“Why do you want to leave your comfortable corporate career and venture in to unknown territory?”
“Is your business model scalable?”
“What;s your USP?, you are just like any other player in the market”
These were few cynical views we had received when we ventured in to starting our own venture. People start the business for various reason, some start to solve problems of customers, I started my business to resolve my own career crises. An idea to start something on our own was floated and it firmed up when my boss didn’t favourable remarks even after we exceeded expectations three years in a row. I started a consulting outfit with two other colleagues, today we are a 100+ people organization with a presence in four countries. We don’t fall in to the category of “start-up” where valuations are crazy and VC funds always eager to put their money. I think there are only few lucky Start-ups which get VC funds. Our organization is self-funded; none of the founders brought any capital. We have grown our business from internal accruals. Our growth has been slow because we didn’t seek any external funding, but nevertheless, we have enjoyed the journey in last five years.
Yesterday PM Modi has launched ‘Start up India Program’; many friends on social media asked me what I thought about it. While finer details of the ‘Start-up India’ are yet to come, with information available, I have put my thoughts in this post. ‘Start-up India’ program aims at creating infrastructure for start-ups and providing financial assistance in some form. I have tried to touch upon few important points from infrastructure and financial assistance in this post.
Ease of Doing Business
We are in to consulting business, hence many of the local labour/environment laws which might apply to manufacturing don’t apply to us. Back in 2010 also we were able to start a business with relative ease. Biggest challenge I have faced in starting a business is to open a bank account, it is easy to get PAN number if you have bank account and it is easy to open bank account if you have PAN number. Nevertheless it was not that difficult, we were able to get things rolling before our first payment from customer was due.
Our organization currently has a presence in Australia, India, Singapore and USA, so I have hands on experience of incorporating organizations in at least four countries. Each country has its share of challenges, but I think Singapore and USA branches were easy to incorporate and open bank account. I would rate Australia and India on the same level. Incorporation of the organization is important but second most important factor is to open bank account. Till the time you don’t have bank account your business is as good as not started.
What is Start-Up
Invariably start-up means tech start-up, however it is not true at all. PM Modi in his speech has rightly highlighted that he doesn’t want to see only Tech start up. My brother in law who started his own venture in Modular kitchen business has gone through same amount of challenges as I have gone through. PM Modi highlighted that start-up entrepreneur means who are job creator. Main stream media and even social media romance the tech start ups ignoring other new business Start-ups all together.
Creating Infrastructure for Start-ups
Generally, failures rate of start-ups in the early phase are quite high. There are many reasons for the failures; however lack of infrastructure should be the last reason. Entrepreneurs can come from all walks of life, I know many successful entrepreneurs who are entrepreneurs because they were not educated enough to get high paying jobs. Hence it is essential for us as country to look beyond tech start-up and create infrastructure which will incubate entrepreneurs in diverse industries and backgrounds. The Start Up Policy seems to be doing that.
Most small and medium enterprises are run by entrepreneurs who are not formally educated in management. Not able to adapt to best business practice causes lot wastage and inefficiency. Here role of government comes in to picture, they should create awareness of best business practice and opportunities available at large. Incubation of businesses is very important if we are to create successful entrepreneurs. We see only successful entrepreneurs but always fail to seek example of unsuccessful entrepreneurs.
I know a family friend who had business in manufacturing related to Nano technology with a factory in Mumbai, was given Singapore Permanent Residency and other incentives to move his factory from Mumbai to Singapore. Creating right environment where Intellectual Property rights can be enforced upon is also important part of the infrastructure which government intends to create.
Creation of affordable shared office space, factory space, availability of skilled man power, availability of power & other utilities, connectivity etc. are essential for Indian businesses to boom. Programs like ‘Start-up India’ would not achieve its desired results till the time such programs and infrastructures are created at local level cutting across all form of bureaucracy.
Benefits extended under Start-up India
Tax benefit: India isn’t first country to extend benefit to start ups, there are many countries provide the same. Singapore provide first three years of tax benefit for newly incorporated company, however profit exemption is capped at SGD 100,000/- and 50% exemption for next SGD 200,000. An enterprise in its early years does need support from government, I happy that Government of India has taken steps in right direction.
Procurement by Public Enterprise: Ministry of Micro Small and Medium enterprise has made it mandatory for all public enterprises to relax norms for MSME for their procurement requirement. It is a welcome step, however I still think lot more can be done in this space. To give our own example, on the competency wise our organization can take up the work for any public sector enterprise yet we still have to work via a Big MNC. Possibility of corruption is a major reason why procurement policy of public enterprise isn’t simple.
Bank Loan for start-up: It will be interesting to see how credit line will be provided to start-ups, last month only I checked up with multiple banks of possibilities of opening overdraft facility from banks. None of the bank was willing to provide overdraft facility without collateral of immovable property. Manufacturing or trading businesses will have inventory to hypothecate, unlike the service business. Any organizations which are in to service business will find it difficult to get bank funding without putting their own personal property as collateral.
Conclusion
It is good to see that government has embarked on the journey to create right infrastructure for Start-Ups. Entrepreneurs are not made overnight, its long process. I hope with ‘Start-up India’ our future generation will be more informed about exploring entrepreneurship with better infrastructure. It is important that our society celebrate successful entrepreneurs, but it also needs to respect and learn from failed entrepreneurs.