India's YourNest compiles start-up wish list ahead of budget

The suggestions in the presentation - titled "Creating a vibrant start-up and entrepreneurial ecosystem in India" - include: increasing fund resources; creating a fund-of-funds with an allocation from the budget; allowing foreign direct investment in venture capital funds; relaxing regulations and taxation; and easing the formation and closing of companies.

The fund-of-funds, Your Nest said, should be a self-sustaining model with a lifespan of 7-10 years. It also singled out the Technology Development Board (TDB) and Small Industries Development Bank of India (SIDBI) as agencies that require ongoing support so they can make high-risk investments into research, incubation and acceleration.

On the issue of taxation, YourNest called for a clearer definition of small business. It also suggested that the government enhance exemptions for small companies under the Companies Act 2013, such as the need for a valuation by a merchant banker, the need for a valuatrion for the issue of employee stock ownership plans (ESOPs) and the need for an internal audit.

The presentation said measures should be taken to encourage India's high net-worth individuals (HNWIs) - who typically focus on assets like real estate, gold and fixed income - to act as angel investors and put more capital toward VC and private equity funds.

It suggests the government does this by - among other things - allowing capital gains to be invested in risk capital. In particular, Your Nest recommends that India replicate the UK's Enterprise Investment Scheme (EIS), which offers personal tax relief for investment in startups and early stage business.

The suggestions come at a time when the wider PE community is hoping the budget will not only make doing business in India easier, but also offer clarity on some of the murkier areas of regulation. VC Circle, which collected views from several India-focused managers recently cited clarity over retrospective taxation as one of the chief concerns.

Other issues include: offering pass-through status for all Alternative Investment Funds (AIFs) with regards to taxation; opening more domestic capital pools for PE and VC by lifting regulatory constraints on institutions such as pension funds, insurers and endowments; and removing hurdles to PE and VC exits that arise due to the lock-in provisions.

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• Topics
• South Asia
• Regulation
• Early-stage
• India
• regulation
• Venture