The new government, which had started by adding entrepreneurship as part of an independent ministry, has gone ahead and proposed new measures to boost entrepreneurs and provide funding support to startups and other small enterprises.
In a major move which will boost capital flow Finance Minister Arun Jaitley has proposed setting up of a Rs 10,000 crore fund of fund for such initiatives.
According to Jaitley this fund will act as a catalyst to provide equity, risk capitals for the start-ups.
Sudheer Kuppam, managing director, Intel Capital APAC Region, said the new fund along with a similar big allocation for developing 100 ‘smart cities’ in the country is a positive. “These positive measures will help foster the spirit of innovation amongst startups who will be the growth drivers of the economy especially in key sectors like big data, cloud computing, mobility services and analytics which will help put the Indian entrepreneurs on the global innovation map,” he said.
However, how this corpus would be channeled is a big question. Typically such funding ends up supporting SMEs with debt funding. If a part of this money flows into early stage funding ecosystem it could well add a good chunk of money for startups.
“The proposal to set-up a Rs 10,000 crore fund for startups and entrepreneurs will act as a great booster for the growing startup landscape and will help drive innovation and solutions for the global as well as the domestic markets,” R Chandrashekhar, president, IT industry body Nasscom, said.
According to R Narayan, Founder & CEO, Power2SME, this fund will act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies. “It will create a favourable ecosystem for the startups to flourish,” he said.
But the distribution of this fund would be the key.
“From a startup viewpoint, the Budget makes the right noises. The fund size looks promising; so this would have a big impact on the Indian ecosystem. However, I am not sure how good the government would be in managing equity investment in startups and VC funds,” said Shobhit Bhatnagar, co-founder, GradeStack, an online course store for students.
Others like Mohit Gundecha, a Stanford alumnus and CEO of Jombay, a talent analytics company, said, “A part of the Rs 10,000 crore fund should be spent to fund incubators in various colleges in India. A good amount should be spent to increase the awareness of startups and their successes among parents of graduating students.”
Besides the big fund, the FM proposed Rs 200 crore to encourage startups by youth from schedules castes and tribes and assigned Rs 100 crore as an initial sum to set up village entrepreneurship programme for encouraging rural youth to take up local entrepreneurship programmes.
A central network has also been announced to promote innovation with an outlay of Rs 200 crore.
The minister has also proposed a framework for bankruptcy; this in turn will make it easier for the startups to shut their businesses, if need be.
“The new bankruptcy framework will encourage experimentation and innovation. This budget sends the message that software products can be an engine of growth for India, like software services a decade ago,” said Sanjay Parthasarthy, founder and CEO, Indix, a Saas & Big Data firm based in Seattle with a product development and engineering team in Chennai.
“The Budget is a good effort considering the constraints the economy is operating under. Positive directions have been set, and we need to see the details on the manner of executing these directions,” said V Shankar, member, The Chennai Angels.
However, according to Satyen V Kothari, chairman and founder, Citrus Payment Solutions, the government failed to look at some of the key issues affecting the sector such as correction in the taxation regime and regulatory policy.
“We would have liked to see a simplified tax and regulatory policy as a big step towards supporting our community so that we can focus on the constant challenges of growing our businesses in an increasingly competitive global environment,” he said.
Calling it a “satisfactory Budget,” Sanjay Sethi, CEO and co-founder, Shopclues.com, said, “The announcement on building of airports and better connectivity for tier two and three cities is very encouraging since it will bring them into the mainstream of commerce in the country. We commend the measures outlined for encouraging entrepreneurship in the country, including the fund for boosting capital flow to startups and SMEs. ”
According to angel fund YourNest, entrepreneurship engine in India, over the next decade, has the potential create 2,500 successful high growth ventures and generate 10 million direct and 20-30 million indirect jobs.
The FM has also announced the setting up of a committee to give advice on financing SMEs and amendment of the Apprenticeship Act in a manner that benefits MSMEs.
Moreover, he talked about introducing an e-site for clearances and compliance which will also have a central e-payment system.
The broadband expansion plan is also seen as important for building wider traction for startups in the domestic market for their products and services.
“The proposed Rs 500 crore allocation to set up broadband network in villages could open up more avenues for the technology startups to reach out to an exponential number of new consumers. This will unlock the power of the internet for diverse industries like agriculture and banking and media till the very last mile. The Rs 200 crore fund for a rural startup village will encourage more and more social entrepreneurs to come forward and this will benefit our villages immensely,” Sumesh Menon, co-founder and CEO U2opia Mobile, said.
(Edited by Joby Puthuparampil Johnson)