years.

Credit Guarantee Fund for Startups to

catalyze entrepreneurship through credit to

innovators. It will be rolled out through the

National Credit Guarantee Trust Company/

SIDBI with a budgetary corpus of Rs.500

crores per year for the next 4 years.

Technology

7 new research parks are proposed to

be set up with an initial investment of

Rs.100 crore each.

These parks shall enable companies

with a research focus to set up base

and leverage the expertise of

academic/ research institutions.

Operations

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StartUp India 2016

AIM proposes to promote entrepreneurship through Self-Employment

and Talent Utilization (“SETU”), wherein innovators would be

supported and mentored to become successful entrepreneurs.

This would be achieved through: Establishment of sector specific incubators

Establishment of 500 tinkering labs

Pre-incubation training

Strengthening of existing incubation facilities

Biotechnology

5 new bio clusters, 50 new bio incubators, 150 technology transfer

offices and 20 bio connect offices will be established though

Biotechnology Research Assistance Council (BIRAC).

Biotech Equity Fund – would be set up in partnership with National

and Global Equity Funds to provide financial assistance to young

Biotech Startups.

Legal support

Startup Intellectual Property Protection (SIPP) scheme will be

introduced on a pilot basis for a one year period to facilitate filing of

Patents, Trademarks and Designs. The scheme would include:

Fast-tracking patent application.

Setting up a panel of “Facilitators” who will advise on different

Intellectual Property Rights (“IPR”) and also provide advice on

promoting and protection of IPRs in overseas jurisdictions.

Such Facilitators will also provide end-to-end advisory from

making applications till the stage of final disposal of the IPR

application.

The Government will bear the cost of such Facilitators and the

Startups shall bear only the cost of the applicable statutory

fees.

A rebate of 80% on patent filing fees vis-à-vis other companies

is proposed.

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StartUp India 2016

MAJOR TAX BENEFITS

Major Tax Benefits 2016

Exemption on Capital Gain

Exemption shall be given to persons who have capital gains during the year, if they have invested

such capital gains in the Fund of Funds recognized by the Government. This will augment the

funds available to various VCs/AIFs for investment in Startups.

In addition, existing capital gain tax exemption for investment in newly formed manufacturing

MSMEs by individuals shall be extended to all Startups. Currently, such an entity needs to

purchase “new assests” with the capital gain received to avail such an exemption.

Investment in ‘computer or computer software’ (as used in core business activity) shall also be

considered as purchase of ‘new assets’ in order to promote technology driven Startups.

Tax Exemption on profits to Startups for 3 years

With a view to stimulate the development of Startups in India and provide them a competitive platform,

it is imperative that the profits of Startup initiatives are exempted from income-tax for a period of 3

years. This fiscal exemption shall facilitate growth of business and meet the working capital

requirements during the initial years of operations. The exemption shall be available subject to non-

distribution of dividend by the Startup.

Tax Exemption on Investments above Fair Market Value

Under The Income Tax Act, 1961, where a Startup (company) receives any consideration for issue of

shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable

in the hands of recipient as Income from Other Sources.

In the context of Startups, where the idea is at a conceptualization or development stage, it is often

difficult to determine the FMV of such shares. In majority of the cases, FMV is also significantly lower

than the value at which the capital investment is made. This results into the tax being levied under

section 56(2) (viib).

Currently, investment by venture capital funds in Startups is exempted from operations of this

provision. The same shall be extended to investment made by incubators in the Startups.

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FEMA Relaxation for StartUps

A start-up in India with an overseas subsidiary is permitted to open foreign currency

account abroad to pool the foreign exchange earnings out of the exports/sales made by

the concerned start-up;

The overseas subsidiary of the start-up is also permitted to pool its receivables arising

from the transactions with the residents in India as well as the transactions with the non-

residents abroad into the said foreign currency account opened abroad in the name of

the start-up;

The balances in the said foreign currency account as due to the Indian start-up should be

repatriated to India within a period as applicable to realisation of export proceeds

(currently nine months);

A start-up is also permitted to avail of the facility for realising the receivables of its

overseas subsidiary or making the above repatriation through Online Payment Gateway

Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten

thousand) or up to such limit as may be permitted by the Reserve Bank of India from

time to time under this facility.

StartUp India 2016

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EMERGE-INSTITUTIONAL TRADING PLATFORM

India has witnessed a growing start-up

ecosystem fuelled by a large entrepreneurial

community. Many entrepreneurs are building

excellent businesses which can grow

exponentially with timely capital infusion.

EMERGE-ITP is a regulated market place which

meets the needs of the country’s contemporary

business environment. It allows start-ups and

young companies to list without an initial public

offering (IPO).

Emerge-ITP is a credible platform for start-ups and growing companies to list. The platform will

attract diverse risk investors including institutions, angel associations and venture capital funds.

StartUp India 2016

EMERGE's Institutional Trading Platform is

for Start-Ups and Small and Medium

Enterprises which do not have their

securities listed on any recognized stock

exchange and which seek listing of their

specified securities exclusively on the

institutional trading platform for informed

investors.

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Simple Listing Process

Benefits for an Investor

StartUp India 2016

According to ICDR

regulation

PrepareInformationMemorandum(IM)

Submit the IMto NSE andapply for listing NSE’s approval

NSE will verify the IM and

make it available on its

website

Company's securities are

listed

1. Unlocking of shareholder wealth. Exitand Liquidity for VC/ PE/ RiskInvestors.

2. Better portfolio churn

EXIT & LIQUIDITY

3. Monitoring of invested portfolio

becomes smoother due to benefits of

disclosures and compliance

requirements of a regulated platform

EASIER MONITORING

4. Exit from a listed company attracts

only Securities Transaction Tax (STT)

instead of Capital Gains tax

BETTER RETURNS

5. Easy access to information will lead tofaster decision making

6. Enhanced ability to enter and exitinvestments

FASTER DECISION MAKING

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StartUp India 2016

Total Start Ups 20,000

Startups % Share

4,300 | 5,700 43% | 57%

E-commerce - 33%

B2B - 24%

Consumer internet - 12%

Mobile apps - 10%

SaaS - 8%

Other – 13%

Engineering - 17%

Construction- 13%

Agri products- 11%

Textile - 8%

Printing & packaging – 8%

Transport & logistics - 6%

Outsourcing & support – 5%

Other – 32% Technology based startups

Non-Technology based startups

800 to 2,000 Average no. of new tech startups have moved from 480 in 2010 to 800 in 2015. Expected to increase to 2,000 in 2020.

4300 to 11,500 Total Tech startups are expected to increase to 11,500 in 2020 from 4,300 in 2015.

Double The number of PE/VC firms have doubled in the last 12 months Total

9 On Unicorn Clubs StartUps Valuation More than US $1 Billion

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First quarter of 2016, Indian startups have cumulatively raised US

$ 1.73 billion across 344 deals from 312 investors. In terms of the

deal volume, the month of March has outperformed the other

respective months with 128 deals. However, e-commerce, SaaS

and Health-tech has turned out to be the top performing

investment segments this quarter with a cumulative investment of

over US$ 810Mn across 103 startups that accounts for ~47 per

cent of the cumulative deal value. in terms of investment (deal

value), January has gained a significant interest with a yelling

investment of US$ 761 Million over 105 deals.

338 - Number of

startups

US$ 1.73 Bn

Total deal size

40 - Mergers &

Acquisition

344 - Number of

deals

312 - Investors

involved

e-commerce -

Prominent

segment

StartUp India 2016

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StartUp India 2016

114 Deals

344 Deals

Q4 2015 Q1 2016

Investment Activity

Deals on Each Month

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Deals Classification

M&A

StartUp India 2016

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11

1316

Total 40 M&A Deals

StartUp India 2016

Pre Series A Funding for start Ups two years ago which was very rare in India is now increasing

day by day this is majorly because of the Govts initiatives and confidence of VCs over the

current situation.

$1 Million plus cheques in the early stage market, which had a prominence in early 2015 but

showing a huge drops in funding it was due to the high pressure on profitability from VCs to the

firms. It also indicates that this market is maturing as no of players are increasing day by day

and investors are now more alert. Also rise in $1Mn plus funding increased significantly for

Apr-16.

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2

9

17

27

35

18

0

5

10

15

20

25

30

35

40

Pre Series-A Funding $Mn

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Apr 16

22 23

24

28

17

10

0

5

10

15

20

25

30

$1 Million plus Funding's

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Apr 16

StartUp India 2016

Food Tech Start Ups in India : Story of Up & Down

256 322

2184

5653

819 0

1000

2000

3000

4000

5000

6000

Food Tech Funding Year Wise $M

2012 2013 2014 2015 2016

23

00

Pro

jecte

d

66

18

11

4 1

0

10

20

30

40

50

60

70

2016 : Funding Break Ups

Seed Funding Series A Series B Series C Series D

Food Tech Industry the App Based food delivery start Ups which are majorly hit as it is the

overcrowded industry as of now in metro cities of India. Majority of the startups finding hard

for further findings. In 2016 most of the funding are from seed funding based.

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Conclusion

India is now a days not among the emerging countries for startup it already emerged as

a startup ecosystem country. According to NASCOM India is now third in global startup

ecosystem. The trend of start-ups is really picking up in India and the scene is only

expected to get much more competitive in the upcoming years owing to the large influx

of online companies all over the country.

According to a report by Nasscom, India will be a center for 11,500 tech startups by

2020. In fact, the NASSCOM report suggests that Indian startups, with their unique

solutions, are witnessing increased traction in global whitespace opportunities like

Internet of Things, Business Intelligence even many more. These findings definitely

signal that India is gearing up to create a startup friendly platform for young tech based

businesses where opportunities for growth are much larger than the challenges in the

ecosystem. Below, we take a look at the various industries that have been the breeding

ground for a dominant number of startups in India.

Beyond doubt, ecommerce startups are the ones that have triggered the startup culture

in India and continue to drive the momentum for the growth of other startup ventures.

Besides the eCommerce and Tech startups in different sectors like Health Care, Chat

Bots, FinTech are emerging in a great way.

Fund raising is critical in ensuring that startups outweigh their competitors and

continue as a successful run in the market. In this regard, Indian startups are placed

securely as the capital being more invested in Indian startups is growing at an

exponential rate. In fact, Indian startups are appealing more VCs as compared to their

US based counterparts.

StartUp India 2016

Page 19

Bibliography

.

StartUp India 2016

InnoVen Capital: India Startup Outlook Report (February 2016)

StartUp India Action Plan 2016 By Department of Industrial Policy and Promotion

A Snapshot of India’s Start-up Ecosystem By CII & Ministry of Skill Development Entrepreneurship

EMERGE NSE Institutional Trading Platform Brochure

https://www.cbinsights.com/blog/category/industry/iot-industry/

RBI Notification : RBI creates Helpline for guiding Start-ups in India on Forex Matters

http://timesofindia.indiatimes.com/tech/tech-news/Is-the-time-up-for-food-tech-startups-like-Foodpanda-Zomato/articleshow/51242113.cms

Economic Survey of India 2015-16 Vol 1 Chapter 2

Page 20

Annexure

List of Companies Registered in SEBI Emerge -ITP

SYMBOL COMPANY_NAME

3RDROCK 3rd Rock Multimedia Limited

ABNINT A B N Intercorp Limited

BDR BDR Buildcon Limited

BHALCHANDR Bhalchandram Clothing Limited

CAPCO Capco Industries Limited

CMMINFRA CMM Infraprojects Limited

ELITE Elite Conductors Limited

FROGCELL Frog Cellsat Limited

GIRRESORTS GIR Natureview Resorts Limited

HECINFRA HEC Infra Projects Limited

HUSYS Husys Consulting Limited

INFOBEANS InfoBeans Technologies Limited

KAWIRES K A Wires Limited

MCSL Mahaveer Cotts Strings Limited

MMNL MIG Media Neurons Limited

MOHINI Mohini Fibers Limited

MRO M.R. Organisation Limited

NEO Neopolitan Pizza Limited

QVC QVC Realty Co. Limited

RATNAINFRA Ratnaakar Infrastructure Limited

SURAJCROP Suraj Cropsciences Limited

StarUp India 2016

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