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.

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




2 How do Investors add value to Startups?

Investors, particularly Venture Capitalists (VCs), add value to startups in a lot of ways:

1. Stakeholder Management: Investors manage the company board and leadership to facilitate smooth operations of the startup. In addition, their functional experience and domain knowledge of working and investing with startups imparts vision and direction to the company.

2. Raising Funds: Investors are best guides for the startup to raise subsequent rounds of funding on the basis of stage, maturity, sector focus etc. and aid in networking and connection for the founders to pitch their business to other investors.

3. Recruiting Talent: Sourcing high-quality and best-fit human capital is critical for startups, especially when it comes to recruiting senior executives to manage and drive business goals. VCs, with their extensive network can help bridge the talent gap by recruiting the right set of people at the right time.

4. Marketing: VCs assist with marketing strategy for your product/service.

5. M&A Activity: VCs have their eyes and ears open to merger and acquisition opportunities in the local entrepreneurial ecosystem to enable greater value addition to the business through inorganic growth.

6. Organizational Restructuring: As a young startup matures to an established company, VCs help with the right organizational structuring and introduce processes to increase capital efficiency, lower costs and scale efficiently.


3 Why do Investors invest in Startups?

Investing in startups is a risky proposition, but the low requirement for overhead capital combined with high upside potential, makes it lucrative for investors to put their bets on startups.

The Thomson Reuters Venture Capital Research Index replicated the performance of Venture Capital industry in 2012 and found that overall venture capital has returned at an annual rate of 20% since 1996 – far outperforming modest returns of 7.5% and 5.9% from public equities and bonds respectively.


4 How can I register a profile on www.startupindia.gov.in ?

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

  • 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.

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

5 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 Eco system tab on the top of the page. 

You may also check your dashboard to find relevant stakeholders based on 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 able to see the enabler as a new connection and henceforth engage in a discussion with them. 

Please note that you can send connect requests to a maximum of 3 users per week.


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 the www.startupindia.gov.in. 


1 What qualifies as a “Startup” for the purpose of Startup India scheme?

Startup means an entity, incorporated or registered in India:

  • Upto a period of seven years from the date of incorporation/registration or upto ten years in case of Startups in Biotechnology sector
  • As a private limited company or registered as a partnership firm or a limited liability partnership
  • With an annual turnover not exceeding Rs. 25 crore for any of the financial years since incorporation/registration
  • 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

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.

An entity shall cease to be a Startup:

  • On completion of seven years from the date of its incorporation/registration, ten years in case of Startups in Biotechnology sector, or
  • If its turnover for any previous year exceeds Rs. 25 crore

 

For additional information, refer notification G.S.R. 364(E) dated 11th April, 2018.


3 For how long would recognition as a “Startup” be valid?

An entity would cease to be a 'startup' upon expiry of:

  • Up to 7 years from the date of its incorporation/ registration; however, in the case of Startups in the biotechnology sector, the period shall be up to 10 years from the date of its Incorporation/ registration; OR
  • If its turnover for any of the financial years has exceeded INR 25 crore

Startups would be required to intimate DIPP of any such cases within a period of 21 days.


4 Can an existing entity register itself as a “Startup” on the Startup India Portal and Mobile App?

Yes, an existing entity that meets the criteria as indicated in response to Question 1 can visit the Startup India Portal and Mobile App and get itself recognized for various benefits


5 What is the timeframe for obtaining certificate of recognition as a “Startup” in case an entity already exists?

The process of registration in such cases shall be real time and the certificate of recognition would be issued typically within 2 working days upon successful submission of the application.


6 An entity is yet to be registered/ incorporated. Can I visit the Startup India Portal and Mobile App to register/ incorporate my entity as either a Private Limited Company or Registered Partnership Firm or Limited Liability Partnership?
  • In the case of  Private Limited Companies and Limited Liablity Partnerships, an entity can register itself through MCA 
  • A Partnership Firm can register itself with the Registrar of Firms using the existing processes

8 Once my registration is successful, would I obtain a certificate for it? If Yes, would I be able to download the certificate?

Yes. On successful registration, you would be able to download a system generated verifiable certificate of recognition.


9 If an entity does not have a PAN. Would I be allowed to register my entity as a “Startup”?

Yes. An entity without a PAN can be registered as a Startup. However, it is advised that a valid PAN of the entity is provided at the time of registration, as each entity is separately taxable person.


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

It is advised that only one mobile number of the authorized representative of the entity is provided at the time of registration. The portal and the mobile app would be sending an OTP on the mobile number provided for the user to complete authentication and registration process.


11 What will be 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

12 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.


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

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


14 What is the timeframe for obtaining certification of Inter-Ministerial Board for availing tax in case an entity already exists?

The Inter- Ministerial Board meeting takes place at least 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 


15 If a startup has submitted a recognition application the same gets rejected or marked incomplete due to missing documents or insufficient information, should the startup edit the existing application or resubmit another application?

If the recognition application has been marked incomplete, the Startup needs to follow the below mentioned flow.

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.

For rejected applications, the same cannot be edited but a new application can be submitted after three months from the date of communication of rejection email.


16 Is partnership firm eligible for benefits under StartupIndia scheme?

Yes, a partnership firm is eligible for all the benefits except tax incentives which are provided to a recognised startups.


17 If a Startup is recognised with DIPP. What are the next steps required for raising 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 funds of fund format and invest in daughter funds which invests in Startup.

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

c) Kindly send an e-mail on the given e mail IDs of the said 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 are directed to SIDBI, Mumbai for financial evaluation.

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

Additionally, you can send an email Startup India Hub (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


18 Can a foreigner enter into partnership under LLP Act & get registered that LLP with StartupIndia?

Yes, a foreign national can enter into a partnership under LLP Act. Also, an LLP can register with StartupIndia HUB and get recognised by DIPP.


19 Can a foreign national, a partner in LLP invest in the said LLP recognised by StartupIndia?

Funding from a foreign partner will be subject to regulations of FDI. 100 % FDI is allowed in LLP given that LLP operates in business sectors where 100% FDI is allowed via automatic route and there are no performance linked FDI conditions.


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

DIPP has launched Learning & Development module for budding entrepreneurs, the learning Program is a 4-weeks 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: http://www.startupindia.gov.in/learning-development/ For more courses, please visit the Learning & Development 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.


21 Is a recognition from DIPP a prerequisite for advertising on Startup India portal?

No, any startup is eligible to advertise on Startup India Portal. Please refer to the link http://startupindia.gov.in/advertisement.php

Final discretion on advertisement will remain with DIPP.


22 How can a foreign national, NRI and PIO benefit from start-up India scheme.

Start-up India benefits are for Private Limited Company or Registered Partnership Firm or Limited Liability Partnership. A foreign national, NRI and 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.


25 Facilitator is not responding or I am unclear on how to select a facilitator which will be a right fit for my Startup. What should I do next?

If the startup is unable to select a facilitator, it should contact the Head of Office of the respective Patent Office as per jurisdiction, who shall provide 3 names of facilitator and the startup shall finalise.


26 What part of cost for filling a patent will have to be borne by startup?

Fee for filing patent application and other statutory fees, as per First Schedule, shall be borne by the startup.


27 I want to use the Startup India logo for branding purpose. What is the procedure to apply for it?

The procedure to apply for Startup India logo is online. Please refer to the link for logo usage guidelines: https://www.startupindia.gov.in/content/sih/en/logo-form/guidelines.html 

To apply for Startup India Logo, please refer to this link: https://www.startupindia.gov.in/content/sih/en/logo-form.html

 


28 What are the types of Tax Exemptions provided under the Startup India initiative to recognized startups?

The Inter Ministerial Board (IMB) shall validate Startups for the following two exemptions:

 

1.  Income Tax Exemption on profits under Section 80-IAC of Income Tax Act

A DIPP recognized Startup shall be eligible to apply to the Inter-Ministerial Board for full deduction on the profits and gains from business.

Provided the following conditions are fulfilled:

  • A private limited company or a limited liability partnership,
  • Incorporated on or after 1st April 2016 but before 1st April 2021, and
  • Products or services or processes are undifferentiated, have potential for commercialization and have significant incremental value for customers or workflow

The deduction is for any three consecutive years out of seven years from the year of incorporation of startup.

 

2. Income Tax Exemption on investments above fair market value received under Section 56 of Income Tax Act

A DIPP recognized Startup being a private limited company shall be eligible to apply to the Inter-Ministerial Board for exemption from income tax on investments above fair market value made by angel investors.

Provided the following conditions are fulfilled:

  • the aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of shares does not exceed ten crore rupees,
  • the investor/proposed investor, who proposed to subscribe to the issue of shares of the Startup has, —

              a. the average returned income of twenty-five lakh rupees or more for the preceding three financial years; or

              b. the net worth of two crore rupees or more as on the last date of the preceding financial year, and

  • the Startup has obtained a report from a merchant banker specifying the fair market value of shares.

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.