Starting up the startups

Starting up the startups

‘Startup’ is the buzz word which has caught the imagination of young India though the hype is not in sync with the hardcore real life issues of doing business in a country where even opening a current account in a bank could make you wonder whether the journey is worth it. Still, thanks to the animal spirit among budding entrepreneurs, mostly from the premier institutions like IITs and IIMs, India is ranked among the five largest startup ecosystems in the world with the number of greenhorns crossing 4,200 by the end of 2015, according to a Nasscom report. A sizeable amount of funding has been pumped into the startups who are quite global in their outlook and lingo, so much so that most of them talk in terms of millions of dollars and not in rupee and crores. Thanks to an encouraging consumer response for the fledgling e-commerce, some of the startups have been valued at over a billion dollars, emerging as the ‘unicorns’ which inspire the younger lots.

It is in this backdrop and unfolding ecosystem that the government’s decision to set up a Rs 10,000 crore ‘Fund of Funds for Startups’ should be welcomed as a catalyst that could generate millions of jobs and add to the country’s economic growth. As per an official reckoning, a corpus of Rs 10,000 crore at the Small Industries Development Bank of India could be catalysing Rs 60,000 crore of equity and twice as much debt. While capital is important, it is one part of an ecosystem required for the startups. Another key aspect is hand-holding by professional venture capitalists who rope in mentors in expertise of different sorts. This gap would perhaps be filled by the Alternative Investment Funds registered with the Securities and Exchange Board of India.

Yet another factor which distinguishes a startup from someone wanting to go in for a settled employment is the risk appetite. Those wanting to make it have to take risks, but then failures should not be made a stigma that stays with an entrepreneur who got it wrong. That is where the concept of ‘limited liability‘ as defined in the corporate law should be respected so that the promoter should not be seen as an offender if his business fails. But the narrative in the wake of some high profile wilful banks defaulters  could make people risk averse and that is something to be guarded against. The exit route should be as respectful as the entry gate.

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