Indian Govt is trying to define “startups” – and there are contradictions all over !

So StartupIndia program has completed more than a year and we are yet to see any serious impact. Having said that, an initiative like this does take time and needs a lot more patience.

StartupIndia Program
StartupIndia Program

But then, here is the ‘foundational’ problem with the way government is defining startups and unless we fix that, I really don’t expect this program to create any impact in any form (emphasis is mine).

A Startup has been defined as a private limited company or a partnership firm or an LLP, incorporated or registered in India not earlier than five years, with annual turnover not exceeding INR 25 crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. Entities formed by splitting up, or reconstruction, of a business already in existence have been specifically stated to be not eligible for recognition under the Plan (from StartupIndia Action Plan: Annual Review).

That is, you have to be innovative and your turnover shouldn’t exceed INR 25 crores.

Okay. Fine.

And now, the government is adding a new parameter to this definition – which is ‘job creation’.

To qualify as a startup under the new definition, an entity would have to declare its job creation target and meet certain financial standards besides having a certain level of innovation in its product or service. “We will do our own scrutiny at the time of examination of applications for giving the tax benefits,”, [govt official/source]

So a startup has to be

  1. Innovative.
  2. Not sell a lot (to meet the turnover criteria), and
  3. Create jobs as well.

That is a lot to do, man!

FYI

WhatsApp has less than 100 employees (~55, as per this).

Facebook had 17000+ full time employees till 2016, while Flipkart had 30,000+.

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Is the thrust more on creating another Flipkart or a Facebook (tech giant)?

Before we argue further, do take a look at this analysis of consumer Internet products in India (TLDR: global giants have won the big games in India and have left the chillar for startups).

What do we want? Loss leaders or Winners?

The one thing that’s obvious about India’s consumer industry landscape is that Indian startups are the loss leaders in the loss categories (these are heavily operational businesses with little or no innovation).

The ones who are winning are the global tech giants – they may not have created a lot of jobs directly, but then run the damn economy (and create much more jobs than operational heavy businesses).

If job creation and controlled turnover is the prime criteria for the govt to recognize startups, we are staring at nothing but copy-cat startups which are loaded with jargons to sound innovative.

I do understand that India has to be an inefficient economy (we do need a liftman to operate the lift – just to justify his salary), but let that not become a hindrance in building great global innovative businesses from the country.

How would you define ‘startups’?