FAQs

1 What is Startup India?

Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of startup businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower startups to grow through innovation and design.

Several programs have been undertaken since the launch of the initiative on 16th of January, 2016 by Hon’ble Prime Minister, to contribute to his vision of transforming India into a country of job creators instead of job seekers. These programs have catalyzed the startup culture, with startups getting recognized through the Startup India initiative and many entrepreneurs availing the benefits of starting their own business in India.

 


2 What are the benefits provided under the Startup India scheme?

For availing various benefits under the Startup India scheme, an entity would be required to be recognized by DIPP as a startup by applying at https://www.startupindia.gov.in/content/sih/en/startupgov/startup-recognition-page.html.

The benefits provided to recognized startups under the Startup India initiative are:

1. Self-Certification: Self-certify and comply under 3 Environmental & 6 Labour Laws

2. Tax Exemption: Income Tax exemption for a period of 3 consecutive years and exemption on capital and investments above Fair Market Value

3. Easy Winding of Company: In 90 days under Insolvency & Bankruptcy Code, 2016

4. Startup Patent Application & IPR Protection: Fast track patent application with up to 80% rebate in filling patents

5. Easier Public Procurement Norms: Exemption from requirement of earnest money deposit, prior turnover and experience requirements in government tenders

6. SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds

Further, the Startup India portal – www.startupindia.gov.in – is a one-stop platform for all stakeholders in the startup ecosystem to interact amongst each other, exchange knowledge and form successful partnerships in a highly dynamic environment.

To know more about the benefits under Startup India, visit https://www.startupindia.gov.in/content/dam/invest-india/startup_kit.pdf.

 


3 What qualifies as a 'Startup' under the Startup India scheme?

An entity shall be considered as a Startup:

1. If it is incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India

2. Up to seven years from the date of its incorporation/registration; however, in the case of startups in the biotechnology sector, the period shall be up to ten years from the date of its incorporation/registration

3. If its turnover for any of the financial years since incorporation/registration has not exceeded INR 25 Crores

4. If it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation

Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.

 


4 How can I register a profile on the Startup India website - www.startupindia.gov.in?

Registering a profile on the Startup India website is a fairly simple process.

1. Simply click on 'Register' and fill in the details as required in the registration form. An OTP will be sent to your registered email address, post submitting which your profile will get created.

2. You will have an option to select your profile type. For 'Individuals', the profile goes live immediately, whereas for 'Startups', the profile goes under moderation for 24-48 Hrs, post which you will be able to avail all benefits on www.startupindia.gov.in.


5 What is the difference between a Startup registered on the Startup India website and a DIPP-recognised Startup?

As stated in the previous query, a Startup which has a profile on the Startup India website is considered a registered Startup on the portal. These Startups can apply for various acceleration, incubator/mentorship programmes and other challenges on the website along with getting an access to resources like Learning and Development Program, Government Schemes, State Polices for Startups, and pro-bono services.

For DIPP-recognition, the Startups have to apply at https://www.startupindia.gov.in/content/sih/en/startupgov/startup-recognition-page.html to avail benefits like access to high quality Intellectual Property services and resources, relaxation in public procurement norms, self-certification under labour and environment laws, easy winding of company, access to SIDBI Fund of Funds, tax exemption for 3 consecutive years, and tax exemption on investment above fair market value.

 


6 Can a foreign company register on www.startupindia.gov.in?

Any entity having atleast one registered office in India is welcome to register on www.startupindia.gov.in. 


7 How do I connect to enablers after creating a profile?

Once you've created your profile on www.startupindia.gov.in, you can find relevant mentors, investors and incubators you would want to reach out to. These enablers are housed under the 'Ecosystem' tab on the top of the page. You may also check your dashboard to find relevant stakeholders basis your industry and preferred stage.

Under the profile of every enabler there will be an option to 'Connect'. Upon clicking, a request will be sent to the respective profile for acceptance. Once accepted, you will be able to see the enabler as a new connection and henceforth engage in a discussion with them.

Please Note: You can send 'Connect' requests to a maximum of 3 users per week.

 


1 I have an innovative idea that I want to pursue as a Startup. What guidance can Startup India provide me?

DIPP has launched a Learning & Development module for budding entrepreneurs. The Learning Program is a 4-week free program for early stage entrepreneurs across the country. This online program is aimed at teaching new and existing entrepreneurs on how to start a new business and how to scale an existing one.

Interested individuals can enroll for this free course at this link: https://www.startupindia.gov.in/content/sih/en/learning-and-development_v2.html. For more courses, please visit the Resources > Courses section.

Also, incubators all across India provide guidance to budding startups and you can approach these. There is a list of incubators listed on the Startup India portal for your reference. Simply visit Ecosystem > Incubator for more details of these incubators.

 


2 My entity does not have a PAN. Would I be allowed to register it as a ‘Startup’ on the Startup India portal?

Yes, an entity without a PAN can be registered as a Startup on our website. However, it is advised that a valid PAN of the entity is provided at the time of registration.

 


3 Would a One Person Company (OPC) be eligible to avail benefits under the Startup India initiative?

Yes. One Person Companies are eligible to avail benefits under the Startup India initiative.

 


4 Can a foreigner enter into partnership under the LLP Act and get that LLP registered with Startup India?

Yes, a foreign national can enter into partnership under the LLP Act and get that LLP registered on our website. It can even get recognised by the DIPP.

 


5 Can I provide two mobile numbers in the registration form?

Only one mobile number and one landline number of the authorized representative of the entity can be provided at the time of registration. The portal and the mobile app would be sending an OTP on the mobile number provided by the user to complete the authentication and registration process.

 


6 What are the documents required by Startups to get recognized under the Startup India initiative?

The process of recognition as a ‘Startup’ is through an online application made over the mobile app/portal at https://www.startupindia.gov.in/content/sih/en/startupgov/startup-recognition-page.html.

You will need to upload the incorporation/registration certificate and explain how your startup is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.

 


7 What is the time-frame for obtaining certificate of recognition as a ‘Startup’ in case an entity already exists?

The certificate of recognition is issued typically within 2 working days upon successful submission of the application.

 


8 If my startup gets recognised, would I obtain a certificate for it? If yes, would I be able to download the certificate?

Yes, if your startup gets recognised, you would be able to download a system generated verifiable certificate of recognition.

 


9 What is the constitution of the Inter-Ministerial Board?

The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion validates Startups for granting tax related benefits. The Board comprises of the following members:

  • Additional Secretary, Department of Industrial Policy and Promotion, Convener
  • Representative of Ministry of Corporate Affairs, Member
  • Representative of Ministry of Electronics and Information Technology, Member
  • Representative of Department of Biotechnology, Member
  • Representative of Department of Science & Technology, Member
  • Representative of Central Board of Direct Taxes, Member
  • Representative of Reserve Bank of India, Member
  • Representative of Securities and Exchange Board of India, Member

 


10 How would the Inter-Ministerial Board review the applications received for the purpose of tax exemption?

The Board shall review the supporting document(s) provided to ascertain if the entity qualifies as an eligible business for availing tax.

 


11 What is the time-frame for obtaining certification of Inter-Ministerial Board for availing tax exemption post successful application?

The Inter- Ministerial Board meeting typical takes place once a month. The cases in the meeting are processed in a serial order. The communication regarding the decision is sent to the registered email address of the startup. 

To regularly follow updates of the IMB meetings, you may refer to the IMB notifications on our website by clicking here.

 


12 If a startup has applied for DIPP-recognition and the application gets rejected or marked incomplete due to missing documents or insufficient information, should the startup edit the existing application or submit a new one?

If the application for recognition has been marked incomplete, the startup needs to follow the given steps:

1)     Log in with their startup credentials on www.startupindia.gov.in 

2)     Select ‘Recognition and Tax Exemption’ button on the right panel 

3)     Select the ‘Edit Application’ button and proceed with completing your application 

If the application has been marked ‘Incomplete’ thrice, the application is rejected.

Rejected applications cannot be edited, and a new application can be submitted after three months from the date of communication of the rejection email.

 


13 If a Startup gets recognised with DIPP, what are the next steps required to raise funding?

A startup can approach SIDBI for funding in the following two cases:

Case 1: Equity funding for early and growth stage startups:

a) SIDBI invests in Fund of Funds format and invests in daughter funds which invest in startups

b) The list of fund of funds, focus sector, e-mail ID and company website can be checked at http://venturefund.sidbi.in/?q=content/contact-vcfs

c) You can send an e-mail on the listed e-mail IDs of the funds

Case 2: Debt funding for mature stage startups (proven revenue model, market traction):

a) Approach the nearest SIDBI office

b) Submit a business presentation and the pitch to the SIDBI office

c) Once the information has been submitted, SIDBI would scrutinize the application and the shortlisted applications will be directed to SIDBI Mumbai, for financial evaluation

d) As per the decision of SIDBI Mumbai, debt may be sanctioned

Additionally, you can send an e-mail to Startup India at dipp-startups@nic.in, with a business presentation. The following aspects need to be covered:

a) About the idea/company

b) Background of the founders

c) How is the idea/product/service innovative

d) Fund Requirement (Detailed segregation)

e) End usage of the funds


14 How can a foreign national, NRI or PIO benefit from the Startup India scheme?

Startup India benefits are for Private Limited Company or Registered Partnership Firm or Limited Liability Partnership. A foreign national, NRI or PIO can register itself through MCA or Registrar of Firms using the existing processes and subsequently register itself on the Startup India portal and mobile app as a 'Startup' to avail the benefits.


1 What is the procedure to claim reimbursement by patent facilitators to services offered to startups?

After a patent application is received by the Patent Office, the facilitator shall submit the claim for fees as per the fee schedule given in SIPP Scheme. A letter addressed to the Head of Office of the respective Patent Office, giving details of claimed fee for drafting of application and his ID proof as a registered Patent Agent, shall be submitted along with the invoice.


2 What is the procedure to claim reimbursement by Trademark facilitators to services offered to startups?

The facilitator shall submit the claim for payment of fees to the respective Head of Office of the Trade Marks Registry. A letter addressed to the Head of Office of the respective Trade Mark Office, giving details of claimed fee for drafting of application and his ID proof as a registered Trade Mark Agent, shall be submitted along with the invoice. 


1 What factors are considered by the Investors to invest in startups?

Different investors use different criteria to judge an investment. The importance of these factors would wary depending on the stage of investment, sector of startup, management team etc. Listed below are typical investment criteria used by investors:

1. Market Landscape: Refers to the addressable market which the startup is catering to.

Factors: Market size, obtainable market-share, adoption rate, historical and forecasted growth rates, macroeconomic drivers, demand supply

2. Scalability and Sustainability: Startups should showcase the potential upscale in the near future, a sustainable and stable business plan.

Factors: Barriers to entry, imitation costs, growth rate, expansion plans

3. Objective and Problem Solving: The offering of the startup should be differentiated to solve a unique customer problem or to meet customer need. Ideas or products that are patented showcase deemed potential in the startups.

4. Customers & Suppliers: Laying out your customers and suppliers, helps investors understand your business better.

Factors: Customer relationships, stickiness to the product, vendor terms, existing vendors

5. Competitive Analysis: A true picture of competition and other players in the market working on similar things should be highlighted. There can never be an apple to apple comparison, but highlighting the service or product offerings of similar players in the industry is important

Factors: Number of players in the market, market share, obtainable share in the near future, product mapping to highlight similarities or differences between competitor offerings

6. Sales and Marketing: No matter how good your product or service maybe, but if does not find any end use, there is no good.

Factors: Sales forecast, targeted audiences, marketing plan for the target, conversion and retention ratio etc. 

7. Financial Assessment: A detailed business model that showcases the cash inflows over the years, investments required, key milestones, break-even point and growth rates should be made out well. Assumptions used at this stage should also be reasonable and clearly mentioned.
See sample valuation template here (to be sourced under templates section)

8. Exit Avenues: A startup showcasing potential future acquirers or alliance partners becomes a valuable decision parameter for the investor  

9. Management and Team: The execution and passion of founder and the management team to drive the company are equally crucial in addition to the all the factors mentioned above


2 How do Investors earn returns from investing in Startups?

Investors realize their return on investment from startups through various means of exit. Ideally, the VC firm and the entrepreneur should discuss the various exit options at the beginning of investment negotiations. A well performing, high-growth startup that also has excellent management and organisational processes is more likely of being exit-ready earlier than other startups.

Venture Capital and Private Equity funds must exit all their investments before the end of the fund’s life. The common exit methods are:

1. Mergers and Acquisitions: The investor may decide to sell the portfolio company to another company in the market. For ex: The $140mn acquisition of RedBus by South African Internet and media giant Naspers and integrating it with its India arm Ibibo group, presented an exit option for its investors, Seedfund, Inventus Capital Partners and Helion Venture Partners.

2. IPO: Initial Public Offering is the first time that the stock of a private company is offered to the public. Issued by private companies seeking capital to expand, it is one of the preferred options for investors looking to exit a startup organisation.

3. Exit to Financial Investors: Investors may sell their investment to other venture capital or private equity firms

4. Distressed Sale: Under financially stressed times for a startup company, the investors may decide to sell the business to another company or a financial institution

5. Buybacks: Founders of the startup may also buyback their investment from the fund.


3 What is a Term Sheet?

A term sheet is a “Non-binding” list of propositions by a venture capital firm at the beginning stages of a deal. It summarizes the major points of engagements in the deal between the investment firm and the startup.

A term sheet for a venture capital transaction in India typically includes four structural provisions: valuation, investment and management structures, and changes to share capital.

1. Valuation: Startup valuations is the total worth of the company as estimated by a professional valuer. There are various means of valuing a startup company, like Cost to Duplicate approach, Market Multiple approach, Discounted cash flow (DCF) analysis and Valuation-by-Stage approach. Investors choose the relevant approach based on the stage of the investment and market maturity of the startup.

2. Investment Structure: It defines the mode of the venture capital investment in the startup, whether it is through equity, debt or a combination of both.

3.   Management Structure: The term sheet details out the management structure of the company, including the composition of the board of directors, and prescribed appointment and removal procedures.

4. Changes to share capital: All investors in startups have their own investment timelines, and they accordingly seek flexibility in seeking exit options through subsequent rounds of funding. The term sheet addresses the stakeholders’ rights and obligations in respect to subsequent changes in the company’s share capital.