By the time Prime Minister Narendra Modi finished his speech on the Start-Up India day, Joyita (let’s withhold her second name till the end of this column), had tears in her eyes.
“It gave me goose bumps,” she said over the phone. “So many young people doing so much... The Prime Minister himself talking about them... I felt so proud.”
Joyita, a much-loved school headmistress, does not know much about companies. Neither is she driven by data. In fact, she is quite an emotional creature who gets swayed by what is these days fashionably called “optics”. But that should take nothing away from the Start-Up India event, or the action plan.
Of course, some of it can be debated. For example, much after the Prime Minister had stopped speaking on the evening of January 16, we debated the impact of the tax holiday in the first three years. No self-respecting startup makes profits in the first three years. That is the growth phase, a time to burn money, and a bit of your soul with it (some founders end up burning their fingers, and a bit of their personal lives, but that’s a story for another day).
Could this tax holiday be then applied to the first three profit-making years? That may not help much either. By the time a startup reaches the stage where it begins to make profits, it is not much of a startup. It is more a mature company that should be able to stand on its own feet without any support, certainly not from the government.
The exemption from capital gains, if the proceeds from the sale of a startup are invested in another, could be a tangible gain. As a founder who sold his company outright to an American media giant says, he would have invested all his returns in his wife’s startup, instead of giving the government 30%.
Many of today’s celebrated founders may be down to single digits in their holdings. That will still give them a substantial sum if they were to sell, but only if they qualify on the many parameters being put out. Given the restrictions on the age of the company, turnover, where the company must be registered, and having to obtain certification from the bureaucratic corridors, many start-ups may not qualify. It has been reported that three-fourths of Indian start-ups that have received substantial funding are registered outside the country; Singapore is a favourite.
Perhaps the Prime Minister should have stuck to what he started his speech with. That the government should not meddle. In the real world, what matters more is what is happening to start-ups in the United States and China.
Interestingly, from China, amid the gloomy economic news, comes the proverbial silver line of news from a startup. Meituan-Dianping on Tuesday raised $3.3 billion in the largest funding round globally for a venture-backed startup. That can only send shivers of delight to India.
Of late, there have been concerns over a supposed valuation bubble being built up in Indian startups. The Meituan-Dianping round will take the air out of it — not the bubble but the talk of a bubble. Many western venture firms have been pumping money in Indian companies because they missed the startup bus in China. The new round of funding there will make them feel once again that the Indian bus may still be there to be boarded. That is the nature of the funding beast.
However, what Prime Minister Modi did is to be appreciated for what it did to the sentiment towards startups. For once, he has put them not only on the high table, alongside himself, but also at the forefront of public discourse in India.
Like it or not, most of Modi’s campaigns have raised awareness and made us think about those issues every day — be it cleanliness or LPG subsidy. If Modi extols a 22-year-old entrepreneur, as he did Ritesh Agarwal of OYO Rooms, a lot of other people are going to talk about him and look at him favourably.
Secondly, the Start-Up India event presented the bureaucracy in a role hardly ever seen before. Amitabh Kant, the DIPP secretary and architect of the event, was the master of the ceremony, not delivering the keynote or some such address as bureaucrats have done.
No wonder, Joyita Bhatt, my mother-in-law, had goose bumps. Hopefully, she won’t read this piece.