A compilation of important news from the startup world:
100% FDI to help online grocery startups in India raise funds
In a boost to retailers and grocery startups such as Bigbasket and Grofers, the government on Monday allowed 100% FDI in food retail, including through e-commerce, provided such items are produced, processed or manufactured in the country. This will allow multi-brand retail giants such as Walmart to look at their food business here closely and perhaps even foray into B2C food retail. Currently , the us giant operates a B2B business here since FDI in multibrand retail is not allowed. The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced or manufactured in India, including through e-commerce, is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country .
Foxconn goes slow on startup funding, invested only in 4 startups in India
In August last year, Terry Gou, chairman of Foxconn Technology Group, announced that the world’s largest electronics contract manufacturing company was in the final stages of investing in New Delhi-based refurbished goods seller GreenDust. The deal, estimated at $65 million-$70 million (Rs 430-Rs 460 crore), would have been the Taiwanese manufacturer’s second-largest investment in an Indian startup, next to its $200-million investment in online marketplace Snapdeal. But 10 months since, the GreenDust deal is yet to be closed. The maker of iPhones for Apple has invested in a mere four startups here since announcing ambitious plans for India more than a year ago, adding to domestic funding woes. Industry experts attribute Foxconn’s go-slow approach towards Indian startups to a likely shift in its overall priorities as well as declines in global technology stocks. “It seems that investing in India’s startup ecosystem has slipped down Foxconn’s pecking order,” said an investment banker who had advised multiple startups in their negotiations with the Taiwanese firm. “(Foxconn) had met dozens of startups (in India) over the past 12 months and not much seems to have been done since then,” this person said, requesting anonymity.
Govt frees startups in India of ‘angel tax’ burden; here’s how
The Central Board of Direct Taxes (CBDT), via a notification of June 14, made changes in Section 56 (2) of the Income Tax Act to implement the same. Under Section 56 (2) (viib) of the Income Tax Act, if an Indian company receives share subscription amount from an Indian resident which exceeds the fair market value of shares, the excess amount is taxed in the hands of the Indian company as “income from other sources”. Start-ups are valued on the basis of their future growth prospects and due to the rigorous provisions of Section 56 (2) (viib), any amount received in excess of the fair market value was getting taxed at as high as 30%. Such a high tax was seen as a big deterrent to investments in domestic funds. In January, Prime Minister Narendra Modi had unveiled a slew of incentives to boost start-up businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and `10,000 crore corpus to fund them. CBDT has in this line exempted start-ups from this tax by including start-ups in this “class of persons”.
MNCs on the startup highway
There is little to connect Brian Cornell, CEO of the $74-billion American retail giant Target, and Subrahmanya Rao, founder and CEO of Discover Dollar, a startup based in Bengaluru. But as Target wades through a challenging market where it missed revenue targets, and faces increasing competition from peers such as Wal-Mart, Cornell would understand the value that the small but nimble company in far away Bengaluru brings. It is quite a big problem for a large company like Target,” says Rao, who had earlier set up ventures with moderate success. “The leakage can vary anywhere between 0.5-1 per cent of the total revenue and even go as high as 5 per cent,” adds the Discover Dollar founder. The software was ranked as one of the top five most innovative solutions by German major SAP in 2014. But despite having such as blockbuster product, Rao, who used to sell newspapers and give tuitions to meet expenses while growing up in Mangaluru, was sweating to find a client. “It is difficult to become a vendor of a large company. We don’t come with a historic achievement or client list. Target helped Rao bridge that gap. In July 2015, Discover Dollar was one of the five startups that were selected for Target’s Accelerator’s 16-week programme in India.
Kerala startups should stay in sync with core hubs
Startups in Kerala should stay connected and reach out to the core startup hubs in other parts of the country until the startup ecosystem in the State becomes self-sufficient, said Kalaari Capital Advisors Pvt Ltd partner Sumit Jain. According to Sumit, startups in Kerala have been trying to find solutions to very relevant problems, and working in cutting edge areas like Artificial Intelligence and Internet of Things (IoT). Last year, Kerala-based startup Fin Robotics raised US$3 million from Kalaari Capital, which is an early-stage technology-focused venture capital firm, to launch its blue-tooth ring ‘Neyya.’ In an exclusive interaction with ‘Express,’ Sumit rates the quality of Kerala startup teams and their expertise as ‘more favourable’ compared to startups in other parts of the country. Excerpts from the interaction:
Startups Naturenama, Dipper & Onspon receive funding
Mumbai-based travel-tech startup Naturenama has raised Rs 1.5 crore ($225,000) in seed funding from White Unicorn Ventures. Started in January this year, the startup will use the funding for technology enhancement, brand building and marketing, according to a VCCircle report . The company’s website is yet to go live. Naturenama will work as a travel guide and as a planner for wildlife and adventure travels. Freight logistics marketplace, a Delhi-based company run by Dipper Technologies Pvt Ltd, has got Rs 33.5 lakh ($50,000) of funding from an undisclosed angel investor, VCCircle reported.