In a surprise move, the Government of India yesterday (06/03/2017), invited feedbacks from the top companies in every sector in India, on the definition of ‘Startups’. According to Department of Industrial Policy and Promotion (DIPP) secretary, Ramesh Abhishek, the definition of ‘Startup’ in India might change soon, depending on the companies’ feedback. According to him, the definition of ‘Startup’ needs to vary depending on which sector the company belongs to. Read more on Startups
“We would be happy to make it even more broad – based. We are not hung up on definition. For example, startups working in biotech, nothing happens before eight years. Maybe we can have different periods for different kinds of startups…to be much more inclusive on the ground reality. From Biotech sector, we have got a specific feedback. Some people have said it should be at least eight years (gestation period). Nothing is cast in stone but there has to be a logical reason”, Abhishek said.
The current definition of ‘Startup’ in India, according to DIPP, is a company that’s not more than five years old and which has made a profit, not exceeding Rs. 25 crores in the first five years since its founding. Also the company has to offer new and innovative services, products or processes which are driven by technology or intellectual property to be classified as ‘Startup’ in India.
“The innovation criteria is deliberately kept otherwise we would not have been able to differentiate between a traditional firm and a startup. We are not diluting the criteria of being innovative”, Ramesh Abhishek said.
To Mr. Abhishek’s remarks, a startup investor, who did not wish to be identified said, “It is a little bit restrictive right now because creating caps of when the company was started or turnover, doesn’t necessarily, for us define what is a startup. There are sectors which could have longer gestation period or companies which could be more capital hungry. One needs to be flexible because finally we are trying to create businesses which will have lots of impact. Startups should best be self-regulated”.
I personally think that the definition of startups will vary across various sectors as different sectors have different gestation periods. Also, a company being classified as a startup, should not become a criteria for investors to invest in that company because even many established firms require funding from time to time depending on the business environment. As the anonymous investor said, creating big impact businesses should be the only real goal of any government. It will be interesting to await the outcome of this debate. Read more on Startup News
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