Startups in India: A Complete Guide in 2024

Table of Contents

Startups in India

Definition- A company or entity is referred to as a startup if it fulfils certain criteria/parameters given by the Department of Promotion of Industry and Internal Trade (DPIIT, Ministry of Commerce and Industry) under Startup India Scheme.

Company Age – Period of existence and operations should not exceed 10 years from the Date of Incorporation.
Company Type – Incorporated as a Private Limited Company/ Partnership firm/ Limited liability partnership
Annual Turnover – Less than 100 crore for every financial year

Initiatives launched to promote Startup Culture in India
Startup India, 2016	Startup India is a flagship initiative of the Government of India, administered by the Ministry of Commerce and Industry, intended to catalyse startup culture and build a strong and inclusive ecosystem for innovation and entrepreneurship in India.
Startup India Seed Fund Scheme (SISFS), 2021	Startup India Seed Fund Scheme (SISFS) aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.
Fund of Funds for Startups Scheme (FFS), 2016	Under FFS, the Scheme does not directly invest in startups, instead provides capital to SEBI-registered AIFs, known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments.
Credit Guarantee Scheme for Startups (CGSS), 2022	The Government of India established the Credit Guarantee Scheme for Startups with a fixed corpus for providing credit guarantees to loans extended to DPIIT recognized startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds.

Read about Dravidian Style of Temple here.

Statistics related to Startup in India

India has become the 3rd largest start-up ecosystem in the world after the US and China.
India is home to as many as 98,000 Startups as of 2023 .
49% of start-ups are from tier-2 and tier-3 cities.
108 unicorns as of May 2023.

Impact of Startups

Promoted employment opportunities: Startups are well known for employing youth at a satisfactory wages as per skills.

Developing Tier 2 and 3 cities : Approximately 47% of the recognised startups are from Tier 2 and 3 cities, which provides employment opportunities and help in improving standard of living there.

Women Empowerment: Approximately 47% of recognised startups in the country have at least one woman director.

Rise in Research and Development: They promote new ideas and innovations. For instance, Deep Tech Startups.

Promoted democratisation of technology and Inclusivity: Fintech startups are now reaching out to remote areas, for instance, Paytm, etc.

Attracted new investments: Startups have attracted multinational corporations to bring in foreign investments.

Issues/Challenges in the Startup Ecosystem of India

Low access to credits and funds- Startups being private companies or limited liability partnerships have lower access to credits and funds generation becomes comparatively difficult.

Less focus on Agriculture: Out of the total recognised startups, only 5.18% are in the agriculture sector.

Low Intellectual Property Rights (IPR): Only 11% of the patent applications filed by startups have been gram patents.

Flipping (Registering in a foreign country): The Economic Survey 2022-23 highlighted the flipping trend due to more access to overseas debt, eliminating the risk of angel tax, better IP protection, etc.

Low utilisation of Income Tax Exemptions: Under Section 80-IAC of the Income Tax Act, 1961, only 1% of recognised startups have received the Certificate of Eligibility.

This Section allows recognised startups a 100% tax exemption for three consecutive profit-making years.

Lack of Infrastructure Support: Absence of adequate and specific testing standards, particularly for startups dealing with hardware products.

Uncertainty with Funding: Funding from angel investors and venture capital firms becomes available to startups after the proof of concept has been provided.

Recommendations of the Committee

Encourage the adoption of advanced technologies: Such as the Internet of Things (IoT), data analytics, etc improve productivity, optimise resource utilisation, and enhance decision-making in agriculture.

Establishing women entrepreneurs-focused funds: To ensure uninterrupted access to capital. Relaxation in regulatory/legal framework: To enable direct overseas listing of unlisted Indian startups and steps facilitate reverse flipping.

Amendments to the Income Tax Act, 1961: So that Employee Stock Option Plans (ESOPs) are taxed only at the time of sale of shares and not on notional gains.

Dynamic testing and certification standards: Shall be established as per international best practices. Filling up the talent gap: Encouraging industries to collaborate with educational institutions to create customised courses.

Encourage partnerships: Between startups and research institutes for collaborative innovation and R&D partnership.