Thursday 23 June 2016

Startup India - Eligibility Criteria for Entity and Product/Services

On 16th January, 2016, The Prime Minister of India, Shri Narendra Modi announced the “Start-up India” initiative. This initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive for growth of Start-ups. The objective is that India must become a nation of job creators instead of being a nation of job seekers.
The Entrepreneurs were excited by the announcements made by Prime Minister Narendra Modi about “Startup India Action Plan”. 
The following is the analysis of eligible criteria under “Startup India”


The following conditions should be fulfilled for getting registration under “Startup India”

A. Conditions for Eligible Entities
1.      The following entities are eligible
-                     - Private Limited Company under the Companies Act, 2013
-                    - Registered Partnership firm under the Indian Partnership Act, 1932
-                    - Limited Liability Partnership under the Limited Liability Partnership Act, 2008.
2.      Five years must not have elapsed from the date of incorporation/registration.
3.      Annual turnover as defined in the Companies Act, 2013 in any preceding financial year must not exceed Rs. 25 crore.
4.      The Startup must not be formed by splitting up, or reconstruction, of a business already in existence.

B. Certification from the Inter-Ministerial Board, setup by DIPP shall be required to validate the innovative nature of the business, and should meet any of the following conditions:-
1.  be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an incubator established in a post-graduate college in India; or
2.  be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
3.   be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an incubator recognized by GoI; or
4.  be funded by an Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with SEBI* that endorses innovative nature of the business; or
5.   be funded by the Government of India as part of any specified scheme to promote innovation; or
6.      have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.
C.      Eligible products and services:-
1. Startup must be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property and the Startup must aim to develop and commercialise a significantly improved existing product or service or process that will create or add value for customers or workflow.

2.      The Startup must not merely be engaged in:
a) developing products or services or processes which do not have potential for commercialisation; or 
b)     undifferentiated products or services or processes; or
c)  products or services or processes with no or limited incremental value for customers or workflow

For Example: if you are engaged in creating and developing online marketplaces like Flipkart and Amazon then a new startup engaged in the same field may not be eligible unless its product is significantly improved than what existing players provide and the startup should get a recommendation letter from the recognized incubator cell or be recognized by the GoI or should be funded by recognized funds.