India's Startup Ecosystem and Entrepreneurial Toolbox

INDIA’S STARTUP

ECOSYSTEM &

ENTREPRENEURIAL

TOOLBOX

By Sreedhar Venugopal

2016

Project conceived and supervised by

Joshua Flannery

INDIA’S STARTUP ECOSYSTEM & ENTREPRENEURIAL TOOLBOX

CONTENTS

Recent news.............................................................................................................................................................................................................................................. 1

Startup Ecosystem in India ...................................................................................................................................................................................................................... 2

Facts and Figures...................................................................................................................................................................................................................................... 3

Global Ranks ......................................................................................................................................................................................................................................... 4

Most Problematic factors for doing business ...................................................................................................................................................................................... 5

Startup Companies and their Stages of Funding ............................................................................................................................................................................... 6

Startup Accelerators & Incubators ....................................................................................................................................................................................................... 7

NCR, Bangalore and Mumbai account for over 93% of total investments ................................................................................................................................. 8

Start-up India Action Plan ....................................................................................................................................................................................................................... 9

Simplification and Handholding ...................................................................................................................................................................................................... 10

Funding Support and Incentives ..................................................................................................................................................................................................... 11

Industry-Academia Partnership and Incubation .......................................................................................................................................................................... 12

Funding: Valuation ................................................................................................................................................................................................................................. 14

Funding: Mergers and Acquisitions ..................................................................................................................................................................................................... 15

Funding: Start-up Exits ............................................................................................................................................................................................................................ 16

Setting up in India................................................................................................................................................................................................................................... 17

Australian Companies in India ............................................................................................................................................................................................................. 18

Visa ............................................................................................................................................................................................................................................................ 19

Conference Visa ................................................................................................................................................................................................................................. 19

Business Visa......................................................................................................................................................................................................................................... 20

Employment Visa ................................................................................................................................................................................................................................ 21

References and Resources .................................................................................................................................................................................................................. 24

INDIA’S STARTUP ECOSYSTEM & ENTREPRENEURIAL TOOLBOX 1

RECENT NEWS*

Recent statistics released by the Central Statistics Office reveal that the India’s GDP growth

rate has accelerated from 7.2% to 7.9% in the fourth quarter of 2015-16, with an average

growth of 7.6% retaining its place as the world’s fastest growing major economy.

At 277 million users as in 2015, India surpasses the US to become the second largest internet

user, second only to China.

As part of India-Australia Nuclear Cooperation Agreement, Australia will soon begin

exporting Uranium to India.

The Australia-India Comprehensive Economic Cooperation Agreement is at an advanced

stage and will encourage investment and growth in trade of services and goods by reducing

barriers, increasing transparency and enhancing investment protections.

*June 2016


STARTUP ECOSYSTEM IN INDIA

On January 16th, 2016, the Prime Minister of India, Mr. Narendra Modi launched the

“Start-up India” initiative. This initiative aims at fostering entrepreneurship and promoting innovation by

creating an ecosystem that is conducive for growth of start-ups.

3rd largest Global Startup Ecosystem

More than 4200 startup companies

110 Incubator/Accelerators, up by 40 % since 2014

8/10 of the top VC/PE firms in India are foreign

~$5 B total funding in 2015

Additional $1.5 B government funding over next four years


FACTS AND FIGURES

Official languages : Hindi, English

Population (billions) : 1.276

GDP (nominal) (US$ trillions) : 2.182 (7th) *

GDP (PPP) (US$ trillions) : 8.027 (3rd) *

GDP (PPP) share of world total (%) : 6.84

GDP Growth Rate (%) : 7.9 (11th)

World Bank estimates that India will be the

world’s fastest growing major economy until at least 2018.

According to the Economist Intelligence Unit,

Bangalore, Mumbai, Chennai and New Delhi were

amongst the top 10 cheapest cities in the world.

*According to IMF 2015; PPP – Purchasing Power Parity


GLOBAL RANKS

3rd in Market Size

6th in Strength of investor protection

13th in Venture capital availability

23rd in Gross national savings (% GDP)

26th in Buyer Sophistication

29th in Ease of access to loans


MOST PROBLEMATIC FACTORS FOR DOING BUSINESS


STARTUP COMPANIES AND THEIR STAGES OF FUNDING

Seed Stage

$0.5 Mn

$0.5 Mn

$0.5 Mn

$0.5 Mn

Early Stage

$3.5 Mn

$10 Mn

$2.5 Mn

$2 Mn

Growth

Stage

$6 Mn

$16 Mn

$15 Mn

$12 Mn

Expansion

Stage

$50 Mn

$133 Mn

$100 Mn

$50 Mn


STARTUP ACCELERATORS & INCUBATORS

Name Location Founded Focus Area Funding Notable Startups

GSF Bangalore/ Mumbai/NCR

2015 Internet and Mobile $30k to 60k

Pokkt, Silverpush, Playcez

Catalyzer Hyderabad 2014 Technology, Social Enterprises and Non-Profits $7.5k to 15k

Health Start Hyderabad 2014 Healthcare $100k Gympik.com, ObiNo

Target Accelerator

Bangalore 2014 Marketing, Mobile, Big Data analytics and Merchandising and Supply Chain Technologies.

$30k Unbxd, muHive, Konotor

Zone Startups

Mumbai 2014 Mobile, internet and digital media startups $50k – $750k

Sismatik, Nimble

Freemont Partners

Mumbai 2012 Mobile, Internet & Cloud up to $75k

Natural Mantra

Kyron Accelerator

Bangalore 2012 Web and Apps up to $20k

Dronna, Scandid

Microsoft Accelerator

Bangalore 2012 Cloud, Internet and Mobile using Microsoft technologies

Undisclosed

Explara, Frrole, Nowfloats

TLabs Accelerator

Noida 2012 Internet & Mobile Startups up to $50k

Dataweave, Musicfellas, Bluegape

Venture Nursery

Mumbai 2012 Media & Entertainment, Retail, e-Commerce, Consumer Tech, Education

up to $75k

Oravel, Klip, InterviewMaster

The Startup Centre

Chennai 2011 Technology, Social Enterprises and Non-Profits $15k Eventifier


NCR, BANGALORE AND MUMBAI ACCOUNT FOR

OVER 93% OF TOTAL INVESTMENTS


START-UP INDIA ACTION PLAN

Unveiled by the Prime Minister of India,

Mr. Narendra Modi, the Start-up India Action

Plan1 is intended to build a strong ecosystem

for nurturing innovation and start-ups in the

country that will drive sustainable economic

growth and generate large scale employment

opportunities.

It is divided into 3 major areas:

Simplification and Handholding

Funding Support and Incentives

Industry-Academia Partnership and

Incubation


SIMPLIFICATION AND HANDHOLDING

Compliance Regime based on Self-Certification: Reduces regulatory burden on

startups allowing them to focus on core business

Startup India Hub: Create a single point of contact for entire Start-up ecosystem

along with enabling knowledge exchange and access to funding

Rolling-out of Mobile App and Portal: Single platform to interact with the

government and regulatory institutions for nosiness needs and information

exchange.

Legal Support and Fast-tracking Patent Examination at Lower Costs: Promote

awareness and adoption of Intellectual Property Rights (IPR)

Relaxed Norms of Public Procurement for Startups: Provide equal platform for

start-ups vis-à-vis the experienced companies in public procurement

Faster Exit for Startups: Make it easier for start-ups to wind up operations


FUNDING SUPPORT AND INCENTIVES

Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000

crore (~ US$1.5 Bn): For the development and growth of innovation driven

enterprises.

Credit Guarantee Fund for Startups: Catalyse entrepreneurships by providing

credit to innovators across all sections of society.

Tax Exemption on Capital Gains: Promote investments by mobilizing capital gains

arising from sale of capital assets.

Tax Exemption for Startups for 3 years: Promote the growth of start-ups and

address working capital requirements.

Tax Exemption on Investments above Fair Market Value: Encourage seed-capital

investment in start-ups.


INDUSTRY-ACADEMIA PARTNERSHIP AND INCUBATION

Organising Startup Fests for Showcasing Innovation and Providing a Collaboration

Platform: To provide national and international visibility.

Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent

Utilisation (SETU) Program: To serve as a platform for promotion of Innovations

Hubs, Grand Challenges, Start-up businesses and other self-employment

activities.

Harnessing Private Sector Expertise for Incubator Setup: Policy and framework to

ensure the professional management of Government sponsored/funded

incubators.

Building Innovation Centres at National Institutes: To propel successful innovation

through augmentation of incubation and R&D efforts.

Setting up of 7 New Research Parks modeled on the Research Park Setup at IIT

Madras: Propel innovation through incubation and join R&D efforts between academia & industry.


Promoting Startups in the Biotechnology Sector: To foster and facilitate bio-entrepreneurship.

Launching of Innovation Focused Programs for Students: To foster a culture of innovation in the field

of Science and Technology amongst students.

Annual Incubator Grand Challenge: To support the creation of world class incubators.


FUNDING: VALUATION

Valuations have consistently been on the rise2. Indian start-ups have shown growth without external

funding such as:

BrowserStack – Does cross-browser product testing

520K+ registered users and 25K+ paying customers

Logistimo – Cloud based supply chain management

$250K revenue and 1000% annual growth

SignEasy – Mobile-first e-signature solution

~3Mn app downloads and among the “Top 10 grossing Apps”


FUNDING: MERGERS AND ACQUISITIONS

Indian start-ups have successfully executed over 65 M&As in 2015 and are on an acquisition

spree.

Trends in mergers and acquisitions include:

Accelerate consolidation

Diversify business offerings

Expand customer base

Acquire technical expertise

Acquisitions are:

MakeMyTrip (IC) acquires Mygola (IS)

Snapdeal (IS) acquires Freecharge (IS)

Twitter (OC) acquires Zipdial (IS)

Exotel (IS) acquires Croak.it!(OS)

* I – India; O – Overseas; S – Start-up; C – Corporate.


FUNDING: START-UP EXITS

The year 2014-15 has seen major start-up exits with instill confidence in the investor community.

Exit valuations are expected to rise as new SEBI policies come into effect which include:

o Being listed on the Institutional Trading Platform,

o Reducing lock-in periods for investors from 3 years for IPOs to 6 months

o Diluting disclosure standards.

Another factor for the increase is the revival of equity markets from the sense of gloom in the global

economy.


SETTING UP IN INDIA

Australian Trade Commission3 (Austrade) advises Australian companies to:

Adopt an appropriate legal and tax structure from inception.

Use a qualified legal and tax firm with a presence in India to review all contracts.

Conduct a legal, financial and technical due diligence on any potential partner to

minimise risk.

Seek legal advice on protecting their intellectual property. There could be potential

violations of intellectual property and copyrights.

Allow adequate time for finalising partners. Companies in India prefer to establish a strong

relationship before finalising a deal.

Be prepared for tough negotiations and to work through any legal issues. Be firm, polite and

creative, but be prepared to say no, if the situation demands.


AUSTRALIAN COMPANIES IN INDIA

GRG International – payment distribution system for the

NREGA*

Cochlear – bionic ear technology

ResMed – sleep disorder diagnosis and treatment

Linfox – transport firm dealing with logistics

*NREGA – National Rural Employment Guarantee Act


VISA

Three types of visas are available to Australian citizens wishing to visit India for business purposes. They

are the Conference visa, Business visa and Employment visa. VFS Global4 provides the following details.

CONFERENCE VISA

Eligibility: A Conference Visa is available to those that would like to visit India for international conferences, or

on certain subjects, may be issued to delegates provided they have an invitation to a

conference/seminar/workshop being organized in India by a Ministry or Department of the Government of India,

State Governments, Public Sector Undertakings, central Educational Institutions, Public Funded University or an

organization owned and controlled by the Government of India or State Government, UN or its specialized

agencies and reputed NGOs. If the conference/seminar/workshop is being organized in India by private

companies, you should apply for the shortest duration Business Visa available. If approved, a three-month single

entry Business visa will be granted.

Duration and Validity: The visa duration starts on the day of issuance, and not on the day of entry into India. The

Conference Visa is a 3-month single entry visa.


BUSINESS VISA

Eligibility: A Business Visa is strictly given to those who would like to make a business related trip to India such as

making sales or establishing contact on behalf of a company outside of India. An applicant going for

employment in projects/contract in India needs to apply for an Employment Visa, and not a Business Visa. If the

applicant does not meet the requirements of any other visa types, he/she should apply for an Entry Visa.

Spouse and dependent family members accompanying the applicant must apply for an Entry Visa (NOT Tourist

Visa). Their visa duration would end according to the visa period of the principal visa holder. The Business Visa

applicant must receive the visa prior to applying for accompanying spouse and dependent family members.

Duration and Validity: A Business visa may be valid for either 6 months or one year with multiple entries. However,

the period of stay in India for each visit is limited to six months. To be eligible for a 5-year Business Visa you must

be the Director/CEO/Chairman of the company or have a Joint Venture document available to support your

application. The visa duration starts on the day of issuance, and not on the day of entry into India.


EMPLOYMENT VISA

Eligibility: Who can Apply?

Employment visas are issued to Australian passport holders or Australian residents (provided the period of

residence in Australia is for more than 2 years and subject to the conditions hereunder:

The applicant is a highly skilled/skilled and qualified professional or person who is being engaged or

appointed by a company, organization, industry, etc. in India on contract or employment basis at a senior

level, skilled position such as technical expert, senior executive, or in a managerial position, etc.

Employment Visa would not be considered for jobs for which large number of qualified Indians is available.

Furthermore, Employment Visa application would not be considered at all for routine, ordinary or

secretarial/clerical jobs.

The salary of the applicant proposed to be employed should not be less than US$ 25,000 per annum.

The applicant should be coming for employment in companies registered in India.

The applicant will have to comply with all other requirements like payment of tax liabilities etc.


The applicant must submit proof of his/her employment or contract or engagement by the

company/organization, etc. in India.

The applicant must submit documentary proof of his educational qualifications and professional expertise.

Other categories of applicants eligible for Employment visa:

The following categories of applicants may also be eligible for Employment visa subject to the fulfilment of the

general conditions mentioned above.

Applicant coming to India as consultant on contract for whom the Indian company pays a fixed

remuneration, (may not be in the form of monthly salary).

Foreign artists engaged to conduct regular performances for the duration of the employment contract

given by Hotels, Clubs, other organizations.

Self-employed foreign nationals coming to India for providing engineering, medical, accounting, legal or

such other highly skilled services in their capacity as independent consultants.

Foreign language teachers/interpreters, Specialist Chefs and Foreign nationals visiting India for voluntary

work with NGOs.


Duration and Validity:

A foreign technician/expert coming to India in pursuance of a bilateral agreement between the

Government of India and a foreign government, or in pursuance of a collaboration agreement that has

been approved by the Government of India, may be granted an Employment visa for the duration of the

agreement, or for a period of five years, whichever is less with multiple entry facilities.

A foreigner coming to India for employment not covered above may be granted Employment visa with a

validity up to two years or the term of assignment, whichever is less with multiple entry facility.

In the case of highly skilled/skilled foreign personnel being employed in the IT software and IT enabled

sectors, the Missions/Posts may grant visa with validity up to 3 years or the term of assignment, whichever

is less with multiple entry facility.

In case of Employment Visa issued for a period of 180 days or less, registration is not required with FRRO/FRO.

However, if the Employment visa is valid for a period of more than 180 days, Employment-visa holder must

register with the FRRO/FRO concerned within 14 days of arrival. Further extension could be given by

authorities in India.


REFERENCES AND RESOURCES

1. Start-up India Action Plan. (2016). 1st ed. [ebook] Government of India. Available at:

http://startupindia.gov.in/actionplan.php

2. Start-up India – Momentous Rise of the Indian Start-up Ecosystem. (2016). 1st ed.

[ebook] New Delhi: NASSCOM. Available at:

http://10000startups.com/downloads.php?f=Startup-Report-2015.pdf

3. Austrade.gov.au. (2016). Austrade, Australian Government - Austrade. [online]

Available at: http://www.austrade.gov.au/

4. Vfsglobal.com. (2016). India Visa Information - Australia - Visa Information. [online]

Available at:

http://www.vfsglobal.com/india/australia/visa_services/visa_information.html.

5. Ventureburn. (2015). 20 startup accelerators in India we should all know about. [online]

Available at: http://ventureburn.com/2015/03/20-startup-accelerators-india-know/

India's Startup Ecosystem and Entrepreneurial Toolbox

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