Elections 2019: Indian startup ecosystem ready for second booster shot from PM Modi

The continuation of the BJP-led NDA government at the Centre for another five years is a welcome relief and a big boost for the startup ecosystem. After all, it was Prime Minister Narendra Modi who brought these young companies under the spotlight through Startup India.

Even as there is euphoria among startups on the return of the Modi government, there is also a sense of realism that is there much to be done in areas such as seed stage funding, ease of doing business, encouraging startups to go for public listing, and making it easier for angels to participate in this growth story.

Terming it as a big boost for the startup ecosystem with the BJP victory, TV Mohandas Pai, Chairman of Aarin Capital, says, “It (startup ecosystem) will boom even more. In the last five years, startups got an estimated $50 billion in funding and this may rise to $70-100 billion in the next five years.” 

Boost to Startup India

The startup ecosystem is a little more than a decade old but the real boost came with the advent of the Startup India programme by Prime Minister Narendra Modi in January 2016. Nakul Saxena, Director – Public Policy of iSPIRT, a think tank for software product companies, says,

“It was the BJP government which made startups a centre force and a lexicon moment for corporate after 2016. Without the Startup India programme, they would have been a fringe player in the lexicon of corporate India. The government showed the intent with that policy.”

The Startup India programme drove on a missionary zeal to imbibe the spirit of entrepreneurship, which encouraged states across the country to come out with startup-specific policies. In fact, the programme also created a Rs 10,000 crore fund of funds for investing in startups.

However, this Rs 10,000 crore fund has not really had a very encouraging start. Mohandas Pai says, "The government has promised a Rs 20,000 crore seed fund and this will address the biggest challenge of the startup ecosystem at the seed funding stage. That will be wonderful.”

Also read: What does the startup community expect from the next Prime Minister?

Key concerns

The key concern for startups was whether the BJP government would come back to power as they had initiated a lot of policies. “The BJP government coming back to power is a boost for continuity, which is much needed not just for startups but also for the corporates,” says Nakul.

Despite this enthusiasm, there are still certain pressing and long-term issues that need to be addressed to create vibrancy in the startup ecosystem.

V Balakrishnan, Chairman of Exfinity Ventures, says, “The biggest challenge is the ease of doing business for startups. There is a lot of talk, but no action. We require a much faster regime on the regulatory front. There are too many regulations bugging startups.”

Also read: Elections 2019: First-time voters have great expectations, say need clean and fair governance

According to various industry observers, startups are cautiously optimistic and the extra exuberance is missing. The ecosystem has survived through various challenges, especially on the Angel Tax issue, and is worried about some sudden government notification.

“The startups are happy to see the government coming in but want things to be sorted out. They are not overwhelmed as startups have also matured over a period of time,” says an industry observer.

Early resolution is the key

The key issue for the government is to get more investors into the startup ecosystem - either privately or through the public market route. Secondly, the government also needs to bring out more clarity on how a higher number of startups can be registered in India rather than a foreign location. 

“The BJP party coming back to power for the second time would mean that the startups want issues to be sorted out as early as possible,” says Nakul.

Mohandas Pai says, “The government should articulate its vision in the first 30 days in office and set up institutions to make sure that flow of funds starts immediately.”

According to him, there was a delay in the past on the flow of funds to startups, but if it starts immediately, positive results could be seen in the next two to three years.

Many believe that the pipelines were cleaned during the first term of the BJP government, and expect the benefits to start flowing in the next five years.

As Balakrishnan says, “Today, there is capital and talent available for startups. But, the challenge is in the form of regulation. Instead of talking about ease of doing business for the country, the government should have a rating on ease of doing business for startups.”

Also read: Modi 2.0 provides booster shot for Startup India, Digital India