This presentation has a set of expectation of start-up entrepreneurs, angel investors and the early stage venture capitalist. YourNest Angel Fund has helped collate this for bring it to the attention of our forward-looking government. Let us create a friendly environment for the creator of jobs and move quickly.

1. Creating a Vibrant Startup &
Entrepreneurial Ecosystem in India
Aug’14
YourNest Angel Fund (SEBI/11-12/0226)
www.yournest.in

2. Need for Start-ups
• First Generation Entrepreneurs enable “Job Creation”-
• Infosys, Bharti, Sun Pharma, Kotak, Mindtree, IndiaBulls, Yes
Bank, Edelweiss, Adani Enterprises, Naukri, Makemytrip…
• Start-up lead technological change & innovation to “Enhance
Productivity” -
• JustDial, Flipkart, Bharat Matrimony, Shaadi, SnapDeal, Redbus,
Bookmyshow, Zomato, Olacabs, Inmobi, MuSigma, Quikr…
• “Entrepreneurship” is a sunrise industry. Youth is re-imagining
India to solve needs of our masses -
• 1000s of new start-ups being launched with vibrant new
ideas…

3. How Start-ups Contribute
• Entrepreneurship engine in India, over the next decade, has the
potential to-
• Create 2500 successful high growth venture.
• Generate 10 million direct & 20-30 million indirect jobs.
• Consequently, powering India’s economic progress with –
• Inclusive economic development
• Innovative products/services for India’s young population
• India as a hub for frugal innovation
• Attracting investment flows and creating substantial wealth
• This cycle has been set in motion over past few years with
emergence of first generation entrepreneurs, increasing availability
of capital, and strengthening of the ecosystem..

4. Ease Process of Starting & Closing a Business
• Catch global headlines in May’2015 that India Improve its rank to
sub-100 from 179th Rank - Ease formation of a company by
leveraging India’s software competence for
• Single Application with 24-hour Turnaround Time (SATTT) - Name Search,
DIN, Digital signatures, Incorporation certificate, and PAN.
• When the start-up decides the place of operation in SATTT - Allocate Tax
Account Number, register it under Shop & Establishment and the MSME Act.
• Make Stamp Duty on Issue of shares an online process
• When the start-up reaches the minimum number of employees in SATTT –
Register under Professional Tax, EPFO, ESI, and Gratuity.
• Similarly, ease the process of closure of a Private Limited Company.
Entrepreneurs who start a business must find it easy to close upon
failure.

5. Ease Operating a Business in Early Days
• Permit self-regulation & self-compliance for Small & Medium
Companies (SMCs) during infancy of a business.
• Define a “Small Business” and relax regulations. such as –
• Why a start-up from Day 1 need to deduct Withholding Tax, comply
with Tax Deduction at Source (TDS), and even the Reverse Charge
Mechanism to gross-up for deposit of income tax and service tax.
• Enhance exemption for “Small Company” multi-fold in The
Companies Act 2013 e.g. Process of Issue of Shares Capital, Valuation
Report by Merchant Banker, Need for Valuation for issue of ESOPs,
Need for Internal Audit.
• Waiver of Foreign Exchange Regulations. Allow “auto-debit” by Indian
Company like Google and Apple.
• Revisit current revenue limits for Service Tax, VAT, Excise Duty.

6. • Indian HNIs & Ultra HNIs are obsessed with Real Estate, Gold, and
Fixed Income – Encourage them to be an angel investor, investing in
venture capital (AIF Category 1), and even Private Equity.
• Allow Capital Gains to be invested in “Risk Capital” in addition to RBI
Bonds u/s 54 of IT Act.
• Consider Incubation, VCF/AIF Cat 1 investment as CSR.
• Upfront exempt Angel Investing from Start-up Tax u/s 56 (2)(viib).
• UK offers best practice for India to learn on this front
• Replicate “Enterprise Investment Scheme (EIS)” that started as “Business
Start-up Scheme (BIS)” in 1982 in UK to offer personal tax relief for
investment in startups & early stage business.
• Replicate scheme of 1995 of UK to extend relief for investment in
Venture Capital Trusts (AIF/VCF) for individuals investing GBP 200K
for at least 5-years as against taxing as business income as per CBDT
circular dated July 28 2014.
Drive Saving of Rich towards Risk Capital

7. • NRI/PIOs have experienced the reward on investing in start-ups in
US, UK, Singapore... They are open to investing in India.
• Clause 3.2.3 under 3.2 of the CONSOLIDATED FDI POLICY requires
DIPP / FIPB approval for non-residents to Invest in VCFs/AIFs.
• India need local Fund Managers to mentor and coach start-ups.
• SEBI approved Trust are highly regulated. Dual regulation not desired.
• 97% of VCF/AIF are structured as Trust, whereas this rule allows “non
residents” to invest in a VCs as Company that are only 3%.
• Automatic Route required for “Non Resident incl. NRI” investment
• A similar provision to be extended to International financial
institutions such as ADB, IFC, CDC, DEG…
Allow FDI in Venture Capital Funds

8. • RBI to encourage VC/Start-up investments by Banks under
“priority sector lending” norms.
• Start-up Equity Funding thru SEBI Approved VCF/AIF Category I to
be at par with priority sector lending norms.
• Vibrancy of start-ups is comparable to agriculture/farming in
having a positive spillover effect on the economy.
• Endowment Fund worldwide invest in VC/PEs.
• Allow Indian Charitable & Religious institutions approved u/s 80G
to invest in VC/AIF Category 1 & II (Amend Rule 17C u/s 11(5))
• Globally Pension Funds too invest in VC/PEs.
• Allow under “New Pension Scheme” of PFRDA for “Asset Class E” to
include “within the cap of 50%, a sub-limit of 10% may be invested
in VC/AIF Cat I & II.
Allow flow of Long-Term Institutional Capital
for Start-ups

9. • FoFs is a self sustaining model over 7-10 years. Requires budgetary
support in initial years.
• Immediate allocation essential for the highly effective schemes of
supporting high-risk investments during stage of research,
incubation & acceleration–
• Technology Development Board (TDB)
• National Research Development Corporation (NRDC)
• SIDBI
• Allocate 10% of the Rs.10,000 crore corpus to Funds with Venture
Capital exposure for FoF deployment including “India Inclusive
Innovation Fund” and “India Opportunity Fund”.
Operationalize MSME & Start-up “Fund of
Funds (FoF)”

10. • Small-B Branch initiative of 2012 must be multiplied many-fold
• Funding start-ups is a specialized skill.
• Multiply current network of Small-B independent branches.
• Collateral Free Loans for SME – CGMSE Loans of Rs.1 crore
• Stop taking personal guarantee of promoters when it is by definition
collateral free with no 3rd party guarantees.
• Push banking network to release such loans.
• Develop lending options for innovative start-ups
• Bridge funding / Working capital loans.
• Auto payment to MSMEs from Large customers within stipulated 45
days.
Develop & Scale-up debt Offering

11. • Replicate Kerala Government Model
• Start-up Village for 1000 local start-ups
• Chief Minister’s commitment to allocate funds for Start-ups
• Governments to Encourage Adoption of Productivity Enhancement
tools
• Leverage automation in services of mass nature : taxi booking, bus
ticket, tourist ticketing, e-governance…
• State Finance Corporations to Invest in VCFs/AIFs
• Seek a commitment of double the sum invested by SFCs be allocated by
the fund for the businesses from the state.
Guide Our states for Entrepreneurship Initiatives

12. • Build and nurture Entrepreneurial Eco-system
• Mentor, Coach, Share Learning through institutions or events -
• Incubators, Accelerators, Start-up Weekend, NEN, TiE, eCells, EDI,
iCreate, Start-up leadership, Founder Clubs, Common Work
Spaces.
• Lead Early Stage Investments (i.e. seed, angel, and venture capital
rounds)
• By investing in Indian start-ups mainly involved in new products, new
services, technology, or new business model.
• Handhold our start-ups to go global
• True test on technology innovation is serving global customers and
being globally competitive.
Our Commitment

13. Conclusion ~ Who can lead the change
S
No. Action Point Could be led by
1 Ease Process of Starting & Closing a Business Ministry of Corporate Affairs (MoCA)
2 Ease Operating a Business in Early Days Ministry of Finance and MoCA
3 Drive Saving of Rich towards Risk Capital Ministry of Finance
4 Allow FDI (including NRI funds) in Venture Capital Ministry of Commerce & Industry (DIPP)
5 Allow flow of Long-Term Institutional Capital Ministry of Finance and Reserve Bank of India
6 Fund-of-Fund (FoF) with allocation from Union Budget Ministry of Finance
7 Develop & Scale-up debt offering Reserve Bank of India
8 Guide Our states in Entrepreneurial Initiatives Chief Minister's of our States
9 Mentoring, Coaching, Investing & Going Global Angel Network and Venture Capital Fund

14. Thank You