Since all these years we have been struggling with the definition of a start-up. Actually, it’s really very confusing to define a start-up and how long a start-up stays as a start-up.
However, it often leaves us thinking that an 8-year-old company or ‘so-called-start-up’, Flipkart is still eligible for the post of a start-up, ironically with a valuation of $15 billion. How is that possible? Maybe we are just messing around with the whole definition, so here comes the government to our rescue.
Big thanks to the Department of Policy and Promotion for clearing the fog.
How do we define a start-up according to the government?
Let’s see the definition of a start-up, as per the Ministry of Commerce and Industry, officially described on February 17th, 2016.
- Its overall age should be less than 5 years as calculated from the date of incorporation/ registration
- Yearly turnover should be less than Rs 5 crore
- The entity should be working towards “Development, innovation, deployment or commercialization of new products, services or process driven by technology or intellectual property”
Above three are the major pointers that can define a start-up of India. Well, sardonically the highly famous Flipkart doesn’t fall under the category anymore.
Another thing that should be noted is that any business, entity or corporation formed by splitting from an existing one is not considered as a start-up.
Registration of a Start-up
A corporation, entity or a business is termed as a start-up if
- The entity is registered under Companies Act, 2013
- It is registered under section 59 of Partnership Act, 1932, as a partnership firm
- Or registered under Limited Liability Partnership Act, 2002, as a limited liability partnership
Any registration except the above three is not considered, and the entity is not a start-up.
Also to mention the turnover of Rs 5 crore is to be calculated as per Companies Act 2013, abiding by the rules and regulations.
How a start-up works and what things it can do?
According to the third point, a start-up should be working towards, “Development, innovation, deployment or commercialization of new products, services or process driven by technology or intellectual property”.
What does this exactly mean?
- The registered start-up has to develop, innovate and commercialise the new services and products by the use of intellectual property or technology.
- It can also make any ‘significant’ changes and improvements in an already existing product, service or process to further add some more value to it and enhance customer experience.
Here, simply developing the product is of no use, if the product is not eligible for commercialization then the company, organization or entity is not defined as a start-up.
Similarly, if we talk about those entities that don’t add any value to the customer or enhance the customer experience shall not be considered as a start-up.
It’s been a really long time we were confused or rather uncertain about the definition of a start-up. Wow! Now we can finally define it.
Check Here to view the issued Notification by Department of Industrial Policy under Promotion Ministry of Commerce and Industry