Mains 2016: Globalization and impact on Indian startups

What is Globalization?

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.

What is a startup?

A startup is a young company that is just beginning to develop. Startups are usually small and initially financed and operated by a handful of founders or one individual. These companies offer a product or service that is not currently
being offered elsewhere in the market, or that the founders believe is being offered in an inferior manner.

As per the notification dated February 17, 2016, Ministry of Commerce and Industry has described an entity as a ‘startup’:
1. Up to five years from the date of its incorporation/registration,
2. If its turnover for any of the financial years has not exceeded Rupees 25 crore, and
3. It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Startup ecosystem in India

Startup ecosystem is developing rapidly in India.
As per Economic Survey 2016,
 India has more than 19,000 technology enabled startups, led by consumer Internet and financial services startups
 Indian startups raised $3.5 billion in funding in the first half of 2015, and the number of active investors in India
increased from 220 in 2014 to 490 in 2015. As of December 2015, eight Indian startups belonged to the ‘Unicorn’ club(ventures that are valued at $1 billion and upwards).

Schemes like Startup India aimed to promote entrepreneurship have been launched.

How can Globalization impact Indian startup industry?

It can help in the following ways: –
 Cross-border collaborations: Indian startups now have the opportunity to collaborate with their foreign counterparts and explore new markets without having to compromise on processes.
 A bigger talent pool and more money to spare: For an Indian startup looking to go global, the costs of setting up a
business could be prohibitive, but by collaborating with their counterparts (and, thus, opening up the Indian market
for them), it could turn into a win-win situation. Moreover, with barriers of culture becoming irrelevant, startups have the opportunity to hire from a much bigger talent pool.
 Increasing investment options: According to a 2014 Forbes article, America was India’s largest Investor and the global confidence in Indian economy is on the rise. Startups now have the opportunity to pitch their ideas to many
more investors and gain funding. Many expatriates, too, choose to invest in Indian businesses. More and more
seasoned venture capitalists are thinking of markets beyond their home turf.
 Platform to expand globally: Companies like Infosys and Zomato have been successful in crossing national
boundaries to establish thriving businesses abroad, giving hope to startups looking to go global. Amazon is trying to take products made in India to the rest of the world by tying up with local manufacturers. Indeed, an innovative
idea backed by the right team would have no trouble expanding globally in today’s times.

Government Initiative to promote start-ups: –

Start-up India, Stand up India
 Government launched a new campaign “Start-up India, Stand up India” to promote bank financing for start-ups and offer incentives to boost entrepreneurship and job creation.
 This initiative would encourage entrepreneurship among the youth of India.
 PM says that each of the 1.25 lakh bank branches should encourage at least one Dalit or Adivasi entrepreneur and at least one woman entrepreneur
 It will include hand-holding for all things related to them, which includes mentoring, linking companies with
universities and institutions, giving marketing support, consultancy on intellectual property rights
 And providing easy regulatory mechanism for them so that they do not have to run from one door to another.
 It would also offer direction in terms of how they can access funds and scale up capacity.
Setting up incubators
 Government intends to create a policy and framework for setting up incubators across the country in PPP mode.
 The plan envisages setting up 35 new incubators in existing institutions, where 40 per cent of funding shall come from the Centre.
 Incubators are set up to provide startups with office space and basic services.
 Setting up of incubators will free up funds and allow them to focus on core business functions.