The best
education that anyone can have is getting out there and doing it –
Richard Branson
Entrepreneurship
is one of the finest expressions of the human spirit. Over the ages we have
seen and benefited from this quality of bringing thought to fruition, of being
able to imagine something and also making it happen. Very few things exhilarate
a person more than creating something. It’s magical, but it’s not a trick. The
movement from I CAN DO IT to DOING IT actually, is often difficult but
invigorating.
Entrepreneurship
is one of the oldest human endeavours. It has a multi-dimensional impact from
the social to the financial arena. Many startups have made millionaires out of
ordinary people. It not only works for founders but entire founding teams and
others. It injects competition and innovation. It disrupts and yet creates. An
important point is the attitude startups have towards innovation compared to
large companies. Startups innovate in breakthrough technologies and large
companies mostly in incremental ones (predictable and risk-controlled).
Startups have a wave effect. Many founders worked previously with other
startups. The chance of winning is low but the winner gets colossal returns.
This
Annual Special issue of BCAJ is focussing on startups. Recently, India has seen
huge growth in this area. Almost everyone has been touched by them in some way
or other – digital wallets, taxis, e-commerce, food delivery, online insurance
and loans, software as a service (SaaS), hotel aggregator, messaging app,
online grocery, music streaming and more. Twenty six of them have become
‘unicorns’ at the end of 2018. (China created one unicorn every 3.8 days in
2018 in comparison and had 186 unicorns in total with a combined valuation of 1
trillion Yuan.) India still remains the third largest in terms of number of
unicorns.
A recent
news report1 from a survey of
33,000 startups in India said corruption and bureaucracy were the biggest
challenges. Only 88 startups have benefited from section 80-IAC. According to
the definition in this section, even Facebook and Apple would not have
qualified for the benefits had this section been there at the time of their
inception! Clearly, the landscape and policies need to be conducive and
constructive.
Take the issue
of registering a patent. Patent registration takes four to six years in India.
If bureaucrats decide eligibility, there is no light at the end of the tunnel;
115BBF should be allowed to all and not just patent-registered startups. The
preposterous attitude of government is perhaps the single largest impediment to
business today. It’s late, yet the government must understand the hundreds of
benefits arising out of having a healthy startup eco-system. Take the case of
China where 80,000 companies in strategic emerging industries received services
from government-run incubators. The Chinese government runs a 40-billion Yuan
fund. The Beijing City government has set up a fintech and blockchain
industrial park as part of its selective resource allocation and favourable
regulatory environment and drives it as a national agenda. The Chinese central
bank is one of the world’s largest patent-holders in blockchain technology. The
startup eco-system could therefore be one of the finest ways to increase the
tax base and generate meaningful and gainful employment.
This
Annual Special issue covers three important topics – valuation of startups,
startups as an investment class and taxation of startups. We also carry two
very interesting interviews – one with the co-founder of an early-stage fintech
startup and another with the CFO of a 12-year-old company that recently had a
merger valued at $1 billion with Jio Music. I hope you enjoy reading these
alongside the budget proposals!
Raman
Jokhakar
Editor
