Where to start?

While the government says it wants to support startups in the country, its website is a labyrinth of challenges for entrepreneurs

According to the Economic Survey of 2021-22, India has the third largest startup ecosystem after the US and China. As of April 20, the Department for Promotion of Industry and Internal Trade (DPIIT) recognised has 68,265 startups. The fiscal year of 2021-22 alone saw over 14,000 new enterprises. Despite this, only 441 out of the 68,265 recognised new businesses have received income tax exemptions.

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Startup India was launched by the Modi government in 2016 with the aim to breed an ecosystem that supported new business endeavours. And it certainly has been helpful to be registered with the government’s website. “I have received great opportunities,” says Ajit Padmanabh, founder and CEO of WHO VR, a Bengaluru-based digital heritage company. “It is a window for cross-culture opportunities,” he says, citing the example of a tie-up with Germany that could allow them to showcase their tech and extend market outreach to the West. “There are also sector-specific funding opportunities,” Padmanabh adds.

Bhopal-based Sneh Nigam, founder and CEO of Mindcafe App, was able to register her mental-health startup after struggling for two months by hiring an “agent” who charged Rs  10,000

However, not all founders have Padmanabh’s luck with the website. 

For the past few weeks, many frustrated entrepreneurs have taken to Twitter to air their grievances about the registration process. Most of them haven’t received the OTP required to log in to register, a step one cannot leap frog over because of the valuable attached benefits of GST and tax exemptions. One cannot be considered for the Startup India Awards without registering either.

The co-founder of a Bengaluru-based social impact startup, requesting anonymity, says, “When we tried to log in to create a profile, the website asked for a Company Identification Number (CIN). Then we got an error message saying that the CIN was already registered.” She tried getting in using different email IDs and mobile numbers, without success. “We changed our company format from a Private Limited Firm (PLF) to a Partnership Firm (PF), which worked,” she says. 

Sneh Nigam

But this simple change will leave her company out of opportunities offered to PLFs. “We might not get notified or won’t be considered for awards. We can’t change back to a PLF now,” she says. Ironically, the firm did nab a Startup India Award in 2018, when the website wasn’t as advanced and developed as it is now. “We didn’t have to register back then,” the Bengaluru-based founder rues. 

Despite her tweets to the official handle of Startup India, and emails asking for a resolution to the problem, she is to yet receive a response. Over two weeks ago, mid-day reached out to the official email address and called their customer care number: There has been no response yet. “An onsite chat feature would be helpful, even if there is a bot replying,” she suggests.

Prime Minister Narendra Modi, Finance Minister Arun Jaitley and Minister of States for Independent Charge Nirmala Sitharaman releasing the Action Plan at the launch of Start-Up India at Vigyan Bhavan on January 16, 2016 in New Delhi. Pic/Getty Images

Sagar Hota, founder and director of 11x INFISOL, an IT company based in Bhubaneswar that deals with digital marketing, has been trying to register for two years. “Our company name starts with number 11, which has been the hurdle despite numerous attempts and complaints,” he says. Unlike the previous case, the support team of the website did respond, but unsatisfactorily.

“When registering a startup with the government,” explains Hota, “the founders have to submit three names, out of which one is selected.” If he had received intimation then that his chosen name would pose a problem on the Startup India website, he could have amended it at the initial stage.

The team at 11x INFISOL, a digital marketing firm from Bhubaneswar, has been trying to get registered for two years but the digits in its name are posing a problem when entering details on the Startup India website. Its founder Sagar Hota says doing so would’ve helped earn credibility and land grants

“I can’t change my company’s name now just to register,” he says, understandably, though he believes that a connection with Startup India would give him leverage. “It would grab eyeballs,” says Hota, “offer a certain credibility and help us get grants.” Padmanabh agrees that getting a DPIIT certificate increases credibility since most investors and government bids ask whether the startup has a registration certificate as a prerequisite.

“Startups absent from the website would lose out on grabbing eyeballs of angel investors,” says Jitesh Agarwal, “as Type One angel funds are restricted to registered startups.” Agarwal is the founder of WallMantra, a furnishing and home décor firm.

Jitesh Agarwal, founder, WallMantra

Hota believes these are too many interlinking hoops for a first-time entrepreneur to jump through. “Angel investors and venture capitalists, from my experience, didn’t seem very interested in unregistered companies,” he says. “When we introduce our firm to clients, having that Startup India logo below adds value to the presentation.” He too failed to receive an OTP, despite several tries.

Sneh Nigam, founder and CEO of Mindcafe App, was able to register her mental-health startup after struggling with the process for nearly two months. As with any governmental process, such gaps create opportunities for touts and “agents”. “I wasn’t able to do it by myself,” says the Bhopal-based entrepreneur, “so I took the help of an agent who charged Rs  10,000. This isn’t very pocket friendly for an early startup.” While she welcomed the opportunities that came with being recognised by the government scheme, she missed out on the three-year GST extension.  

Ritvik Nagarkar; Nikhil Madan; Dhianu Das; Ajit Padmanabh and Sagar Hota

“They claim that every startup registered under them would not have to pay GST for the first three years,” says Nigam, “but they miss telling you that this is only true if you fill an optional form found on the website before filling the registration form. I had already completed the procedure and could not go back.” Ironically, Nigam’s prime motivation to register with Startup India was to avail tax benefits and a GST exemption. She says fellow entrepreneurs have also waded through this frustration. 

True to stereotypes of any official procedure, even the website is hard to navigate. mid-day contacted the website two weeks ago, but didn’t get any response. “There were problems with the form. It kept throwing up an error message, even though I had filled in all details. The system could not recognise it,” she says. 

It’s not all “attested copies in triplicates and greasing of palms”, though. Some entrepreneurs have been able to navigate the labyrinthine website successfully. Such as Ritvik Nagarkar, the founder of the Pune-based enterprise Farmhand. He founded his company in March 2020 and was able to register fairly easily, he says, despite the exhaustive documentation required. His objective was the three-year tax break, which he has availed. The Startup India process has been seamless for Anurag Pandey too, the founder of Nimbbl, an online payment provider. He received his registration certificate in January 2021. 

Professionals who handle the back-office procedures of websites pin point the problems. A creative director of an independent website designing firm shares an insight: Data management becomes a challenge on government websites due to the volume. Footfall is not taken into account while designing the website, and so, it crumbles often. 

A platform strategy manager, who works on national technology operations with the government, says co-ordination between various departments handling websites of the government is tangled or absent. Adoption of micro services in the form of multichannel enablement such as payment portals, getting an OTP or any other pop-ups are woven into the websites which make them difficult to manage. “Thus, many a time, the entire website doesn’t go down; just a part of it crashes because of these micro services,” he explains. He also says that engineers who create these platforms don’t always have the best understanding of the ground reality in terms of low infrastructure and network coverage in certain parts of India.

To some, the concept of the startup outweighs the Startup India stamp. 

Dhianu Das, founder of Agility Ventures which invests in startups says that he would support a company irrespective of their registration status. “A good investor handholds the enterprise from ideation to execution, provides valuable mentorship, always stands behind it, helps with networking and aligned business opportunities, and speaks like a family. A unicorn has such people.”

According to Das, unicorn startups are not magical because they are fancy or are doing something unique or getting extra grants from the government. They are distinctive because they are implementing all facets—sales, business and marketing—the right way.

This multiplies other benefits manifold. 

“Unicorns become unicorns because many angels have invested in them,” he says, “The founders have all these brains and minds who have skin in the game. That’s why the unicorn benefits more. That’s the key to a unicorn startup getting more grants.” explains Das. 

Nikhil Madan, serial entrepreneur and a global investor based in Germany, says that the grant and allocation distribution process is skewed.  “The grants are distributed through consultants,” he says, “and influencers in the decision-making process, who have not run a business or may have just run a consultancy firm.” 

While getting tax treatments and paperwork is a challenge in India, Madan still urges startups to operate out of a regime where they are located and use it as a beach head. Set up a company there, and start working. “Most founders should recognise that an investor should have an understanding of the business and a visible track record, which is not just verbal,” says Das. 

Pandey credits clarity of thought with attracting funds. “The main thing any startup should look out for is whether they are offering a solution which a large number of people are willing to pay for. If you are able to show and solve the problem, the funding takes care of itself.” 

441
No. of recognised new businesses from a massive 68,265 that have received income tax exemption

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