Startups in India – Incorporation and Funding

Startups in India - Incorporation and Funding

The entrepreneurship bug has been catching Indians and there has been a lot of startup activity in the last twelve months. There are new ideas and innovation along with proven models from the US being customized in the Indian context. Private sales, social networking, mobile and location-based services are few of the hot trends in the technology sector. Incubators, startup competitions and networking events where entrepreneurs can demo their products and ideas have started to be organized across the country. The support from the government has added fuel to the entrepreneurship drive. Angel investors, Venture Capital and Private equity firms have also started showing interest in the startup businesses and putting in big money behind ideas that have the market potential and the right team.

Any new company in India has to be registered with "The Registrar of Companies (ROC)", the government body that manages incorporation and administration of companies. In India, incorporation of a company is governed by the Companies Act 1956, which empowers the Central Government to regulate the formation, financing, functioning and closing of companies. The Companies Act does not apply to universities, co-operative societies, and scientific and other societies. The Act is administered by the Central Government through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board and Director of Inspection. Private companies are registered with the Registrar of Companies in each state and you have to contact the registrar’s office to access data on private companies since its not available online. Finding information on startups that may be incorporated as "Proprietorship" or "Partnership" firms is even more difficult.

The traditional method of raising capital for startups in India was to reach out to family and friends. However, with US based VC and PE firms setting up shop in India over the last couple of years, this trend is changing. There used to be an "Electronic Data Information Filing and Retrieval (EDIFAR)" website maintained by the Security and Exchange Board of India (SEBI) that maintained filings and funding data. This website has been discontinued and replaced by the Corporate Filing and Dissemination System (CFDS) that was put in place jointly by the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). However, only information on publicly traded companies is available in this database. Thus if you want to research funding information in India, you have to find on your own by digging through Investors sections of startup websites and following technology news sources such as Techcrunch, GigaOm, CNET, Indian web startup and Startup Dunia. Finding information on the team behind a startup is even more difficult in India and you have to research on the typical sources such as LinkedIn.

The two main stock exchanges in India are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). However, there are also several regional stock exchanges in every state. Any startup that wants to go public lists on one of these exchanges. Bangalore (Karnataka) is the center of startup activity in India. The city has been the IT hub of India since the last two decades. Some other major cities where most startups have come up are Mumbai and Pune in Maharashtra, Hyderabad in Andhra Pradesh, New Delhi, Chennai in Tamil Nadu and Kolkata in West Bengal. Unlike the US, there is no place like Delaware, which is preferred for legal incorporations due to tax or legal filing benefits.

Useful Resources:

Company filing and registration:

Startup Related Websites in India:

Explore how we can help your startup accelerate.

Let’s Talk