The Indian startup sector has seen a progressive shift in the recent past, with India being home to the second largest startup ecosystem in the world, and the third largest country of incubators and accelerators, right after China and the USA.
In the past decade, the country has validated the existence of thousands of start-ups and independent entrepreneurs in areas of robotics, analytics, EduTech, HealthTech and Fintech. However, most of these companies are facing liquidity crunch due to a lack of capital for expansion. These start-ups also seem to be dwindling to a low growth rate considering the opportunities for raising funds are extremely low.
Therefore, to overcome the challenges of fundraising, here are some insights shared by industry experts, VC's and CEO's of startups to boost investments for them:
Sumit Peer, Founder and CEO of Aurelius said, "One significant aspect which can boost the economy and start-up environment by far is the investment by individuals in private equities. Private equity can be an intriguing option for investors who are seeking potentially higher returns and are uncorrelated to the equity markets. An individual investing in private equity investment can also gain access to high profile opportunities, along with needed portfolio diversification. Moreover, the domestic private equity industry, being regulated by the Securities and Exchange Board of India (SEBI), will set compulsory registration and set investment holding limit. By making private equity investment an open source and letting it unleash its own potential will help Start-up India grow by leaps and bounds. The early stage start-ups will also be nurtured with more investments."
"The Start-up trend in India is on a spectacular growth path. However, in spite of the government's efforts to aggressively promote the emerging businesses, entrepreneurs continue to face various challenges which they are unable to overcome, leading to an elevation in the failure rate of new ventures. In order to boost the long-term growth of the start-up sector, the government should ideally take into perspective an enhanced taxation regime for incubators and accelerators, including allowance on the exemption from various taxes. Basis the role of guides and mentors who try and connect innovators and create new avenues and opportunities in the field, I believe that the money allocated for incubation activities should be considered as investments done for research and development and should be considered for 200 percent tax rebate as offered to R&D expenses for at least five more years so that the startups not only sustain the jesting period but also grow and become significant contributors to the Indian economy," said Vikas Katoch, Founder and CEO of Adomantra.
"To boost Indian start-ups, the Indian government has already taken the first step by creating a Rs 10,000-crore pool of capital to seed Indian VCs. Deployment of that capital requires speeding up instead of dribbling it out slowly. Then perhaps a gentle push to have pension funds, insurance companies, and others start to allocate 20 percent of their capital to venture capital and private equity. Then there will be enough funding to support Indian startups with Indian money and then we can have a more sensible discussion around protecting Indian startups," added Sashi Reddi, Managing Director of SRI Capital.
According to Raghavendra Pratap Singh, Co-Founder of i2iFunding, "India is a capital-starved country where angel investors have become the deciding factors of the fate of many startups. In this context, the government's approach towards startup-taxation is that of immense importance. The present tax machinery has time and again taken adverse positions against the startups receiving funds from angel investors in excess of the fair value of the enterprise. Recognising Angel Investors and Angel Networks and allowing them the flexibility to continue without excessive regulations can be a game changer for raising funds for various start-ups. Multiple complaints from various startups and angel investment groups have made the Government take notice. The Department of Industrial Policy and Promotion (DIPP) is taking up this issue with the SEBI to relook at some of the rules laid down by them. As per the current policy, only those startups can avail exemption from tax who have been recognised by the DIPP as a startup, which, in my opinion, is not justifiable. All startups should be treated uniformly for the same.