Introduction
As entrepreneurship changes in India, acquiring funding becomes a major challenge for startups. The government of India launched the Startup India initiative in 2016 to develop an ecosystem through multiple benefits provided to recognised startups. The recognition from the Department for Promotion of Industry and Internal Trade (DPIIT) is one of the primary advantages. The recognition lends credibility to the mentorship and also provides startups with different routes for funding.
Understanding DPIIT Recognition
DPIIT recognition is an official endorsement awarded to startups that comply with specific requirements established by the government. To qualify as a startup, it must meet the following criteria:
Be a Private Limited Company, Limited Liability Partnership (LLP), or Registered Partnership: The startup must be incorporated under Indian law.
Incorporated in the last 10 years: The startup must be relatively recent and enable innovation and improvement.
Annual turnover not exceeding ?100 crores: This measure is to guarantee that benefits are channelled to new entities rather than established companies.
Working towards innovation, development, or improvement of products or processes: The startup should attempt to place new products in the market or improve or innovate existing solutions.
Not formed by splitting or reconstructing an existing business: This provision prevents a "duplicate" enterprise (employer) or simply a "resurrected" enterprise (making it clear this is something new).
How DPIIT Recognition Facilitates Investment?
1. The DPIIT recognition
Guarantees the Indian Government's endorsement and assures the investors and startup ecosystem that a startup is embracing the government standards and criteria. It can enhance the trustworthiness of the startup to the investors who are considering making investments in it.
2. Access to Government Funds
Upon receiving recognition, a startup has access to government funds available to startups, such as the Startup India Seed Fund Scheme (SISFS), which provides funds to start-ups and resolves the gap in sme situations that a start-up experiences with private investors.
3. Tax Benefits for Investors
The DPIIT registration provides tax benefits to investors, such as exemption of capital gains under Section 56(2)(viib) of the Income Tax Act. This makes the incentive more attractive for employees to invest their gains back into a startup without tax liabilities.
4. Easier Jumping Board to Venture Capital
Venture Capitalists are usually more inclined to invest in startups that have government recognition. It reduces the risk that is perceived, which acts as a springboard for the startup to approach venture capitalists and secure their financial support.
5. Enhanced Visibility and Networking Opportunities
Startups don't just get the visibility that is their due with the help of Startup Indi; they also get the whole entrepreneurial community to see them. The visibility can lead to the start of networking with potential funders, mentors, and collaborators, as well as making it more probable to get funded.
6. Reduced Compliance and Regulatory Burden
DPIIT-recognised startups are toiling under a less stringent compliance regime that includes self-certification for labour and environmental laws. This lower regulatory burden improves the startup's attractiveness to investors since it indicates a more efficient operation with lower operational risks.
7. Support for Intellectual Property (IP)
The federal government provides faster processing of patent applications and fees reduced by as much as 80% for recognised startups. This assistance in securing intellectual property rights makes the startup more attractive to investors because it protects the startup's innovation and adds value to the startup.
8. Access to Government Contracts
Recognised startups can sell to governments and government contracts, generally with a lower bar for qualifications. Selling to government contracts could help provide a level of consistent revenue for the startups and make the startups more attractive to investors.
9. Access to International Markets
The Startup India program provides opportunities to participate in international events and shows. International exposure could introduce foreign investors to a startup as a potential investment given its viability.
10. Mentorship & Assistance
Startups selected for recognition might have an opportunity to apply to mentors and industry professionals who can help support and give counsel and advice. Mentorship can help address challenges and generate a more effective growth plan in the business. This can also help spark interest in funding opportunities.
Real-World Impact: Success Stories
Several startups have successfully used DPIIT recognition as a tool in obtaining significant investment and achieving impressive growth. For example, startups in Tamil Nadu were able to get government grants and funding schemes that collectively attracted greater investor interest and involvement in the pitch sessions.
Conclusion
Startups that have received DPIIT recognition under the Startup India initiative have a range of benefits available to them that can substantially improve their chances of securing investment. The benefits include increased investor confidence, access to government funding schemes, tax advantages, and reduced compliance requirements. Startups that are able to receive DPIIT recognition can improve their attractiveness as a credible investment opportunity relative to similar opportunities available in the competitive landscape for entrepreneurship in India.
For startups that are looking to obtain investment, pursuing DPIIT recognition is a very smart move that can lead to many funding routes and sustainable growth.
Author:
Leave a Comment
Previous Comments