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Bootup: How to kick start your venture!

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An overview of Start-up ecosystem in India, various legal entities which can be floated. What is Start-up India plan & its benefits? Funding environment in India, Various funding options. How to shutdown/exit your venture?

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Bootup: How to kick start your venture!

  1. 1. < Seemant Shrivastav/> <Hetal Shah/> <2017/05/27> <Booting up: How to kick start your venture>
  2. 2. <CAVEAT> caveat ˈkavɪat/: noun a warning or proviso of specific stipulations, conditions, or limitations. The presentation on Start-ups is made for the audience at the 91 springboard hub. The presenters do not wish to solicit, invite or provide inducement of any sort whatsoever from Attentio Corporate Services LLP or any of its members to create an Consultant- Client relationship with members of audience. While due care & diligence has been exercised in creation of the contents of this presentation. The presenters do not assume any liability for the interpretation and/or use of the information contained on this presentation, nor do they offer a warranty of any kind, either expressed or implied. Audiences are hence requested to consult reliable sources, including Government websites and/or their advisors before taking any action/decisions with regards to contents of this presentation
  3. 3. <Index> • Start-up Environment • Available entity structures • Major Compliances • Ease of Doing Biz • Start-up India Program • Benefits of Start-up India • Funding environment • Lifecycle of funding • Funding sources • Shutting down business • Bankruptcy code • Closing thoughts
  4. 4. <before we begin> #World wide: Source HBR India: Source IBM Survey of Indian Start-ups fail in first 5 yrs.90%
  5. 5. <Start-up /Environment>
  6. 6. <Start-up /Ecosystem> <IndiaVs US> 0% 10% 20% 30% 40% 50% 60% 50-88 35-49 Below 35 51% 33% 16% US: Avg Age of Entrepreneurs In India 72% of entrepreneurs are below 35 years 9.50 2015
  7. 7. Company Last Round Valuation (Bn $) Date of entry into Unicorn club Sector/Model Investors Founders Flipkart $11.6 08-06-2012 eCommerce/Marketplace Accel Partners, Ebay, Iconiq Capital Sachin & Binny Bansal One97 Communications (operates Paytm) $5.7 05-12-2015 Fintech Intel Capital, Sapphire Ventures, Alibaba Group Vijay Shekhar Sharma Olacabs $3.5 27-10-2014 On-Demand Accel Partners, SoftBank Group, Sequoia Capital Bhavish Aggarwal, Ankit Bhatti ReNew Power Ventures $2 14-02-2017 Energy & Utilities Goldman Sachs, JERA, Asian Development Bank Sumant Sinha Hike $1.4 16-08-2016 Social Foxconn, Tiger Global management, Tencent Kavin Bharti Mittal Shopclues $1.1 01-12-2016 eCommerce/Marketplace Nexus Venture Partners, GIC Special Investments, Tiger Global Management Radhika Aggarwal, Sandeep Aggarwal & Sanjay Sethi Zomato Media $1 04-10-2015 Social Sequoia Capital, VY Capital Deepender Goyal, Pankaj Chaddah InMobi $1 12-02-2014 Adtech Kleiner Perkins Caufield & Byers, Softbank Corp., Sherpalo Ventures Naveen Tewari, Amit Gupta, Abhay Singhal Quikr $1 04-07-2015 eCommerce/Marketplace Brand Capital, Tiger Global Management, Kinnevik Pranay Chulet <Indian/Unicorns> #Source: www.cbinsights.com
  8. 8. <Entity/Structures>
  9. 9. <Entity/Types> Unincorporated Proprietorship Partnership Incorporated OPC LLP Private/Public Company
  10. 10. Type of company Pros Cons Sole Proprietorship Easy to start & dismantle, limited compliances, complete control, low cost of formation and management Unlimited liability, lack of credibility , lack of resources, not recognized as a separate legal entity, Foreigners are not allowed to start a proprietorship One person company Limited liability, benefits & simplicity of proprietorship Higher compliances vs a sole proprietorship Partnership Easy to set up & dismantle, hardly any compliances, Unlimited liability, not recognized as a separate legal entity, Foreigners are not allowed to start a partnership Limited liability Partnership Incorporated Partnership with Limited liability, Foreigners are allowed to invest with prior approval of RBI & Applicable DIPP approval (if applicable),Tax benefits More compliances, Equity Capital raising is a challenge, Private /Public Company Limited liability, Foreigners are allowed to invest through automatic route in most sectors, Easier to raise capital from PE/VC firms. Most regulated, Highest level of compliances, Corporate Governance & other mechanisms come into play. <Entity/Types>
  11. 11. <COMPLIANCES/LEGAL> • Routine operations : General meetings, Board Meetings, filing IT returns, remitting Tax deducted at source(TDS) returns, Filing ST/VAT/Excise (going forward GST Returns) • Fundraising Related : mode of issue of securities, valuation for tax purposes, Reserve Bank of India (RBI) and Foreign Exchange Management Act (FEMA) regulations for foreign investors. • IP related: Applying for trademarks, patents & copyrights, protecting your IP, attribution, and royalties. • Employee Related: Provident fund, Employee State Insurance, Bonus, Gratuity, Maternity Benefits, POSH Policy There are also various Acts, Rules and Regulations applicable to entities which are State or Sector Specific (depending on nature of business) and may have separate regulators also.
  12. 12. <Ease of Doing Biz>
  13. 13. <Ease of Doing Biz> Ease of doing Business index prepared byWorld Bank for 189 economies and aggregates information from 10 areas of business regulation: • Starting a Business; • Dealing with Construction Permits; • Getting Electricity • Registering Property • Getting Credit • Protecting Minority Investors • PayingTaxes • Trading across Borders • EnforcingContracts • Resolving Insolvency India has moved 4 notches in last three years on this index:
  14. 14. 14 Co. Incorporation time lines have shrunk from 15-20 days to 5-8 days <Incorporation/Timelines>
  15. 15. <Ease of Doing Biz> Incorporation time has been squeezed down by merging/doing away with certain procedures.
  16. 16. <STARTUP/INDIA>
  17. 17. <STARTUP DEFINITION> An entity shall be considered as a Startup : a) if it is incorporated as a private limited or registered as a partnership firm or a limited liability partnership in India; and b) up to seven years from the date of its incorporation/ registration and c) if its turnover for any of the financial years since incorporation/ registration has not exceeded Rupees 25 crores; and d) 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.
  18. 18. <STARTUP INDIA SCHEME> • Launched by PM Modi in January, 2016. • Focuses on building a strong ecosystem • Established a start-up hub to answer the queries from companies and help with the registration process • Establishing Incubator centres • Establishing 500 tinkering labs. • 7 Research Parks will be set up • 15Technology Business Incubators (TBIs) and 15 Start- up centres are being set up • Exemptions on CapitalGains for Angel,VC/AIF investors If invested via funds of funds recognized by SIDBI
  19. 19. <Steps/Checklist for registration> Company must be a private company/LLP/partnership firm I II Age should not be more than 7 years Yes Turnover should not exceed 25 cr in any year III Yes must be working towards innovation, of new products, processes or services or scalable business model with a high potential of employment generation or wealth creation. Get approval from DIPP that your company is innovative recommendation from an incubator established in a post- graduate college in India recommendation from an incubator which is funded from GoI recommendation from an incubator which is recognized from GoI be funded by an Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network have a patent granted by the Indian Patent and Trademark Office IV V VI cVI bVI a VI d VI e IF you meet conditions I,II,III,IV,V and any one ofVI series, then you are a startup
  20. 20. <Benefits of Start-up India>
  21. 21. BENEFITS OF RECOGNITION Tax Exemption Rs 10,000 cr fund of funds Fast track of patents; Rebate of upto 80% Access to Government Contracts Easy exit Rs 2,000 cr credit guarantee fund <Recognition Perks>
  22. 22. <START UP INDIA/ STATUS> Till 15th May,2017 • DIPP has recognized 932 companies as startups. • 23 companies have received tax exemption • 200 Patent applications have received benefit of reduction of 80% in fees and free legal assistance. • Started a startup India online learning program free for everyone.
  23. 23. 623 cr committed to 17 AIFs 33 cr discbursed to these funds Investments made in 62 startups to the tune of Rs 180 cr. Fund of Funds Set up the GOI, managed by SIDBI <FUND OF FUNDS> 600 cr released to SIDBI 10000 cr allotted till 2025
  24. 24. • To be Launched by DIPP • Screening process – June 2017 (10,000 applications expected, shortlisted 2000 will present here) in Mumbai, Kolkata, Delhi, Guwahati, Indore , Chandigarh and Bengaluru. • Most of the funds for the show would be met through sponsorship • Final round around 35-40 will be shortlisted and telecasted onTV <SHARKTANK INNOVATE INDIA>
  25. 25. <Funding Environment-India>
  26. 26. <Start-up: Fund raise Survey>
  27. 27. <Start-up: Fund raise Survey>
  28. 28. <Deals/2016> 9% 9% 7% 5% 5% 5% 4% 4%3%2%2%2% 2% 2% 2% 37% Ecommerce healthtech fintech enterprisetech media & entertainment Edtech discovery hyperlocal Foodtech Traveltech Fashiontech Analytics Hardware Logistics AI Others
  29. 29. <Funding Lifecycle for Start-ups>
  30. 30. <Start-up:Typical Financing Cycle>
  31. 31. <Funding Options>
  32. 32. Equity Debt Barter(exchange) Others VentureFunds CreditCards PartneratVC's,CorporateHeads PersonalLoans SaasinsteadofProduct AngelFunds&Networks VentureDebt(PEfundedCo) GetSeniorpeopletowork AngelSyndicatePlatforms SMELoansbyNBFC's CustomerAdvances MediaBarters Factoring Licenseyourproductsinothermkt HNI's Leasing GovernmentGrants&Incentives Incubator/Accelerator LoanagainstCollaterals Barter-ConsignmentBiz WinPrizesincontests CrowdFunding CGTMSE Backofficesupport Managingwithownrevenues Friends&Family OfficeSpacevsproduct/equity Moonlightingonjob Bootstrapping Exchangeresources GetFreeresources Costoffund <Start-up: Fund sources>
  33. 33. <Shutting Down/Bankruptcy>
  34. 34. <CLOSING DOWNTHE BUSINESS> • Generally it takes three years to close down a business. • Regulatory compliance requires a procedure to be complied when returning money. • Not shutting down an earlier venture can create a problem for the current venture. • India's archaic laws and labyrinthine processes of liquidation make dealing with shuttering a start- up far harder than handling the emotional struggle of giving up. • Abandoning a business is not the solution. Defaults in company law compliance and inherent shareholder obligations will lead to a black mark in the RoC (Registrar of Companies) records
  35. 35. • If an asset sale is undertaken, one can kill the business in a week or two. • If one can demonstrate that the company has no assets and operations for two years, the process can be faster. • The Insolvency and Bankruptcy Code, which is finalised, is expected to ease some of the pain involved in the liquidation process. • Where possible, make short term commitments on lease lock-in, employee hire, business promotion, etc. <CLOSING DOWNTHE BUSINESS>
  36. 36. To initiate an insolvency process for corporate debtors, the default should be at least Rs 100,000 (which limit may be increased up to Rs. 10,000,000 by the Government).The Code proposes two independent stages: Insolvency Resolution Process, during which financial creditors assess whether the debtor's business is viable to continue and the options for its rescue and revival; Liquidation, if the insolvency resolution process fails or financial creditors decide to wind down and distribute the assets of the debtor. <BANKRUPTCY CODE>
  37. 37. <ClosingThoughts>
  38. 38. <To Sum Up> India is one of the more difficult places to do business for a start up. However, this is changing gradually with Government focus on easing the regulatory & taxation norms. This will still take some time though and Entrepreneurs in meanwhile should keep chasing their vision.
  39. 39. 39 www.attentiocs.com

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