Experts deliberate at Cross-Border Startup summit was organized by MVIRDC World Trade Center Mumbai and Sardar Patel Technology Business Incubator along with All India Association of Industries (AIAI) in Mumbai. India must frame regulations to promote tokenomics as a mainstream avenue for fund raising by 1.2 lakh growth-stage start-ups and MSMEs in the country, who stand to benefit from this funding avenue, according to experts at Cross-Border Startup Summit.
Tokenomics refers to the fragmentation of real-world assets into digital units or tokens, which can then be sold to investors through blockchain platform. This would facilitate fund raising through these digital units or tokens that can be traded just like stocks and bonds in the secondary market.
“At present, tokenomics is a regulatory grey area. We need clear regulation, investor awareness and technology adoption to develop tokenomics in the country,” said Satish Kataria, Co-founder, Fandora, India’s first content Intellectual Property Tokenisation platform.
Companies like Ryzer and Fandora have pioneered blockchain-based tokenized fund raising platform in India for real estate and entertainment sectors. Fandora is a platform where entrepreneurs from entertainment, books, music and sports industries can raise funds by converting their intellectual property into tokens. It is estimated that the market for creative-content based intellectual property in India is at Rs.17,000 crore.
Unlike large corporates, start-ups do not have deep pockets and have to raise funds at regular intervals, for which they can set up structures in foreign countries. However, they need to be wary of regulations applicable for offshore entities, experts said.
Sharing insights on managing regulatory procedures while setting up offshore entity, Ms. Priya Kapasi, Principal Associate, Treelife – a consulting firm said, “When it comes to offshore entity structuring, such as flip or externalization, startups should prioritize gaining a comprehensive understanding of the legal and tax implications involved.
This includes considerations such as Exchange Control Regulations and Transfer Pricing, among others. Thorough research and compliance with both Indian regulations and the regulations of the chosen offshore jurisdiction are also crucial.”
Earlier in his welcome remarks, Dr. Vijay Kalantri, Chairman, MVIRDC WTC Mumbai called for a dedicated ministry for start-up ecosystem, which is facing various challenges such as slowdown in funding, stringent norms of angel taxation and complex procedures for doing business.
Improving ease of doing business, capacity building support for growth-stage startups, easing angel tax norms for genuine startups and effective implementation of government schemes and incentives for startups are needed, Dr Kalantri said.
Pointing out that the global recessionary outlook, rising interest rates in the global market and the uncertainty amidst geopolitical tension are some of the reasons for decline in start-up funding in India, Dr. Kalantri said, “Our start-ups should re-examine their strategy to become profitable instead of focusing on unsustainable growth in turnover.”
Concurring with Dr Kalantri’s view, Mr. Devansh Lakhani, Startup Fundraising expert & Director, Lakhani Financial said, “Byjus, Pharmeasy, Ola, Pinelabs, Swiggy all have got their valuation marked down by approximately 30% which shows investors want to back only profitable startups and not loss making ones.”
Speaking on this occasion, Vikram Pandya, Director- Fintech, S P Jain School of Global Management pointed out, “Lack of product market-fit, me-too (copied) business models, increasing competition, highly price sensitive market resulting in razor thin margins and lack of R&D-led innovation are some of the reasons behind high startup mortality rate in India.”
Pandya suggested, “Government should nurture entrepreneurship culture, add that as a topic in education, increase R&D in emerging technologies and make funding more accessible.”
Shrikant Patil, CEO & MD, DigiAlly outlined the importance of product-market fit to develop right product for the right customer segment at sustainable cost. “Start ups must invest in constant customer validation, strategic digital partnerships and developing cultural sensitivities as critical foundation to build correct Product Market fit (PMF).
While large corporations may have ability absorb these misalignments and start over, for start ups and SMEs, PMF is a survival game – especially when the scrutiny from investors has tightened in the recent past.”
In conclusion, the discussion at the Summit revolved around strategies for startups to overcome the current slowdown in funding by re-evaluating their growth strategy, making course corrections (wherever required), identifying the right customer segment, adopting appropriate structure for their offshore business presence and so on.
The summit was attended by start-up founders, investors, start-up mentors, coaches, financial institutions and other ecosystem players in the start-up industry.