India ranks 3rd in global startup ecosystems

Bengaluru: India ranks third among global startup ecosystems with more than 4,200 new-age companies, IT industry body Nasscom said Tuesday.

Nasscom along with Zinnov launched the second edition of the start-up report titled "Start-up India - Momentous Rise of the Indian Start-up Ecosystem" on the sidelines of Nasscom Product Conclave 2015 here.

"It has been a good year and in a sense a landmark year for the startup ecosystem. Last time when we met we were the fourth largest in the world, right now we are the third largest," Nasscom President R Chandrashekhar told reporters here.

Releasing the report, he said "three to four startups being born every day, and nearly five billion dollars of funding coming in 2015. The emergence of the Unicorns that is the over billion dollar valuation privately held companies...Have created a lot of confidence".

"Conditions in India- connected India- the large number of people coming on to the internet and the consumer base is driving all this growth. We are seeing the multiplier effects of the startup programme," he added.

Noting that India is just after the US and the UK, Chandrashekar said, "Israel is the country that we have just overtaken and if all goes well next year we will be second."

According to the report, Indian technology start-ups landscape has seen a "tremendous" growth in the emergence of innovative start-ups and creative entrepreneurs.

In terms of providing a conducive ecosystem for the start-ups to thrive, India has moved up to third position and has emerged the fastest growing base of start-ups worldwide, Nasscom officials said.

India is one amongst the first five largest startup communities in the world with the number of start-ups crossing 4,200, a growth of 40 percent, by the end of 2015, he added.

Stating all these things doesn't mean everything is fine, Chandrashekhar said "we think we are doing well, but we can do a whole lot better, I think the potential is much greater."

He said keeping this in mind Nasscom has tried to collate things that needs to be done, policy enablers that need to be put in place so as to ensure full potential.

"We have submitted the 10-point recommendation to the

government, what we have been given to understand is - the government is now formulating its own policy in this regard and we understand in the next couple of months that would be shared by the government," Chandrashekar said.

"We have had discussion both with the Department of Industrial Policy and Promotion as well as the NITI Aayog regarding this," he added.

Chandrashekar listed out the recommendations Nasscom had made to the government said the first is to define what a technology startup is - what is included in it, what is not along with a set of suggestions.

Second is on taxation, he said. There are a number of issues relating to taxation and there is need for integrated approach to tax, so that tax regime is achieved supportive of the whole tax startup ecosystem.

"This includes things like tax liability from TDS, startups having to pay TDS even before they get decent revenues, service tax, VAT, MAT, income tax, ESOPs, barriers to ESOPs, the new corporate law and way the angel investments are taxed...," he added.

He also said Nasscom has suggested simpler and easier ways for starting, operating and closing the company. "Making it simpler and easier to file, moniter and verify; more reliant on self declarations rather than audits and inspections."

On funding - enabling access to risk capital and debt funding, Chandrashekar said "we are actually seeing lot of these fundings from overseas. There is need to support the increase in the share of domestic fund in the alternative investments also."

He also stressed on the need to align India's angel framework with global practices like how it is taxed and at what point it is taxed.

Noting that the 10-point programme also includes issues

relating to online transactions, Chandrashekar said "we have also suggested on the importance of creation of incubation facilities".

Stating that the significant percentage of startups are focused on Indian and overseas markets, he said there is need for support on market access and also training in areas where they need supplementation.

Chandrashekar pointed out that startups are creating impact in core areas, critical areas from the national point of view like in electronics and defence. Therefore IPR regime and how the support is given for acquisition of IPR is another important and critical area for continuing the growth.

He also stressed the need for branding exercise and said "we need to brand India as startup nation.We are already known as the IT nation- we need to re brand it as IT and innovation and that's what startups are bringing to the table."

Nasscom from its report also said with 100 percent growth in number of private equity, venture capitalists, angel investors along with 125 percent growth in funding over last year, Indian start-up ecosystem has risen to the next level.

The total funding in India based start-ups is estimated to be nearly $5 billion by 2015, it said, adding that various central and state government start-up initiatives are further supporting this progressive phase of start-ups in India.

Other key highlights of the study report include- India is the youngest start-up nation in the world and 72 percent of the founders are less than 35 years old.

It also says more than 50 percent of the 1,200 startups focus on e-com, consumer services and aggregators; and female founders and co-founders in startup ecosystem is around nine percent.