Tuesday, December 29, 2015

[Editorial # 27] Letting startups scale up

[Following editorial has been published in The Hindu on 27th December 2015. Read through it and try to answer the questions that follow. Please do not copy and paste answers. The objective of this exercise is to get you in the groove of answer -writing. Try to write in your own words. Don't hesitate to write in a bulleted-format, if you are uncomfortable in writing in paragraph form.]
Prime Minister Narendra Modi’s announcement on Sunday that the government will unveil, in January, a comprehensive plan to help make India the world leader in startups is noteworthy. A part of the plan is to link all the IIMs and IITs, central universities and National Institutes of Technology via ‘live connectivity’. The move is expected to assist aspiring entrepreneurs plug into a network of incubators, mentors and angel investors and provide them the ambience to try out their business ideas in the real world. The startup policy is expected to, among other things, make it easier to start and exit a business, allow flexible hiring for new firms in their first three to five years, and provide incentives for financiers, especially domestic funds, as 90 per cent of startup financing currently comes from foreign venture capital funds. The government’s hopes of making India a serious contender to Silicon Valley may seem aspirational, but are also driven by the realisation that India needs many more new enterprises to create 10 million jobs for the youth entering the workforce each year. Apps and services apart, India needs startups in manufacturing, industrial design, agro-based food processing and renewable energy among some of the key sectors. Many Indian startups have made a mark this year with valuations in billions of dollars. The home-grown Flipkarts and Snapdeals have resiliently taken on the global e-tailing giant Amazon, so far. But many of these Indian success stories, more than 65 per cent of startups, have left the country to operate from places like Singapore.
This exodus is not because India doesn’t foster innovation per se. Google CEO Sundar Pichai, in fact, remarked that the constraints people work with in India inspire more creativity and make their ideas more useful for the world. Indian entrepreneurs — from the small-scale factory owners in the 1970s and 1980s to the Bombay Club barons who resisted liberalisation in the 1990s — have a history of successfully adapting their business plans to adversarial regulatory regimes. That startups blossomed in the past few years was not related to the UPA government’s policy or lack thereof. They came up despite the government. Certainly, targeted interventions for startups would help. The mandatory use of Aadhaar for registering a new micro, small or medium enterprise could, for instance, be done away with. Similarly, angel investments by domestic financiers should not be treated as taxable income in the hands of a startup. Clearances and patents should be expedited, and crowd-funding allowed. Most importantly, the labyrinth of regulations and compliances that even startups that attain scale end up being subjected to — making business sense for them to leave India — has to be addressed. It is here that the new policy must deliver. As Mr. Pichai said, the ease of doing business has improved, but it needs to get a ‘whole lot better’ for India to meet its true potential.
1. What is understood by Startups?
2. Explain the following terms/phrases

  • Incubators
  • Angel Investors
  • Domestic Funds
  • Silicon Valley
  • Valuation of a company
  • Bombay Club
  • Adhaar
  • Crowd-funding
3. What is meant by Policy? What is Startup Policy?

4. Why do we need a Startup Policy?
5. What are the hurdles faced by the Startups in India?
6. What role do Startups play in the development of the economy?
7. Why are Startups exiting India and relocating abroad?
8. What steps should the government take to encourage the culture of Startups in India?
9. Given the current level of growth of economy in general and manufacturing sector in general, Startups could play a vital role in generating employment in the country. Do you agree? Justify


  1. Incubators : company that helps new companies by providing capacity building, management trading, office infrastructures etc
    It is in the context of business while incubators in science is a device which is used to care for premature baby in ICU

    Angel investors: is a wealthy person who provides capital for a business start up.

    Domestic fund: fund raised within country by native affluent persons for business start up or manufacturing units.

    Silicon valley: it is in San Francisco, USA which is a IT hub and home to prominent companies like apple, Google, Facebook etc.

    Bombay club: during 1990s when our economy was liberalised. Our market was open for MNCs from developed countries. Then a group of Indian businessmen got together to lobby the government for protection. They demanded level playing field vis a vis the foreigners. They came to be known as Bombay club.

    Crowd funding: is the practice of funding for a project to raise funds by contribution from a large number of people. This is mostly done with the help of internet.
    There are three types of players in crowd funding model:
    Project initiator: who propose idea
    Individuals or group: who support the idea
    Platform: that brings the parties together to launch that idea.

  2. 1- start up literally means begin something from the very existence. In context of this passage start up is a company that is in the first stage of its operations, where an entrepreneur moves from the idea stave to secure business. Start up have the potential to grow rapidly and ultimate aim is to become real company.

  3. 3- policies are principles, rules, and guidelines adopted by an organization to get its long term goals.

    Start up policy is designed to influence and determine major decisions and actions, and to see that all activities take place within the boundaries set by authority.