There is no global definition of startups. Most countries would define a startup with parameters such as age, growth, revenue, profitability or even stability.
Is Uber (valuation of USD 50 billion, having operations in more than 300 cities worldwide) a startup?
Is Zomato (operations in 23 countries, nearly 2500 employees and more than USD 250 million of funding) a startup?
The essence of startups is generally related to the concepts of technology, innovation, scalability, and entrepreneurship. Many of the world’s largest technology companies, including Google and Facebook, still consider themselves to be startups in one sense or another.
Indeed, they see being a startup as more of a state of mentality of innovation and problem solving for masses.
Startups – a proposed legal definition.
As the Government of India proposes to provide tax incentives and other benefits for Startups, it is imperative that a clear definition of Startups is provided in the proposed notification.
A Startup status depends on its age, revenues, profits, employees, business and technology.
Therefore, a draft legal definition that covers the following elements can be included in the proposed notification:
A Startup is an incorporated legal entity of not more than 7-years, which uniquely uses technology to deliver products, services or solutions across India,
and in any Financial-Year it has, annual profits of less than Rs. 5 crores; and annual revenues of less than Rs. 100/- crores; and less than 100 direct-employees on it’s rolls; and also market capitalization of less than Rs. 100 crores.
This proposed definition of Startups has several advantages for Government of India.
These advantages are:
A startup status can be given to any kind of entity- it can be a company, LLP, Partnership, Section-8 not-for-profit, Society, Trust or even proprietorships.
The annual profits, revenues, employment, market capitalization, patent filings are all measurable and can be supported with paper-evidence and proof — Indian bureaucracy likes this.
This Startup definition will require startups to solve a problem that caters to India. Many startups may have market exclusively outside India (for example a call center), and such Startups cannot be eligible to seek Incentives from Government of India – funded by Indian tax payer’s money.
This definition will also keep away several “Pop and Mom” shops that are incorporated on daily basis. The “Pop and Mom” shops will not be to show unique use of technology to deliver products, services or solutions across India.
The requirement of “unique use of technology” can be proved by an entity filing a patent application for it’s new ideas and technology. And therefore, complements Indian Government goals of increasing patent and IP filings from India.
With this kind of definition, Startups will be now required to increase patent filings and reap the long term benefits of its ideas and innovations.
A right way to legally define a “Startup” will go a long way in encouraging genuine startups to take advantage of benefits announced under the Startup-India program, and also to unleash the power of innovation, technology and ideas among deserving entrepreneurs of India.
Is Uber (valuation of USD 50 billion, having operations in more than 300 cities worldwide) a startup?
Is Zomato (operations in 23 countries, nearly 2500 employees and more than USD 250 million of funding) a startup?
The essence of startups is generally related to the concepts of technology, innovation, scalability, and entrepreneurship. Many of the world’s largest technology companies, including Google and Facebook, still consider themselves to be startups in one sense or another.
Indeed, they see being a startup as more of a state of mentality of innovation and problem solving for masses.
Startups – a proposed legal definition.
As the Government of India proposes to provide tax incentives and other benefits for Startups, it is imperative that a clear definition of Startups is provided in the proposed notification.
A Startup status depends on its age, revenues, profits, employees, business and technology.
Therefore, a draft legal definition that covers the following elements can be included in the proposed notification:
A Startup is an incorporated legal entity of not more than 7-years, which uniquely uses technology to deliver products, services or solutions across India,
and in any Financial-Year it has, annual profits of less than Rs. 5 crores; and annual revenues of less than Rs. 100/- crores; and less than 100 direct-employees on it’s rolls; and also market capitalization of less than Rs. 100 crores.
This proposed definition of Startups has several advantages for Government of India.
These advantages are:
A startup status can be given to any kind of entity- it can be a company, LLP, Partnership, Section-8 not-for-profit, Society, Trust or even proprietorships.
The annual profits, revenues, employment, market capitalization, patent filings are all measurable and can be supported with paper-evidence and proof — Indian bureaucracy likes this.
This Startup definition will require startups to solve a problem that caters to India. Many startups may have market exclusively outside India (for example a call center), and such Startups cannot be eligible to seek Incentives from Government of India – funded by Indian tax payer’s money.
This definition will also keep away several “Pop and Mom” shops that are incorporated on daily basis. The “Pop and Mom” shops will not be to show unique use of technology to deliver products, services or solutions across India.
The requirement of “unique use of technology” can be proved by an entity filing a patent application for it’s new ideas and technology. And therefore, complements Indian Government goals of increasing patent and IP filings from India.
With this kind of definition, Startups will be now required to increase patent filings and reap the long term benefits of its ideas and innovations.
A right way to legally define a “Startup” will go a long way in encouraging genuine startups to take advantage of benefits announced under the Startup-India program, and also to unleash the power of innovation, technology and ideas among deserving entrepreneurs of India.
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