Employees of startup companies work in front of computer screens at the Mistletoe Base Camp Tokyo office, in Tokyo, Japan. (Photographer: Akio Kon/Bloomberg)

Startup Street: What Venture Capitalists And Startups Made Of Budget 2019

This week on Startup Street, we take stock of the Indian startup community's reaction to the interim budget. We also feature a Malaysian startup that's offering services based on Islamic beliefs and a $250,000 WhatsApp challenge.

Budget 2019 Good For Startups, But What About Angel Tax?

The Budget 2019 mentioned the word “startup” only five times, compared to multiple mentions of startups, venture capitalists and angel investors, among others, in the previous budget delivered by Union minister Arun Jaitley.

Considering this was only an interim budget, India’s startup ecosystem believes that some of the measures, despite lacking details and clarity, sound encouraging.

For startups, one of key announcements were setting up of one lakh digital villages, said Anil Joshi, managing partner at Unicorn India Ventures.

This initiative when rolled out will have multiplier effect on startups in segments like ed-tech (education technology), content-based companies, media tech and fintech and e-commerce.
Anil Joshi, Managing Partner, Unicorn India Ventures

Even the announcements made around Jan Dhan accounts and rural distress alleviation presents a big opportunity for the fintech and ed-tech startups, he said in a statement to BloombergQuint.

Venture Capital firm YourNest said the government’s announcement of a National Centre of Artificial Intelligence will promote the use of technology, digitisation and also boost job creation.

It, however, expressed disappointment regarding the lack of measures on angel tax. “As a venture capital, we were also  hoping for some clarity on the angel tax issue that is currently plaguing the ecosystem,” said Girish Shivani, executive director and fund manager at YourNest Venture Capital.

The issue of angel tax is ranked as the biggest concern for India’s startups and venture capitalists, according to a recent survey by Inc.42—a media platform that reports on startups. More than 150 startups received a notice for angel tax in mid-December. While the government announced measures to ease the process of filing for exemptions, startups called it “cosmetic” in nature. The issue, according to Padmaja Ruparel, co-founder of Indian Angel Network, could kill the startup ecosystem.

We were really hoping for some resolution on the angel tax issue, disappointed to see nothing.
Anurag Bhatia, CEO And Head Of Investments, Minance

BECKFriends—a startup that allows people to earn by delivering goods while they travel—expressed strong disappointment towards the budget.

“Ignoring the pain areas for startups and the ecosystem is sending wrong signals to the youth of the country,” said Co-Founder Deep Malhotra.

The Startup Josh is low and something needs to be done!
Deep Malhotra, Co-Founder, BECKFriends

Here’s what other startups had to say:

Curofy: The budget, as expected, had a lot for the farmers and the middle class. The direct transfer for farmers and the tax cut for the middle class will be a big boost to consumption in the country, especially in the rural areas. For startups, this will result in more and more people buying smartphones and getting connected to the internet.

Routematic: Not much was talked about startups in the budget this year. The 2 percent interest subvention on MSME loans will help to get access to capital. Areas where the company wanted more allocation were higher education to improve talent pool and some innovative thinking around reducing capital gains tax for venture capitals, which could make India the preferred investment destination for such funds.

SMartCoin: For a fintech company in direct lending space, this is a huge push to achieve the vision of bringing underbanked masses under a formal credit system.

Incubex NestaVera: While the government has been positive on a macro vision for the rural economy, some measures could have been taken to bolster the co-working sector and smart cites.

No Pork, No Alcohol, No Porn

A Malaysian startup is betting on Muslims browsing the internet to go “halal”—what refers to being permissible in Islamic Law.

SalamWeb Technologies MY Sdn has launched a complete suite of internet services, including a web browser, a news application, a messaging service and an app that lets you give to charity. And it has already planned investing $15 million into the services over the next two years.

“We want to make the internet a better place,” Managing Director Hasni Zarina Mohamed Khan told Bloomberg. “We know the internet has the good and the bad, so SalamWeb offers you a tool to create this window that lets you go to the internet to see the good.”

SalamWeb mobile browser (Photographer: Justin Chin/Bloomberg)
SalamWeb mobile browser (Photographer: Justin Chin/Bloomberg)

SalamWeb’s services hinge on community-vetted filters that will block web pages that have any content that may be deemed as inappropriate for Muslims. It also has specific functions like prayer times and indicator for the direction people must face while praying.

Hasni Zarina wants to capture 10 percent of the 1.8 billion global Muslim population. “We’re promoting universal values— although SalamWeb is targeted to Muslims—it can be used by anyone,” Hasni Zarina said. “The internet can be a harmful place. It’s obvious that we need an alternative.”

WhatsApp’s Startup Challenge

Messaging platform WhatsApp has announced a $250,000 award for Indian startups that come up with ideas to solve socio-economic problems of the country.

“Entrepreneurs with highly innovative ideas, business models that solve a local India problem, making a large scale socio-economic impact, are invited to apply,” the Facebook-owned platform said in a media release. WhatsApp will select five winners to receive a grant of $50,000 each.

The Grand Challenge has been announced in a tie-up with the Startup India programme of the government. Applications will be open till March 10.

The themes for the challenge include healthcare, rural economy, financial and digital inclusion, education and citizen safety. The challenge is open for startups across all industry segments.

This is the second such initiative by Facebook in a span of five months to promote India’s startup ecosystem. Last year in October it had organised its first Startup Day in India where five startups were given awards for their work in various categories.