It was nice to see Prime Minister Narendra Modi and a battery of his aides optimistically launch the “Startup India, Standup India” movement this weekend. Startups are not new to India but the renewed vigour and promises of better policies make the nation optimistic again. But, days ahead of the launch, I got into a Twitter debate after I said something about any small company being a startup – something those in the new wave of optimism seem to disagree with.
I believe it is important to define startups properly, now that the matter is increasingly moving away from coffee table conversations to government policies and tax breaks.
The Oxford dictionary simply defines a startup as “a newly established business.” The Cambridge lexicon deems it “a small business that has just been started” while Mirriam Webster, the American favourite, simply says it is “a fledgling business enterprise.”
Mohandas Pai, former finance head of Infosys and a key angel investor in India, thinks any small business is not a startup, and says that technology platforms that help businesses scale up are key to get the tag. But then, I recall how a vice-chairman of Nasdaq, the technology-heavy stock exchange, used to boast about how even Starbucks was listed on the bourse.
Venture capital, the money used to fund startups, is simply another term for private equity, but there are those who might smell technology the moment the term is mentioned. India now has venture-funded eatery chains including Chai Point and Mast Kalandar.
Investopedia.com defines a startup more elaborately as “a company that is in the first stage of its operations” and goes on to explain that typically, it develops a new product in a manner such that due to limited revenue or high costs, most of its small scale operations are not sustainable in the long-term without venture capital.
TechCrunch, the respected technology website, ran an article on the issue two years ago and said : “Everyone has their own definition of just what a startup is, and nearly everyone is wrong.”
For India, where money-laundering, corruption and shell companies are part of the folklore, it is important that startups are defined properly. On the one hand, the policy regime should not favour one class of investors over another. On the other hand, tax breaks cannot be a loophole for shady companies to disguise themselves as startups.
The author tweets as @madversity. Views expressed are personal