It was early this January, a couple of weeks before Prime Minister Narendra Modi announced the coming of age of Indian startups by launching the Start-up India Action Plan; in Bengaluru, Anandraj Koormapolu had queued up to get a Rs 500 stamp paper to urgently close a deal.
This was his second attempt in as many days to procure the paper as the vendor in the city’s Koramangala area—home to many technology companies—had closed while he was waiting for his turn the previous day.
Koormapolu, a software products veteran, couldn’t help being bemused at the system; he could have spent his time fine-tuning the latest release at his startup. Zoojoo.be, the company he co-founded with friend Avinash Saurabh, had recently raised its first $1 million from venture capital (VC) firm Roundglass Partners, and the two were excited about raising their game. Zoojoo.be brings together employees of an entire company in a social media environment to drive wellness; using gaming elements, users are encouraged to set and beat personal fitness goals. The implications of this for health insurance are enormous.
India’s new age startups aren’t about exporting cheap labour. They solve big problems for Indians in India. Some of them might even go on to set the bar for the rest of the world in innovation, despite the frustrating trips for stamp papers and other red tape.
It is the recognition of this potential of the startup economy, and the current environment that stifles its growth, that has prompted the Union government to announce the country’s new policy to build the startup ecosystem.
Everyone Forbes India spoke to agrees the policy is a giant leap forward. “The biggest win here is the government’s recognition of startups,” says Girish Mathrubootham, founder and chief executive of Freshdesk, India’s first startup to attract investment from Google Capital and whose cloud-based customer support products boast of 50,000 customers in 143 countries. “Now we will have a seat at the table,” and startups might get more attention, Mathrubootham said in a phone interview from Chennai.
“The prime minister’s backing for the policy is bringing entrepreneurship to the forefront...making it a household name for the first time in India’s history,” says Alok Goel, managing director at venture capital firm SAIF Partners. “The biggest thing it’s doing is telling people that being an entrepreneur is fine.”
It has also dawned on the government that startups are different from the traditional small and medium enterprises, and that these ventures are a legitimate economic activity and a source of wealth and job creation, says Sanjay Anandaram, partner at Seedfund, a Bengaluru-based VC firm.
For ventures starting today, this is a huge step, says Rajiv Srivatsa, co-founder and chief operating officer at Urban Ladder, which sells furniture online. From creating a Rs 10,000-crore corpus to popularising entrepreneurship in schools, the policy reflects “tremendous energy and momentum”. “Ten years from now... school children will want to do this [entrepreneurship],” he adds.
The startup policy also has some tax breaks and other concessions for new startups and tries to make tasks such as registering a new startup, or shutting down a failed one, less bureaucratic. There is even a proposal to build a smartphone app to track the progress of such processes.
While the startup policy has set the ball rolling, there is also the feeling that it lacks bold steps and the new policy is a missed opportunity to have articulated something truly visionary. “I don’t think this policy has anything for startups that were established four years ago or even six or seven years ago,” says Srivatsa, “barring some mentions like encouraging patent filing.”
Aditya Sanghi’s Hotelogix in Bengaluru is a rival to Freshdesk in the hospitality space, selling internet-based customer management software for small- and medium-sized hotels across the world. Sanghi needs to collect payments from customers fairly frequently, “but we can’t have their cards on file”, he says. Under Indian rules, each payment would require a second factor of authentication, which means that startups here can’t save the credit card details of their customers to periodically deduct fees. “I spent a year setting up a unit in the US, which we now use to collect money,” says Sanghi.
With Freshdesk, too, Mathrubootham headquartered the company in the US, which also makes it easier to raise money from overseas investors, and eventually list on a stock exchange. “I understand that the RBI has these rules to ensure security and prevent funding of terrorist activities and such things,” he says. “But you’re also killing startups.”
Bikram Sohal, who started SavvyMob, a last-minute online hotel reservation service, recalled how at an earlier venture, his co-founder had turned up at Hong Kong, where Sohal was based at the time, with a big bundle of documents to register the company. “None of that was in fact required,” Sohal recounts. “Within a few hours we were done, and we had a bank account and a card in a day” and they were good to go. At Bengaluru-based SavvyMob, getting a corporate credit card—for working capital—required a deposit larger than the credit limit as collateral.
“If you can do this [registering a company] in a couple of hours in Hong Kong, and in a day in California, why not here,” Seedfund’s Anandaram asks. “You are forcing companies to leave India because of the onerous documentation requirements.”
The startup policy has made no hard decisions on easing bureaucracy in payments, raising money or listing norms.
(This story appears in the 19 February, 2016 issue of Forbes India. To visit our Archives, click here.)