Are you a recognized Startup?

If you haven’t heard about the Startup India Initiative, then you’ve definitely been living under a rock! The initiative was launched last year with much fanfare to encourage entrepreneurship and promote sustainable growth within the Indian startup ecosystem. In fact, it was only in 2016 that “startup” was defined as a separate term[1] by the Department of Industrial Promotion and Policy (“DIPP”). But despite many incentives for startups such as tax benefits, credit availability etc. it wasn’t very well received by the startup community. After taking feedback and suggestions from various stakeholders within the startup ecosystem, the government reassessed its Action Plan and in May 2017 and the DIPP[2] notified a broadened definition of the term “startup” (discussed below), relaxed the norms for eligibility and made the process for recognition of startups much simpler. As a result of this much needed amendment as of now 3160[3] startups have been recognized and 67 out of those have already received funding support from the government!

[1] DIPP Notification No. G.S.R. 180(E) dated February 17, 2016

[2] DIPP Notification No. G.S.R 501(E) dated May 23, 2017

[3] http://startupindia.gov.in/ (last visited August 30, 2017)

The eligibility criteria for “Startup” recognition is now broader!

Having assisted multiple startups with their application for recognition, over a period of time we felt there was dearth of information regarding the relevant documents and the process of application. In this blog post we would like discuss the relevant details and information that an applicant must furnish as well as keep in mind the key parameters for the eligibility criteria for recognition of a startup. We hope to bring clarity and help many applicants realize their dream of being recognized as a startup.

But before we delve any further, it is imperative to understand the revised definition of a startup which will help in understanding the process of application and the key parameters that applicants must keep in mind. The broadened definition of startup is:

  1. It has to be an entity, i.e., a private limited company or an LLP or a registered partnership firm
  2. It should be less than 7 years’ old. In case of a biotechnology company, this limit is 10 years.
  3. The entity must not be formed by splitting up, or reconstruction of an existing business.
  4. It should not have annual turnover exceeding INR 25 crore in any preceding financial year.
  5. It should be working towards innovation, development or improvement of products or processes or services, with a scalable business model and can generate employment opportunities or wealth creation.

If an applicant fulfills the above mentioned criteria, then it may be eligible to apply for recognition as a startup.

Certificate from Incubator not mandatory anymore!

Let us now proceed to understand the application process, necessary documents and other relevant information that an applicant must furnish with its application:

  1. The application can be made online either through the DIPP web portal[1] or via their mobile app.
  2. Following documents are required to be submitted:
  • KYC (Know Your Customer) details, i.e., certificate of incorporation, registered office address, details about the directors or partners, authorized representatives of the company, number of employees etc.
  • Details of all or any intellectual property rights that the applicant may have registered or applied for. This includes the entire gamut of IPRs such as trademarks, patents, copyrights, design and plant varieties.
  • Identify the industry, sector and category.
  • To facilitate ease of doing business in India, the government has introduced self certification of the application. That means that it has eliminated regulatory and bureaucratic hurdles of obtaining recommendation and support letters from incubators and industry associations.

Once all the basic details regarding the entity are filled in, we come to the section that we believe can make or break the chances of receiving the recognition. Every applicant must keep in mind the revised definition a startup that is, an entity that is working towards innovation, improvement (existing product/service/process) and scalability. Applicants are required to submit a brief note highlighting how their startup is supporting these 3 key parameters in about 250 words. This section also requires the applicant to indicate the current stage of development of its product that is, whether it is in ideation, validation, early traction, or scaling stage. Apart from this, applicants may submit links to their website, any videos and press coverage of their entity. The application also requires applicants to submit a pitch deck, however, in our experience, essentially, the applicant has to submit an overview of their business and their business plan. Any document whether it is a brief profile of the startup, or an executive summary or a pitch deck that elucidates this would suffice

This sums up the application process for recognition of a startup. Unless there are issues, a certificate of recognition is granted within 3-4 days (sometimes even 1) of making an application.

Startup recognition can be obtained in less than 7 days!

It goes without saying that the Government has taken steps to simplify the application and kudos to the government for that. For instance, it comes as a huge relief that the self certification has been introduced and that the age limit for startups have been extended. But like all things new there are teething issues and of course, there are areas of concern that need to be looked at; for instance, we believe that at present the list of industries is not exhaustive. The Indian startup ecosystem is young and extremely dynamic. However, the list of industries is very limited and in our experience, a number of industries are missing from the list. This poses a huge problem for applicants. Kudos to the government for relaxing the age limit for startups, but we feel that there are many startups that have a longer gestation period and age limit of 7 years may be unfair to quite a few. Further, we also feel that a lot of startups may not be able to meet the criteria of employability and wealth creation in their early stages. Having said that, we also believe that the government has taken steps in the right direction. Over the next few years we hope to see favorable amendments that will benefit the entire startup ecosystem and give the Indian entrepreneurial spirit the impetus that it truly deserves!

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