Startup – the jobs aren’t coming anyways

I started up a digital business about 3 years ago. Among the unfortunate realities anyone who’s been a salaried professional starting up faces, is the double whammy of getting no income whilst having to invest in your business. In itself, there’s nothing out of the ordinary about this – any entrepreneur whether previously salaried or not faces this situation and in that sense, it’s the cost of doing business. As someone who paid taxes for a decade and a half it’s disappointing not to get any financial help from the government whilst you’re setting up (I don’t know why so much is made out of reducing the amount of time it takes to start a company – it’s hardly the biggest worry when you’re starting up). But, what’s particularly bothersome is if you’re fortunate enough to be invested in where the transaction involves the entrepreneur gaining from a sale of shares is that the government’s there to take a clean 30% of your gains. No help when you needed it but there for their share of profits. For most of us, upside participation with no downside risk remains a distant dream scenario.

It therefore comes as a pleasant surprise to see the steps being taken to improve things on this front. Not that any government has too many other options. With over a million job seekers hitting the market every month, there just isn’t any other way than to create a fair share of job creators rather than simply have everyone looking to someone else to provide them with a means to a livelihood. The Chinese solution of manufacturing led job growth is probably too hard for us to pull off. Also, our timing is off – it just doesn’t take as many people to produce a car or a pair of jeans in 2016 as is did a decade earlier. It would therefore leave it to entrepreneurship to solve our unemployment and chronic under employment problem.

My take on some of the recent and budget announcements are as under:

• Profit on share sale exempt from capital gains If invested in another start-up is so much better than having to part with 30% to the government. First time entrepreneurs re-deploying their gains could only be good for the start up ecosystem in the country.
• Long term being defined as 2 rather than 3 years on capital gains in unlisted companies is welcome for promoters and investors alike. A year is a long time in a start-up’s life!
• The 100% deduction on profits for any 3 years out of the first 5 would, in my opinion be quite a non starter. Am unsure of how many startups saw any meaningful signs of profitability in their first 3 years.
• The setting up of a Rs. 5000 crore fund for entrepreneurship benefitting scheduled castes, scheduled tribes and women is a welcome initiative. But, like all other such schemes, implementation often falls far short of expectations and my sense is this one will be no different. If
I were to bet, I’d say a large part of this fund would remain unutilized same time next year.

Overall though, these are steps in the right direction. I’d argue that it’s the only direction available so we might as well go down this path full throttle.

(This article is authored by Manish Shah, co-founder & CEO, BigDecisions.com)
(Image credits: Indiatimes)