Startup India: Challenges galore on funding, patent and IPR fronts

First generation entrepreneurs across the country are applauding the government’s efforts to recognise their business ventures under the banner of Start-Up India, but for most challenges of funding, patents and creation of intellectual property remain.

“The Prime Minister seated with entrepreneurs on a national platform is a very positive signalling,” said Abhishek Sinha, Co-Founder and CEO, Eko India Financial Services, who was also a panellist in one of the session. However, small problems such as bank funding in the lack of any collateral turn out to be big roadblocks for many entrepreneurs.

“Banks are careful while giving out loans. When we started out, we had to depend on loans and credit cards. Even today the story is same,” he told BusinessLine .

Minister of State for Finance Jayant Sinha had also noted that 90 per cent of funding, at present, comes from foreign venture capitals and domestic financiers could change the nature of innovation as well. A recent study by Grant Thornton revealed that in 2015 more than 600 such companies got funding, with over $2 billion deployed by PE and VC funds.

In fact, the ₹10,000-crore fund of funds that would start with an initial ₹2,500 crore annually would be a dip in the ocean given the vast potential of the sector and the huge number of companies.

Prime Minister Narendra Modi’s Start-Up Action Plan has a 19-point agenda including incentives such as self certification for complying with labour and environment regulations, a panel of facilitators to help file patent and intellectual property applications, tax exemptions for seed funding, capital gains and three year holiday on income tax as well as a ₹10,000 crore financing support through a fund of funds for four years.

To be eligible, the Department of Industrial Policy and Promotion has defined start-up — “an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding ₹ 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.”

Similarly, the long process of registration of patents and lack of incentives for research and development is another bone of contention, which according to many is a reason why many start-ups prefer to be domiciled abroad.

“I have patents registered in the US and Singapore but have not been able to do so in India till now,” said another start-up owner.

“The intent of the government is good and a lot has been done but not everything that was demanded has been given,” said Umesh Sachdev, Co-Founder and CEO, Uniphore Software Systems, stressing that more could be done for R&D that would have also helped in patenting.

According to government data, as many as 2,46,495 pendency in patent applications and 5,32,682 trademark applications were pending as on November 1, 2015.

Taxation

Industry has also called for clear definition of digital products and services from a taxation point of view. “This is essential. We cannot have a long list of intangibles in our balance sheet. There has to be an acknowledgement that IT products are being created,” said Abhishek Sinha.

As a start, the Centre t has extended capital gain tax exemption for investment in newly formed manufacturing MSMEs by individuals to all start-ups and has promised that investment in ‘computer or computer software’ would also be considered as purchase of ‘new assets’ to promote technology.