Gamers from esports teams CYCLOPS athlete gaming, left, and Rush Gaming, play Sony Corp.’s PlayStation Call of Duty game during the Tokaigi Game Party Japan esports competition. (Photographer: Shiho Fukada/Bloomberg)

Startup Street: Sony Is Banking On Startups To Boost Its Innovation Tech

This week on Startup Street, we have Sony Corp. opening up its doors to startups around the world in a bid to reattain its position as a global tech leader. India’s startup ecosystem finally saw some relief measures with regard to angel tax, and a wider definition for startups. Biscuit maker Britannia is getting paranoid about startups; the government has started its work to release states’ startup ecosystem ranking for 2019; and Department of Promotion for Industry and Internal Trade is holding a meeting with startups on March 1 to discuss fund flows.

Sony’s Innovation Game Plan

Sony Corp. is opening up its internal startup accelerator programme with a plan to acquire any startup that may help boost its tech bank.

Under the programme, Sony will provide mentorship and support in marketing and sales, according to its official website. The Tokyo-based company is also partnering with the Tokyo University to help students to convert their ideas into working businesses.

“All kinds of people should have a chance to be an entrepreneur, that’s our slogan,” said Shinji Odashima, head of Sony’s accelerator program, at an event in Tokyo, according to a Bloomberg report. “We’ll offer the know-how and the environment of our enterprise. Through these things, we want to realise the vision of creators.”

The announcement comes on the back of a cut in its annual forecast and weaker profits for PlayStation. Once known for its futuristic innovations such as the Walkman in 1979, the Trinton color TV in early 1970s, the first CD player in 1982 and a robotic dog in 1999—the company is looking to regain that position under Chief Executive Officer Kenichiro Yoshida.

Started in 2014, the Sony Startup Accelerator Program has already incubated 34 ideas with 14 of them evolving into businesses. One of these businesses made a product called the toio (small toy robots that can be instructed to perform custom games) which was acquired into the PlayStation division last year.

Other successful businesses include smartwatches line wena, a digital smell dispenser called Aromastic and a self flying drone startup AeroSense.

Acquisition, however, is not the only goal. Sony may also decide to partner or simply invest in the startup, Odashima said. "It all begins with just an idea. I can't tell you how many businesses began with just one word."

Startups Finally Get Some Relief On Angel Tax

India eased angel tax norms in a big relief for startups that feared tax demands on investments could hurt growth in early-stage startups.

Registered startups will be exempt from tax on funding of up to Rs 25 crore compared with the existing limit of Rs 10 crore, Suresh Prabhu, minister of commerce and industry, tweeted on Tuesday. A company will be considered a startup for 10 years from the date of incorporation instead of seven, and the maximum turnover to be called a startup has been raised from Rs 25 crore to Rs 100 crore.

These two changes are likely to excuse a large number of startups from tax liability.

"The policy change is in tandem for what the startup community asked for," Vipul Sharma, founder and chief executive officer at Chqbook, told BloombergQuint. "While there is a lot more to be done, this is definitely a big step in the right directions."

The best thing about this is that there is something for everyone, Nakul Saxena, director, public policy at think tank iSPIRT, said. Apart from increasing the cap on tax-exempted investments, he said, “there’s a clear move towards sharpening the definition of what constitutes a startup while simultaneously broadening the scope of that definition.”

Angel tax is the tax levied by the government on any private company that raises equity capital at a price above its fair market value. Over the past few months several startup and their angel investors have complained of aggressive tax demands. While the government did announce some changes in early January, startups found them largely inadequate.

Startups Are Making Britannia ‘Paranoid’

Packaged food company Britannia Industries Ltd., is “paranoid” of startups and is being “kept on its toes” by them. Its answer is to make sure it maintains its market position and invest in those very startups.

“There's a BCG [Boston Consulting Group] study that says the small fish has started to eat the big fish. That’s exactly what's happening with the arrival of the startups and they are doing a great job of building their businesses,” said the company’s Managing Director Varun Berry, at a Nasscom event on Thursday, according to PTI.

“Hence, it is very important for us to be on our toes and be paranoid about the small fish coming out and taking big bites out of this big fish.”
Varun Berry, MD, Britannia

Barry said while Britannia is very good at what it does, it needs to step out of its comfort zone to compete with startups, and/or partner with them.

The Wadia group-controlled Britannia, which is looking at making small investments in startups across platforms, said its mantra is to be nimble, agile and aggressive and also nurturing small businesses.

Startup Rankings 2.0

The commerce and industry ministry has started the exercise of ranking states and union territories on initiatives taken for startups.

The ministry will evaluate the work done by the states and union territories to boost the local startup ecosystem between May 1, 2018 to June 30, 2019, the ministry said in a statement.

The ranking framework comprises of seven pillars and 30 action points such as institutional support, simplifying regulations, easing public procurement, seed funding, incubation, venture funding and outreach related activities.

In 2018, Gujarat emerged as the best performer in developing startup ecosystem for budding entrepreneurs. Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, and Telangana were ranked as leaders while Haryana, Himachal Pradesh, Jharkhand, Uttar Pradesh, and West Bengal were ranked as aspiring leaders.

A Lot More To Be Done

The Department of Promotion of Industry and Internal Trade will hold consultations with startups on March 1, 2019 to discuss ways to boost flow of funds to new businesses, its Secretary Ramesh Abhishek told PTI.

There are still several things which need to be looked upon for strengthening the startup ecosystem, the official said. "We would discuss how to augment more flow of funds into startups and if there are any regulations or laws that need to be changed to augment that flow. We would like to talk that."

Many countries are providing tax and other incentives to angel investments into startups, he said. "We are also going to see how angel investments can be incentivised in the country.”

The department will also ponder on the concept on accredited investors, he said. Securities and Exchange Board of India has defined accredited investors as individuals with gross income of Rs 50 lakh annually with a minimum liquid net worth of Rs 5 crore, or any corporate body with net worth of Rs 25 crore.