Are incubators wasting time and money of young entrepreneurs?

Role of Incubators in success of a startup

There is a wave of startups in India when Govt. initiated startups India program. There were a time when people were starting their businesses from their own savings or borrow from friends and family. But now Govt. is encouraging young entrepreneurs by providing cash incentives through incubators or venture capitalists. 

Private venture capitalists has made the incubator centers to support new ideas. They are with mindset of professionalism who believe in documentation with technology. Young entrepreneurs feeds with their terms of management. It seems irrelevant with reality when you go for ground check.

Incubators are in the role of facilitator who supports new startups come with hope to get financial support. They call it seed fund. 

Many youngsters go to them with new ideas, best presentations and zeal of working towards their idea. Incubators also find interesting their ideas and get them enrolled under their program. Incubators have program fee to get them mentor-ship, fixing the meeting with investors, allowing them to make network with young entrepreneurs. 

Youngsters get frustration when they find after three month or more month program with incubator we again came to zero from where we have started. Incubators don't give attention to their need, their skill, their fund requirement, support etc. they give their own fix agenda in excel sheet, ppts etc. So startups gets frustration after spending three to six month time, energy and money is extra which spent during that period.

I find what incubators should do that they should bet on young ideas, choose them and give seed fund to all who got selection. Track their progress and mentor them. If they get fail then also youngsters will learn a lot and their purpose will solve of opening an incubator center in true meaning.

Many times we found that while following incubator's steps we end up with no output in hand. Many of youngsters lose their belief on their idea and start finding jobs to shape their career. 

Also there are many examples when a young mind work for startup for a year or more they don't find jobs according to their expectations like salary, freedom at work etc. 

So there should be careful while adapting an incubator center's advice to shape your startup. Better is you start your work with limited resources available and build business venture around your society, friend and family. It will be a biggest moral booster.

Good Luck.

Support from Govt. of India for Startup

Will I get Benefits of Startup India Policy?

Our expectation as young startup lighten up again by Prime Minister Shri Narendra Modi on 16th January, 2016 announced programs, incentives and exemptions for Startups in India. It was a clear message to young talent who are not taking part of any Reservation agitation or abusing Govt’s policy or throwing stones on Govt. who believe on their own talent and hard work stamina. Policy for Startup India by Honbl. Prime Minister is aimed at creating a strong and vibrant startup eco-system in India and to create a culture of Entrepreneurship.

Let us get into the policy points which make a smile on your face:

How “Startup” word defined?

The Startup India Action Plan defines “Startup”:

Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board (Not clear yet), setup for such purpose.

• It is an entity, incorporated or registered in India not prior to five years
• It has an annual turnover not exceeding Rs.25 crores in any preceding financial year
• It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
• Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.
• Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.

What is the Eligibility for getting Incentives?

           The Startup India Action Plan has stated that

•      Only Private Limited Companies, Limited Liability Partnership and Registered Partnerships are eligible for the Government schemes.
•      Those Companies, LLPs and Registered Partnerships registered even before the announcement are eligible and it is best for Entrepreneurs starting a new business hereon-forth to register a Private Limited Company or Limited Liability Partnership or Registered Partnership.

     How to get Tax Exemptions & Incentives?

A business is considered to be a startup under the Startup India Action Plan if it aims to develop and commercialize: 

•        New product or service or process,
•       Significantly improved existing product or service or process, that will create or add value for customers or workflow.

Eligibility is clearer as under:

•       Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or
•       Be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
•      Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or
•      Be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI that endorses innovative nature of the business;
•      Be funded by GoI as part of any specified scheme to promote innovation;
•      Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

 Who are not eligible as Startups? 

The mere act of developing of products or services of the following nature DO NOT make an entity eligible for incentives:

•        Products or services or processes which do not have potential for commercialization; or
•        Undifferentiated products or services or processes; or
•       Products or services or processes with no or limited incremental value for customers or workflow.

          Startup would be eligible to obtain tax benefits only if:

•       When it has obtained certification from the Inter-Ministerial Board, setup for such purpose.
•     The Inter-Ministerial Board setup by DIPP would validate the innovative nature of the business for granting tax related benefits.
•     However, approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the Startup from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/ or supporting such application.
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 Fast Facts:

•     Eligibility Criteria – New or significantly improved version of existing services or products.
•     Another eligibility criteria states that the startup should get a recommendation letter from the recognized incubator cell (like CIIE, TiE etc.) or be recognized by the GoI or should be funded by recognized funds. Startups can take part of contest running by incubator cell and get recognition letter from it.

For example company who are engaged in product manufacturing like fmcg ITC or Pepsico. So a new startup engaged in the same field may not be eligible unless its product is significantly improved than what existing players provide.

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