Startups want more funds, tax relief once the new govt takes office

Lack of significant funding, heavy tax deductions and import duties and red tape are some of the biggest hurdles that startups want the new government to address once it comes into power after polls

Located in a corner of the Indian Institute of Science’s (IISc) verdant campus in Bengaluru is the Foundation for Science Innovation and Development (FSID). It is an incubator that aims to commercialise innovations with the potential to directly impact society. Inside, Padmini Sampath, wearing an orange and blue linen sari, is tinkering with a gadget, as big as a large smartphone.

Sampath is co-founder and chief executive officer of a little-known company, Green Collar Agritech Solutions. But it has developed an artificial intelligence-based crop grading solution that can determine key component ingredient percentages in commodity samples and provide the quality in two minutes. It aims to help farmers get a premium for good quality harvest.

At a time when food adulteration is on the rise, Green Collar Agritech is also looking at building a patch-sized solution that can be fitted on a phone. Consumers can then determine the freshness and quality of the food items by scanning them at supermarkets. However, that requires a lot of funding and access to top government laboratories in the country. This is the support that Sampath wants once the new government comes into power after the elections.

“This is a dream. But we need a lot more funding for this,” said Sampath. Her firm builds most of the hardware for its products in the country. But the challenge is that some parts still have to be imported. “There is an import duty of almost 30 per cent that we unfortunately have to pass on to the customer. The government can waive off duty for such products which have agricultural applications,” said Sampath.

General elections are being held in India from 19 April to 1 June 2024, in seven phases, to elect 543 members of the Lok Sabha. Karnataka’s 18th Lok Sabha elections are split into two phases on 26 April and 7 May.

Lack of significant funding, heavy tax deductions, import duties, and red tape are some of the biggest hurdles that startups want the new government to address once it comes into power after the elections.

“Current regulations and compliances are more suited to large, established companies and are often too complex for startups,” said Dr. Gopichand Katragadda, President of The Institution of Engineering and Technology (IET). “Simplifying these requirements for startups and smaller businesses could significantly ease operational challenges,” said Katragadda.

Difficulty in accessing critical parts for medical devices is a challenge that Afser Shariff, co-founder of Dfine Bioinnovations, wants the government to address after the elections. His firm develops indigenous and cost-effective medical devices for small laboratories, especially in rural areas, to help them perform diagnostic testing. Shariff said his products are 30 per cent cheaper compared to the devices in the market and which are mainly imported. The startup’s first product is a semi-automated Haemostasis system that will help clinicians with an understanding of bleeding or thrombotic defects in the human body. However, it took Shariff almost 8 months to find a vendor who could provide a touchscreen display for the product. “We wanted to give a touchscreen display as a feature to customers as the available models in the country even today have LCD,” said Shariff. “It was very difficult to find a local vendor who could provide us with such a component and we didn’t want to import it. There is no government platform which could help us in such efforts.”

Shariff said that late-stage funding is another big challenge for startups that the government needs to address. “Banks don’t give capital without collateral and venture capitalists make you feel worthless,” said Shariff.

Doctor-turned-entrepreneur Dr. Satish S Jeevannavar hopes the government will come up with a national policy for Congenital Heart Diseases (CHDs), which are the most common birth defects. Jeevannavar’s medtech startup Ai Health Highway is focused on building innovative solutions that help in the screening, early detection, and prediction of cardiorespiratory disorders at primary healthcare clinics. Ai Health Highway’s first product is AiSteth, a smart stethoscope. It helps to screen, detect, and predict cardiovascular disorders using AI and machine learning integration. It then provides an instant digital report. The gadget comes with an app that has multiple features to empower doctors to auscultate and analyse accurately with ease. Jeevannavar explained that India has only about 5,500 Cardiologists for 1.4 billion people. AiSteth is bridging the healthcare access gap by empowering the staff at primary healthcare clinics.

Ease of Doing Business

Located across Bengaluru, in Hosur Sarjapura Road Layout, the prominent suburb of South-Eastern part of the city, is another large startup facility. At the entrance, one can see the electric vehicle charging station developed by Flextron. The firm partners with the operators at essential slots such as hotels, petrol pumps, midways, shops, and restaurants to install, monitor, and maintain EV charging stations. Ameen Khan, the chief technology officer of Flextron, said that electric vehicles today take more than 3-4 hours to charge. And Flexitron is on a vision to bring that down to 10 minutes.

Khan said that one of the fundamental gaps that he is seeing in the country is financing for EV technologies. This needs a push from the government. Lack of EV charging infrastructure is going to impact the adoption of EVs in the country. A lot of EV solutions are also being imported which is another challenge for indigenous products.

“Push towards make in India, incentivising charging infrastructure, and EV adoption through various policies is something that I would recommend to the government that is coming up,” said Khan.

Umesh Joshi, co-founder of Calibr, an e-learning platform for corporates, is of the view that there has been an intent to smoothen the processes of doing business and inculcating the culture of startups at the Central government level. But executing that intent at ground level has been a challenge. He suggested that the new government should separately handle startups for taxation and compliance-related processes instead of treating them the same as large firms.

“For example, angel tax is something that impacted my previous startup. We couldn't onboard a couple of angel investors because they were unsure about how this entire taxation would pan out,” said Joshi.

Calibr is setting up a subsidiary in the US. Joshi said that it would take him only a week to do that and the paperwork is minimal. “I remember when we opened a private limited firm here, we had to go back and forth on multiple documentation for more than two months before we could set it up,” said Joshi.

Prinkan Pal, co-founder and CEO of data analytics firm LegoAI Technologies, said there have been some amends related to tax benefits. However, when a company tries to become global or outsource work outside the country, it is billed Goods and Services Tax (GST). He said that it is much easier for startups to do global business in places like Dubai or the US. Pal said these issues need to be addressed. Otherwise, organisations may switch their headquarters to other countries.

Dr. Gopichand Katragadda of The IET also highlighted that on average, it takes about four months to close a startup funding round. This is primarily due to the stringent compliances and legal frameworks that need to be navigated. “This delay can critically impact the momentum of young companies,” said Katragadda.

Government as Tech Buyer

CS Murali, Chairman of the STEM Cell, FSID, IISc, was of the view there is continued support by the government to startups in various ways. However, there is a need for government schemes to be executed at a faster pace as startups only have a limited opportunity. He said that the government could also become the biggest buyer of the innovative products developed by deep tech firms. “This is important because we live in times where we may be heading back to an era where sensitive technology will not be shared by foreign companies,” said Murali. “One good thing we have seen is that at least 3-4 of our companies have closed deals faster with defence organisations than with commercial establishments.”

AlgoBotix, founded by a team of IISc professors and students offers software solutions for the growing global drone industry. As a drone software developer, the company caters to unmanned aerial vehicle (UAV) platform manufacturers, service providers, defence establishments, and several governmental organizations. Onkar Chopra, co-founder and CEO of AlgoBotix, hopes the government will enable standardization from the perspective of drone software developers. This is important for seamless communication between different UAVs.

With age, disease, and disorder, the simple act of sitting down in a chair and getting up is also becoming a serious problem. Sanchit Jhunjhunwala and Manoj Kumar, the co-founders of Translead Medtech, want the government to come up with a policy that would enable public spaces such as parks, railway stations, airports as well as restaurants to have functional seating arrangements for elderly people and persons with disabilities. Their flagship product, called the ‘Stand at Eaze Assistive Chair’, is a passive yet responsive solution to the problem of sitting down and standing up. As the person begins to sit, the movable part of the split seat folds down. When the person moves slightly, with the intention to get up, the mechanism provides a gentle ‘lift and push’. The chair is based on a patented ‘compliant hinge aided responsive mechanism’ that requires no external power source.

“The Indian entrepreneurial landscape has witnessed rapid expansion, yet it requires significant transformation to reach the next level,” said Suresh Bhagavatula, Professor of Entrepreneurship, IIM Bangalore. “All types and sizes of ventures should be nurtured, not just those with the potential for rapid growth or high valuation, disregarding unit economics,” said Bhagavatula.