While there has always been a lot of expectations from the Union Budget from the startup ecosystem, it often falls short of adequately addressing the needs of startups, primarily due to the government’s inclination towards a more conservative approach, notwithstanding the ecosystem’s rapid expansion which outpaces administrative responsiveness.
That being said, here are a few recommendations that can improve the startup landscape of the country, if incorporated in the Budget:
1. Fostering innovation in deep tech and biotech: The nation has witnessed a surge in innovations within deep tech and Biotech, originating from various regions. To channelise efforts from founders and investors towards these sectors, the government should spearhead targeted missions. Incentives such as grants, land rebates, lab support, and academia collaborations can significantly bolster innovation in these domains.
2. Empowering entrepreneurship in Tier II & III Cities: Encouraging entrepreneurship in smaller cities can yield solutions tailored to niche sectoral or geographical challenges. Entrepreneurship programs aimed at nurturing leadership and problem-solving skills among youth not only cultivate potential founders but also groom skilled employees.3. Diversifying startup hubs beyond major metropolises: – The Bangalore-Mumbai-Delhi corridor has been responsible for an average of 90% of all startup funding activity in the country. In order to increase participation across various other regions of the country, the right ecosystem needs to be created and this mandate should be passed on to the individual states. The right ecosystem creation requires incubators, talent pools, mentorship support, and funds. Incentivising state governments to push this agenda forward via public-private partnerships can ensure micro-level disruptions.4. Nurturing indigenous venture capital – Every funding winter teaches us something. This one taught us a lot of things but in this context we learnt that most funds go back to their home base (comfort zone) when times are tough while keeping one eye on the prize. In order to ensure that during future downturns, there is sufficient focus on Indian startups, promoting the establishment and growth of homegrown VC funds is important. This can be done by – a) Government Fund of Funds – Incentivising the Government FOFs to be more active in their deployments across funds of various sizes will subsequently help in faster deployment by these funds.
b) Early-stage VC support – Enabling FoFs to support smaller funds focusing on the earlier stages helps in fostering innovation and grassroots development
5. Tax incentives for investors: Providing tax concessions to domestic investors can augment the availability of capital for startups. This measure encourages greater participation in funding rounds, thereby fostering a conducive investment environment.
That being said, here are a few recommendations that can improve the startup landscape of the country, if incorporated in the Budget:
1. Fostering innovation in deep tech and biotech: The nation has witnessed a surge in innovations within deep tech and Biotech, originating from various regions. To channelise efforts from founders and investors towards these sectors, the government should spearhead targeted missions. Incentives such as grants, land rebates, lab support, and academia collaborations can significantly bolster innovation in these domains.
2. Empowering entrepreneurship in Tier II & III Cities: Encouraging entrepreneurship in smaller cities can yield solutions tailored to niche sectoral or geographical challenges. Entrepreneurship programs aimed at nurturing leadership and problem-solving skills among youth not only cultivate potential founders but also groom skilled employees.3. Diversifying startup hubs beyond major metropolises: – The Bangalore-Mumbai-Delhi corridor has been responsible for an average of 90% of all startup funding activity in the country. In order to increase participation across various other regions of the country, the right ecosystem needs to be created and this mandate should be passed on to the individual states. The right ecosystem creation requires incubators, talent pools, mentorship support, and funds. Incentivising state governments to push this agenda forward via public-private partnerships can ensure micro-level disruptions.4. Nurturing indigenous venture capital – Every funding winter teaches us something. This one taught us a lot of things but in this context we learnt that most funds go back to their home base (comfort zone) when times are tough while keeping one eye on the prize. In order to ensure that during future downturns, there is sufficient focus on Indian startups, promoting the establishment and growth of homegrown VC funds is important. This can be done by – a) Government Fund of Funds – Incentivising the Government FOFs to be more active in their deployments across funds of various sizes will subsequently help in faster deployment by these funds.
b) Early-stage VC support – Enabling FoFs to support smaller funds focusing on the earlier stages helps in fostering innovation and grassroots development
5. Tax incentives for investors: Providing tax concessions to domestic investors can augment the availability of capital for startups. This measure encourages greater participation in funding rounds, thereby fostering a conducive investment environment.
6. Streamlining startup operations: Simplifying operational procedures for founders can mitigate time delays and enhance the ease of conducting business. Formalising Standard Operating Procedures (SOPs) for tax incentives and establishing streamlined processes with banks for capital inflows, both domestic and foreign, can expedite business operations.
While the challenges in this ecosystem are wide & large, with lots of room for improvement, these recommendations will help pave the way for long-term development.
The writer is CFO & Partner at Aeravti Ventures.
