sikkim - startup india

SIKKIMEMERGING STARTUP ECOSYSTEM

STATES’ STARTUP RANKING 2019

SIKKIM | EMERGING STARTUP ECOSYSTEM2

Table of

Contents

1. Overview of State Startup Ecosystem ......................05

2. Snapshot of State Performance ................................. 07

3. Pillar Wise Assessment ..................................................08

3.1. Institutional Support .................................................................. 08

3.2. Simplifying Regulations ........................................................... 10

3.3. Easing Public Procurement .................................................... 11

3.4. Incubation Support ...................................................................... 13

3.5. Seed Funding Support .............................................................. 14

3.6. Venture Funding Support ...................................................... 15

3.7. Awareness and Outreach ..................................................... 16

5

OVERVIEW OF STATE STARTUP ECOSYSTEM

The state of Sikkim has witnessed a wave of startups and also rise in various schemes and programmes to support entrepreneurs. To provide an impetus to the unemployed youth and to develop new entrepreneurial ventures, self-employment opportunities are introduced in the state with a credit linked promoter’s contribution and financial assistance administered by Department of Commerce and Industries. This initiative aims at bringing a paradigm shift in the employment sector and overall startup ecosystem of the state.The state has submitted a Draft Startup Policy in 2019 which is yet to be notified. The ‘Sikkim Micro Small and Medium Enterprises and Startup Policy, 2019’ (hereinafter called ‘the draft policy’) envisions to encourage and empower the local youth to take up entrepreneurship and help create sustainable avenues, thereby establishing themselves as successful startups in the state.Given that the Micro Small and Medium Enterprises (MSMEs) and startup sector of the state needs active promotion in the interest of the local entrepreneurs.

01

SIKKIM | EMERGING STARTUP ECOSYSTEM

SOME OF THE KEY OBJECTIVES OF THE POLICY ARE:

Promote development of entrepreneurship

within the state through awareness creation,

sensitisation and exposure

Assist young entrepreneurs by providing skill development training, all round incubation, funding access, subsidies and marketing assistance in order to ensure that enterprises are firmly rooted and capable of sustained growth through sound

business model development

Encourage established MSME startups to upscale their

businesses and grow from local to national and even international enterprises

Provide technology support to new and

existing entrepreneurs to maximise their production

Promote employment of the local people in local businesses to

enhance the capability of each MSME and startup (especially

Micro & Small Enterprises or MSEs) to employ several unemployed

youth

Ensure that enterprises follow the green development pathway by adopting environment friendly

measures


KEY HIGHLIGHTS OF THE STARTUP ECOSYSTEM IN SIKKIM, AS ATTRIBUTED FROM THE DRAFT POLICY:

REIMBURSEMENT OF POWER COSTThe state would reimburse 50% of the cost of the Diesel Generator (DG) sets excluding installation charge for uninterrupted power supply. Fixed power cost reimbursement at INR 1.00 per unit for five years would be provided to startups from the date of commencement of commercial production

STAMP DUTYThe state would reimburse 50% of the stamp duty and transfer duty paid on purchase of land or for lease of land/shed/buildings for MSME and startup activities

RESEARCH & DEVELOPMENTResearch & development for upscaling or modernising startups would be facilitated through national level research institutes if it cannot be taken up by the state or institutes of MSME and startup ministry. The state would facilitate and bear the cost of such research

SKILL UPGRADATION • Registered institutes/

training centers operated by local entrepreneurs would be given preference as skill development partners in the state

• 50% of the training or incubation fee would be reimbursed

ASSISTANCE FOR CLUSTER DEVELOPMENTFinancial assistance up to INR 1 crore would be provided for common infrastructure facilities or common facilitation centers from the Industrial Development Fund (IDF) in cluster development areas taken up under MSME and startup schemes or solely under state budget

FIXED CAPITAL SUBSIDY • 20% subsidy on fixed capital investment in plant and

machinery for small and medium scale industries subject to a maximum of INR 50 lakh in manufacturing sector, including agriculture

• 10% subsidy on fixed capital investment in equipment for small and medium scale industries subject to a maximum of INR 20 lakh in service sector

• 10% subsidy on fixed capital investment in plant and machinery or equipment for micro scale industries subjected to a maximum of INR 5 lakh for all sector industries

• Additional 5% would be reimbursed towards women entrepreneurs

VALUE ADDED TAX (VAT)/CENTRAL SALES TAX (CST)/ STATE GOODS AND SERVICE TAX (SGST)

• For micro and small industries, 70% of the SGST would be reimbursed for a period of five years from the date of commencement of commercial production

• For medium industries, 50% of the SGST would be reimbursed for a period of five years from the date of commencement of commercial production

SEED CAPITAL ASSISTANCE FOR MICRO ENTERPRISES

• The state would provide seed capital assistance at 20% of the machinery cost for new enterprises, which would be adjusted from the eligible investment subsidy, if any

• Those entrepreneurs who are willing to invest their own initial capital to an extent of 100% of the project cost would be given preference for incubation and such incubates would be sent outside the state to the MSME and startup development institutes and technology centers established by the government of India across the country or even oversees incubation centers at state government cost.

• Those entrepreneurs who were supported financially in the project cost either from state/central government or other agencies would be supported to the extent of 50% of the cost of training

7SIKKIM | EMERGING STARTUP ECOSYSTEM

SNAPSHOT OF STATE PERFORMANCE 02

Relative Performance of the State

Performance of the Best State in the pillar

The following representation details status of Sikkim’s implementation on each of the 7 pillars of assessment. Data presented below is the percentile score.

Sikkim has been evaluated on 7 distinct pillars which largely contribute to the growth of the startup ecosystem in Sikkim. The representation as expressed above depicts the relative performance of Sikkim in each of the seven pillars in comparison to the performance of the best state in that pillar.

Although efforts have been made to enhance the startup ecosystem, the initiatives undertaken towards uplifting the startup ecosystem in Sikkim require improvements since results have been negligible across pillars. Greater efforts need to be employed by Sikkim for noticeable outcomes.

Detailed analyses of this snapshot can be viewed in the subsequent section, with extensive insight into the initiatives taken by Sikkim to uplift its startup ecosystem.

Incubation Support

0%

Institutional Support

0%

Awareness and Outreach

0%

Venture Funding Support

0%

Simplifying Regulations

0%

Seed Funding Support

0%

Easing Public Procurement

0%


PILLAR-WISE ASSESSMENT

• The state has submitted a draft startup policy; wherein the state has laid greater focus on promoting women entrepreneurships. According to the draft startup policy, the state would reimburse additional 15% of SGST and 5% fixed capital subsidy for women entrepreneurs. Also, 20% of the industrial estate area would be reserved for women entrepreneurs.

• Out of the total annual procurement from Micro & Small enterprises, 3% of the 25% target would be earmarked for procurement from women entrepreneurs.

KEY FACTS

1. INSTITUTIONAL SUPPORTInstitutional support envisages provisions and execution of the state’s startup policy including information on the nodal team within the state, online implementation system, registration of mentors and their listing on the state startup portal. The states are evaluated based on the laid provisions along with parameters of availing benefits through state intellectual property rights portal, establishing partnerships with institutions, providing special incentives for women led startups and entrepreneurship

03

WAY FORWARD

The state needs to give importance to this pillar in order to further strengthen the startup ecosystem. The state could prioritise actions required in three categories: short, medium and long term. Action required in each of these categories are summarised below: -

MEDIUM TERM ACTIVITIES (4-6 MONTHS)The activities suggested in this category are important and will take relatively more time for implementation. Through dedicated efforts, results can be achieved within four to six months. Activities suggested under this category are as follows:

Need for a comprehensive startup policy with release of notification• The state could have a comprehensive “Startup Policy” mentioning various benchmarks as per the guidelines

• The state could notify its Draft Startup Policy and include the detailed process for registering of startups. The state could provide systematic process and procedures for availing incentives by the state’s startup under the draft policy

• The state could clearly define entities to be startups with a sector agnostic approach wherein the incentives/ benefits are not restricted to any sector. The draft policy could define important terms of an ‘entrepreneur’, ‘incentives’ and other vital terminologies in the policy and the same could be made available in public domain for reference of state entities to register as startups and successfully foster the overall startup ecosystem of the state

• The startup policy for the state could be well-framed to address the issues and challenges of startups for all sectors

• The draft policy could include provisions to open a single-window system to meet the requisite registrations, certificates, finance, labour and environment-related compliances, and various other state regulations


Identify and establish a dedicated team for supporting startups• The state could clearly designate a nodal department, officer and team for its startup initiative. The nodal officer would act as a single

point of contact to deal with issues related to startup ecosystem in the state

• The state could establish an experienced team to provide the needed support to state’s startups. The team deployed could have a strong foundation with suitable and required experience in startup ecosystem development, innovation or startups. The team could be identified exclusively to provide immense support and contribution to the overall collaborative growth of the state’s startups

Ensuring support from various departments• The state may create strategies to detail out schemes of each department in the state in order to provide institutional support to

startups. The other departments may support the state to conduct increased sustainable programmes, such as, grand challenges, hackathons and bootcamps

• Establishing such departments would enable the states to effectively execute sectoral activities amongst startups and allow them to perform with increased development and operational management

Establish an online implementation system for startups• The state could have a dedicated portal to provide various details of the startup guidelines

• The state’s startup portal could have a comprehensive online system with facility of online registration of entities as startups and online tracking of application status. The state could issue an online registration certificate and an online resolution to queries. The call center numbers could also be made available online for ease and convenience of the startups

• A mechanism to have a well-built list of incubators and mentors could be made available online

• A dashboard detailing number of startups registered, seed funded startups, venture funded startups, incubators supported, number of incubates and purchase order awarded could be strategised and provided by the state

Developing strategies to build a robust mentor network for guiding startups• In order to provide mentorship support to startups, the state could create a pool of mentors for supporting startups in the state. The

network of mentors could essentially be developed by driving experts from relevant sectors, corporates with experience in the field, individuals with strong knowledge of legal and regulatory issues, personnel from the financial sector with funding experience and successful entrepreneurs to assist with establishment and growth of startups in the state

• The state could build both online and offline mechanisms to connect startups with mentors wherein the mentors could understand the gaps and by providing mentorship at different stages of the startup lifecycle to entrepreneurs in order to accompany startups in building a strong startup ecosystem The guidance would be in the form of refining business mode, addition of team members, pivoting of the business, market size etc

• Additionally, the state could build a holistic mechanism for the state’s startup ecosystem, enabling startups to make a strong nexus and connect with the identified mentors to gain personalised support and regular inputs towards their robust business growth

LONG TERM ACTIVITIES (7 – 12 MONTHS)The activities suggested in this category will take more time for implementation. Activities suggested under this category are:

Focus on partnerships with corporates/educational institutions• The state could focus on increasing partnerships with business houses, corporates, and/ or educational institutions both in and outside

the region for expanding their assistance to state-based startups

• These partners could provide assistance to startups such as professional services/mentorship/ corporate social responsibility/ co-working spaces, software, hardware tools and other lab equipment, knowledge exchange, technology transfer and market linkages

Develop Intellectual Property (IP) Support• The state could develop a sound intellectual property support system to persistently grow and sustain state’s startup ecosystem. The IP

support would help guide startups to secure their businesses and protect them from any sort of infringement by competitors

• The state could take guidance from experienced entrepreneurs and qualified IP professionals to create awareness amongst startups and the state could provide such assistance by providing incentives, such as, subsidies, fee waivers, facilitators, and by building IP support centers

• To enhance the use of IP rights amongst state startups, the state could provide 100% reimbursement for patent/ trademark filing for both domestic and international patents which would support startups with an IP portfolio to attain esteem for their businesses


2. SIMPLIFYING REGULATIONSSimplification of regulations considers mandatory requisites for state level approvals and clearances for registering and operating a business or startup online. In order to make compliance for startups friendly and flexible, simplifications are required in the regulatory regime. It encapsulates regulatory issues faced by registered startups which have been identified through an interactive online mechanism subject to approving action by regulatory agencies. The states are evaluated based on the support provided to startups by introducing a list of rules, regulations or Acts in the state including amendments in the Acts and regulations with requisite details to create a conducive environment for the state’s startups.

The state is yet to develop a mechanism to identify and assess all the regulatory issues faced by state’s startups; along with an online interactive mechanism detailing out all state level approvals and clearances required for registering and operating a business or a startup.

KEY FACTS

WAY FORWARD

The state needs to give importance to this pillar in order to further strengthen the startup ecosystem. The state could prioritise actions required in three categories: short, medium and long term. Action required in each of these categories are summarised below: -


Develop a Business Compliance Information System for startups• The state could develop a BCIS (Business Complaince Information System) which would detail out all state level approvals and

clearances across different sectors required for registering and operating a business or startup online.

• The state could also add a chatbot to the main website. This would help in real time problem-solving for the startups and lead to customised responses instead of standardised Frequently Asked Questions (FAQs).

Invite or identify regulatory issues• The state could establish an interactive online mechanism for inviting and identifying grievances faced by startups on state’s rules and

regulations. The portal could be used to provide suggestions and resolutions to state’s startups.

• The state could conduct quarterly roundtables/ workshops to resolve sector specific regulatory issues. This would include a two-way communication between startups and relevant government departments aimed at direct consultation and grievance redressal to assist state’s startups in identifying challenges and seek resolution with ease and convenience.


Develop a clear compliance information system for startups• The state could introduce rules and regulation or other statutory Acts with necessary amendments as and when applicable to the state.

• The state could ensure that the startup portal comprises of list of rules, regulations or Acts amended or introduced by state supporting startups and timely updation of the portal.


3. EASING PUBLIC PROCUREMENTEase in public procurement simplifies criteria to ensure participation of startups in government tenders. The states are evaluated based on the support provided to startups in resolving issues related to state public procurement as norms of Earnest Money Deposit (EMD), prior experience, and prior turnover which prove to be barriers for participating startups. Easing of such norms enable startups and entrepreneurs to avail exemptions and share an equal platform with established organisations.

• According to the Draft Startup Policy of the state and in line with the central government public procurement policy for MSEs, every state government department/offices/institutes /universities/colleges /State Public Sector Undertakings (PSUs) proposes to set an annual target of 25% procurement from the MSE sectors.

• A sub-target of minimum 4% out of the 25% target of annual procurement from MSEs would be from Scheduled Caste (SC)/Scheduled Tribes (ST) entrepreneurs. Out of the total annual procurement from MSEs, 3% of the 25% target would be earmarked for procurement from women entrepreneurs.

KEY FACTS

WAY FORWARD

The state needs to give importance to this pillar in order to further strengthen the startup ecosystem. The state could prioritise actions required in three categories: short, medium and long term. Action required in each of these categories are summarised below:

SHORT TERM ACTIVITIES (1-3 MONTHS)The activities suggested in this category are important and will take relatively less time for implementation. Through dedicated efforts, results can be achieved within one to three months. Activities suggested under this category are:

Develop an online grievance redressal mechanism

The state could ensure to develop an online mechanism to resolve grievances of startups; specifically related to public procurement. Establishment of a dedicated online mechanism would support startups to come up with the issues faced in procurement and necessary resolutions to sustain the startup businesses in the state.

MEDIUM TERM ACTIVITIES (4 –6 MONTHS)The activities suggested in this category are important and will take relatively more time for implementation. Through dedicated efforts, results can be achieved within four to six months. Activities suggested under this category are as follows:

Increase in the number of purchase orders/work orders• The state could consider increasing the number of work orders awarded to startups in order to encourage entrepreneurship.

• The state could devise projects, create structures and consider organising annual events where startups could demonstrate their abilities directly to the government and subsequently take part in public procurement activities.


Provide necessary relaxations in “prior experience, turnover and Earnest Money Deposit (EMD)’ • The state could notify the relaxation of ‘prior experience’ for startups in public procurement.

• The state could provide sample Request for Proposals for exemptions applicable to startups and list all startups along with their registration numbers to make purchases and work orders for public procurement easy.

• The state could further notify the relaxation of ‘prior turnover’ in public procurement with a 100% exemption to startups.

• A plan of action may be designed laying out norms of procurement and the exemptions given to startups.

• The state could provide 100% EMD exemption to facilitate participation of startups across all the public tenders. The state could ensure that the startups in the state are able to fulfill the objective of participating in the government tenders with no deterrent of ‘submission of EMD’ criteria.


4. INCUBATION SUPPORTIncubation support is an integral element of the startup ecosystem that supports entrepreneurs to grow their businesses and assists new startups to succeed. In order to promote startups, the state governments collaborate with organisations, corporates or industry associates to establish incubators to support startups in the form of capital expenditure or operational expenditure. The evaluation is based on setting up of incubators supported by the state governments to release funds to the startups, thereby creating a unique mechanism to provide subsidised incubation and operate acceleration programmes in partnership with the industry.

• According to the Draft Startup Policy, the entrepreneurs who are willing to invest their own initial capital to an extent of 100% of the project cost would be given preference for incubation. Such incubates would be sent externally by the state to the MSME, startup development institutes and technology centers established by the Government of India across the country or even overseas incubation centers at state government cost.

• In addition, the draft policy encapsulates that incubation centers, tool rooms and technology centers would be created of appropriate number and at appropriate locations in the four districts of Sikkim to assist MSEs to take up enterprises in their desired field. Possibilities for developing these incubation centers/ tool rooms/ technology centers would be explored with the existing PSUs.

KEY FACTS

WAY FORWARD


MEDIUM TERM ACTIVITIES (4 –6 MONTHS)The activities suggested in this category are important and will take relatively more time for implementation. Through dedicated efforts, results can be achieved within four to six months. Activities suggested under this category are as follows:

Organise acceleration programmes• The state could organise acceleration programmes in association with the industry. Most importantly, the state could formulate

measures to seek support of other departments in the state to encourage industry participation.

• The state could also encourage enrollment of startups in acceleration programmes to provide startups with the opportunity to connect with investors, engage in skill development and obtain knowledge support. The startups would be able to connect with the investors and leverage opportunities to seek funding support for establishment and acceleration of their startups


Develop a mechanism for subsidised incubation• The state could develop a mechanism to assist startups with subsidised incubation

• The state could support subsidised incubation to unique startups. The state may also provide subsidy benefit to registered startups and maintain a list of startups which are provided direct subsidy in rental fee of the incubation space

Necessary action to set up supporting incubators• The state could enable swift action for setting up new incubators or upgrade any existing incubators in the state.

• The state could also support incubators by providing financial grant for capital expenditure for covering the initial cost. The incubators could clearly certify the support provided by the state.

• Additionally, state could explore alternative models of incubation support such as provision of rent-free space (on lease) for setting up of incubators. This would ensure high level incubation support to the startups.

Seat allocation across operational incubators

The state could take an initiative to allocate seats to startups across operational incubators. It could explore opportunities and back it up by an acknowledgement letter or certificate from incubators specifying the number of seats allocated to such startups.


As per the Draft Startup Policy, the state ensures to provide seed capital assistance of 20% of the machinery cost for the new enterprises, which would be adjusted from the eligible investment subsidy.

KEY FACTS

WAY FORWARD



Provision of seed funding guidelines • As the seed funding would be provided to startups, there could be a mechanism to follow up on the progress made by an enterprise

barring those that have achieved commercialisation. This could be in the form of timely feedback mechanisms and follow up reports. It would enable the government in outlining the success stories and also track the utilisation of funds.

• The state could develop seed funding guidelines which may clearly state the eligibility criteria, extent of seed funding and application procedure.

Invite Investors to provide Seed Funding to Startups• The state could encourage startups to participate in the dedicated annual events and approach relevant investors with a pitch deck on

the startup’s potential to raise seed funding during early stages of business.

• The state could also consider other models for seed funding, such as, subsidisation of interest payments on loans obtained from commercial banks


Provision of online facility to avail seed funding• The state could have an online facility where startups can apply for seed funding. The facility could allow startups to submit their

application online along with relevant documents.

• The online facility could also have other features such as online tracking of application and enabling startups to obtain subsequent approvals online.

5. SEED FUNDING SUPPORTSeed funding can be in the form of a direct grant, subsidised loan, product development and marketing financial assistance, monthly sustenance allowance or even equity seed funding. With seed funding, the evaluation is based on the states’ endeavor to help a business grow and generate its own capital by establishing a guiding document. The states need to ensure that startups scale with the right velocity in order to achieve leading positions, through state investment and startup’s entrepreneurial knowledge.


6. VENTURE FUNDING SUPPORTVenture capital funding support is provided to the startups from state supported funds. The states are evaluated based on the establishment of the Fund of Funds (FoF) with approved operating guidelines and signing a memorandum of understanding (MoU) with the fund manager along with a concrete budget allocation. Venture funding provides strong growth potential to startups wherein the fund is used for the all-round development of startups and to levitate the startup ecosystem of the states.

• The MSME and Startup division in the Department of Commerce & Industries of the state would make arrangements to facilitate/ arrange/ coordinate funding, whether angel or venture capital or equity or debt funding from financial institutions or agencies

• According to the draft policy of the state, it would set up an MSME and startup development and rehabilitation fund to operationalise appropriate schemes for development of MSME and startups in the state

• Any central assistance by means of grants or waiver of tax or other liabilities would also be planned to be accessed• The draft policy of the state provides for a fund of INR 100 crore which is to be proposed for a period of five years from the

date of notification of the policy towards enhancing the state’s startup ecosystem

KEY FACTS

WAY FORWARD


MEDIUM TERM ACTIVITIES (4-6 MONTHS)The activities suggested in this category are important and will take relatively more time for implementation. Through dedicated efforts, results can be achieved within four to six months. Activities suggested are:

Supporting venture funds• The state could facilitate establishing of venture funds to support startups through the following measures:

− Establish clear operating guidelines for venture funds

− Appoint fund managers for such funds and sign a memorandum of understanding

− Approach independent venture funds for participation

Deploy measures to support startups with venture funds

In order to encourage startups to avail benefits from state supported and established venture funds, the state could consider deploying certain measures, such as, offering a success fee at a fixed rate to startups for availing investments through state supported seed funds.


7. AWARENESS AND OUTREACHIt is the endeavor of state governments to raise awareness about the Indian startup ecosystem and increase its outreach throughout the state. The states are evaluated based on awareness of startups created through workshops, national and international events including bootcamps and hackathons/ grand challenges. In order to promote startups, the state encourages participatory and inclusive processes for linking startups with angel investors and high net worth individuals. Maximum participation is encouraged for exchange of valuable knowledge amongst startups, and pitching sessions for angel investments with widespread propagation.

The draft Startup Policy of the State Government enlists to facilitate access to angel funds and increase the interaction between angel investors and startups.

KEY FACTS

WAY FORWARD

The state needs to give importance to this pillar in order to further strengthen the startup ecosystem. The state could prioritise actions required in three categories: short, medium and long term. Action required in each of these categories are summarised below:-


Conduct bootcamps • The state could organise bootcamps in schools and colleges at regular intervals wherein industry experts would be invited from the

startup ecosystem to conduct bootcamps and disseminate information on startups to foster their ecosystem.

• The state could also ensure that such events are backed by supporting documents specifying the date, event name, venue, startup participants and brief description of the event and comply with such formalities for the official recognition of these events.

Conduct hackathons and grand challenges• The state could organise hackathon/ grand challenges to identify innovative technological solutions and for supporting entrepreneurs

in building these solutions as viable products or service offerings.

• The list of hackathons could be supported with event reports consisting of event name, dates, venue and duration of the event, problem statement posed, startup participants and brief description of the event and event-wise list of participating startups/students.


Conduct angel investment workshops • The state could conduct angel investment workshops or networking events for connecting startups with angel investors/high net worth

individual’s/angel network.

• The state could consider offering additional incentives to startups to avail funding from angel investors. Incentives such as offering a success fee at a fixed rate to startups for mobilising investments from angel investors.

• The state could also consider providing grants to startups that are supported by angel investors.


Conduct increased number of national and international events• The state could conduct national and international events and invite more startups from other states and countries to participate at

events with conviction and strategise to accelerate the business of state’s startups with improved measures and facilitation. These events would be of immense help in fostering innovation and developing skills among the entrepreneurs. The state could ensure that the events are made to be supported with event reports consisting of requisite details and event wise list of startups who actively participated.

• Students or aspiring entrepreneurs could be given basic understanding of ideation, business planning, finance, legal and pitching before they venture out to run a startup.

• The state could conduct more training and events in educational institutes of the state to ensure coverage of all districts.

• The state could ensure compliance by complying with all required formalities for the official recognition of these events


Notes

CONTACT US

www.startupindia.gov.in

[email protected]

1800-115-565

sikkim - startup india

Documents