India is often described as “the poster child of emerging markets” for its vast commercial potential for startups. In a country with a population of nearly 1.3 billion people, even niche products can have significant market potential. In the 1990s, economic reforms moved India towards a more market-based economic system. Startups in India as in many other parts of the world, have received increased attention in recent years. Their numbers are on the rise and they are now being widely recognized as important engines for growth and jobs generation. Through innovation and scalable technology, startups can generate impactful solutions, and thereby act as vehicles for socio-economic development and transformation.

The COVID-19 outbreak not only brought the global economy- it exposed the inadequacies of the developed world’s health systems in addressing fast-spreading pandemics. The pandemic has caused what is being called a structural shift for digital healthcare in many countries, including India. The current situation prescribes that it is time for India to reboot healthcare and support healthcare startups for closing the gaps in the traditional healthcare system.

Health-tech is the fastest-growing sector in the healthcare world. Health-tech, the term itself encapsulates this evolution, clearly referring to the intersection between healthcare and technology. The ever-evolving startup culture and faster adoption of new-age technologies like cloud computing and artificial intelligence (AI) have catalyzed the growth of health-tech startups in India. These startups facilitate medical procedures by marrying traditional practices with modern technologies. Such ventures are increasingly becoming popular in India as telemedicine, and online delivery of healthcare facilities help them tap a larger market base.

In India, the health-tech market can be broadly divided into

• Telemedicine – it is the platform where the medicine is combined with technology to provide healthcare services remotely.
• E-pharmacy – an online marketplace where the patient can order medicines, health products and can get them deliver at their doorsteps.
• Healthcare and IT analytics – Healthcare organizations may use SaaS (Software as a Service) and other Cloud solutions to manage and access resources, patient records, data, and healthcare infrastructure.

GOVERNMENT OF INDIA STAND

Indian government plans to fabricate an ecosystem that advances entrepreneurship at the startup level and has taken various activities to guarantee that the entrepreneurs get suitable help.

Digital India is an activity drove by the Indian government to guarantee that government services are made accessible to each resident through online platform. In July 2015, the PM declared the Digital India activity that plans to interface provincial territories by building up their advanced framework. This converts into a great business opportunity for startups. Online based companies in India have been wanting to go into India’s rural region as part of the governments initiative.

DATA PRIVACY IS A GROWING CONCERN FOR MORE CONSUMERS

We have accepted a lot of terms and conditions on various apps but have we ever read them? Many of us have not, to be honest. In these terms and conditions, they always ask for permission to collect our personal data? Like they ask for our location, contact information, storage access, and so on. Through these permissions, they monitor whatever we do on our devices and collect that data. For example, we search something on Google, Instagram, other social media apps start showing us the ads or promotion pages related to our searches. Likewise, other apps also do this. Across multiple apps and websites, for a smooth, better, and user-friendly experience, this data is used to train AI algorithms.

Even though it is done for the user’s benefit this comes at the cost of data privacy. Sometimes this data is collected only to be sold to third parties by the companies. Moreover, this data is at the risk of getting stolen by exploiting loopholes.

HOW DO YOU PROTECT YOUR DATA AND IDENTITY ONLINE?

Now the concern is that how to keep your data safe and protected. Apart from data protection rules that binds an application or website, the user must ensure few things for better safety. Such measures include:

• Staying away from apps not available on Play Store or App Store (iOS).
• Not entering information without checking the credibility of the app or site.
• Clearing cache and cookies regularly.
• Inspecting what permissions, we are giving them to access and process our data.

These are some of the things that a user can do from their end for data protection. But actual data protection lies in the hands of the government and the developers.

THE LEGAL AND REGULATORY FRAMEWORK PERTAINING TO DIGITAL – HEALTHCARE IN INDIA

It is the primary duty of a government to protect its people and keep their personal or even public data safe. Governments of different nations have different policies regarding data privacy and protection. Like in the USA, each state has its own rules regarding data protection. Apart from abiding by government rules and regulations, the developer also takes measures to protect a user’s data.

With the outbreak of the COVID-19 pandemic, many developing countries including India are on the cusp of a digital revolution. Further, as part of its Digital India Mission, the Indian Government recognizes the issue of cyber security and the need for robust laws to protect digital data. An important step in this direction is the proposed Digital Information Security in Healthcare Act (“DISHA“), which seeks to provide for electronic health data privacy; confidentiality, security and standardization; and establishment of National Digital Health Authority and Health Information Exchanges.

• Digital Information Security in Healthcare Act (“DISHA”)

DISHA lays down provisions that regulate the generation, collection, access, storage, transmission and use of Digital Health Data (“DHD“) and associated personally identifiable information (“PII“). DISHA states that health data including physical, physiological, mental health condition, sexual orientation, medical records, medical history and biometric data is information that can only be the property of the person it pertains to.

• DHD is an electronic record of health-related information about an individual and includes information relating to an individual’s physical or mental health; donation by the individual of any body part or any bodily substance, etc.
• PII is defined as any information that can be used to uniquely identify, contact or locate an individual specifically or along with other sources. This includes information such as name, address, date of birth, vehicle number, financial information etc.
• The legislation creates a central regulator called the National Electronic Health Authority (NeHA), and various State Electronic Health Authorities (SeHA) to give effect to the provisions of DISHA.
• It covers within its ambit clinical establishments (which includes hospitals, nursing homes, dispensaries, clinics, sanatoriums and pathology labs) and any other entity that collects DHD.
• DISHA has proposed stringent penalties for defaulters in the nature of fine and/or imprisonment.

Challenges to implementation of DISHA

The most serious issue with data collection and sharing will be how to obtain informed consent from a data owner. Another concern will be effective enforcement of the provisions of DISHA, given that the costs involved in implementing security solutions may become a drain on resources for clinical establishments.

Electronically stored data is vulnerable to security breaches and therefore comprehensive and technology driven data security measures would need to be adopted. Sensitization and protection of people’s right to privacy and security of their data will be the bedrock of DISHA.

• Personal Data Protection Bill 2019

The Government of India had introduced the Personal Data Protection Bill 2019 (PDP Bill) in the Lok Sabha on 11 December 2019.

The “PDP Bill 2019” which defines both Personal and Non-personal Data, is a substantive framework which introduces a specialized regulatory approach for the Protection and Privacy of Data in any form (digital or non-digital) in India. The proposed legal framework would be applicable to processing, storage and transfer of any form of personal data across sectors of the economy, academia, industry and the society. The Bill has also limited provisions relating to Non­Personal Data (NPD).

The key recommendations made by the Joint Parliamentary Committee in their report:

• The “Bill” will apply only to data collected, stored and processed in digital form.
• The JPC has recommended that all the data has to be dealt with by one Data Protection Authority (DPA). JPC have proposed to change the name of Bill to “Data Protection Bill”.
• JPC has recommended that all social media platforms, which do not act as intermediaries, should be treated as publishers and be held accountable for the content they host.

• The Information Technology Act, 2000, and the Information Technology Rules, 2011

Digital health involves a constant exchange of information between the patient and the service provider. This information is termed Sensitive Personal Data or Information (SPDI).Before a doctor or an institution does anything with the data, the patient’s written permission needs to be obtained.

The IT Act, 2000 does not apply to digital health services in such circumstances, the service provider would be classified as an intermediary under the Intermediary guidelines and IT Act . An intermediary is not liable for third-party content hosted by the intermediary if the intermediary’s role is limited to providing access to a communication system over which information is hosted or stored, and the intermediary has followed the due diligence requirements outlined in the IT Act.

The constitutionality of the Intermediary Guidelines and Section 79 of the IT Act was challenged before the Supreme Court in the case of Shreya Singhal v. Union of India (2015), stating that these provisions were vague, broad. The Supreme Court interpreted Section 79 of the  Act and the Intermediary Guidelines to indicate that the intermediary must receive a court order or communication from a government agency ordering it to remove the particular content. The court further noted that any such court order or notice must fit within the scope of Article 19(2)’s reasonable limitations, implying that any removal must be legal.

CONCLUSION

Data analytics and predictive healthcare will become more accurate as healthcare data becomes more extensive. While both the bills that is DISHA and the PDP Bill have not been passed by the Parliament and await enactment, it shall be interesting to see the shape and form in which they are both enacted. These bills will change the shape of data protection (personal or health data) in India making it more in tune with global standards. While the present law in terms of protection of health or personal data is more generic in nature, the bills bring out additional responsibilities on the data collector with stringent fines and penalties for non-compliance of such responsibilities which need to be properly assessed once these bills become law.

References:

2019. “Pradhan Mantri Gramin Digital Saksharta Abhiyaan”, accessed September 4, 2019.
2020. NASSCOM, “Indian Tech Start-up Ecosystem, Approaching Escape Velocity,” 2018.

• https://www.mondaq.com/india/privacy-protection/1161678/personal-data-protection-bill-2019–key-highlights-of-reports-of-joint-parliament-committee-jpc

INTRODUCTION

Seed funding or seed-stage funding is a very initial investment. Generally, investors often get an equity stake in exchange for the capital invested. In case the founders use their savings to start up a business, it is called bootstrapping. On the 16th of January 2016, the Government of India introduced the Start-up India Seed Fund Scheme in order to create possibilities for entrepreneurs to grow their businesses. Our esteemed Prime Minister, Mr. Narendra Modi, made the announcement to establish this scheme. Financial help of up to Rs 50 lakh would be provided to entrepreneurs at an early stage through incubators under this scheme. This scheme has a budget of Rs 945 crore set aside by the government. Proof of concept, prototype development, product trial, market entry, and commercialization will all be covered by this fund. The government will offer funding to incubators via this programme. The incubator will be in charge of constantly giving these funds to the company. 3600 entrepreneurs through 300 incubators will benefit from the start-up India seed fund scheme in the next 4 years. The government will award a grant to 300 incubators under the Start-up India Seed Fund Scheme 2022. This scheme would provide up to Rs 50 lakh in funding to the start-up. Through the official webpage, incubators can apply for funding under the Start-up India seed fund scheme. The government would provide them with a seed fund after confirming their application. Start ups can also apply for this plan directly through the portal, where they can choose from a list of incubators based on their preferences.

OBJECTIVE OF SISFS

The Start-up India Seed Fund’s major goal is to provide cash to entrepreneurs for their firms so that they can build their businesses. Entrepreneurs no longer need to resort to banks or financial organisations to receive cash for their business ideas thanks to this scheme. They can apply for cash directly from the government by using this scheme. The Start-up India seed fund concept will meet early funding needs at the right moment. So that product development, trials, market introduction, and other activities can occur at the appropriate time. This programme will also create a lot of jobs and validate start-up business concepts.

 FEATURES OF THIS SCHEME

• In the next four years, it expects to support 3,600 entrepreneurs through 300 incubators.

• DPIIT will appoint an Experts Advisory Committee (EAC) to oversee the Scheme’s overall implementation and monitoring.

• Grants of up to Rs.5 crore would be given to the committee’s chosen suitable incubators.

• Start-ups will receive subsidies of up to Rs.20 lakh from the selected incubators for validation of proof of concept, prototype development, or product trials.

• Start-ups will be given up to Rs.50 lakh in convertible debentures or debt-linked instruments to help them enter the market, commercialise their products, or scale up.

ELIGIBILITY CRITERIA OF SISFS

FOR START-UPS:

• DPIIT should recognise the start-up.

• The start-up must have been founded within the last two years at the time of application.

• The start-up must have business ideas in order to build a product or service that is marketable, scalable, and commercially sustainable.

• According to the businesses act of 2013 and SEBI regulation 2018, the Indian promoter’s equity in the company must be at least 51 percent or more at the time of application to the incubator for the scheme.

• No support of rupees ten lakh or more should have been given to the company under any Central or government scheme.
• Start-ups developing new solutions in areas such as water management, waste management, education, agriculture, food processing, and so on will be given priority.
• In order to solve the problem that is being targeted, the firm should include technology into its primary product or service.

FOR INCUBATORS:

• It is necessary for the incubator to be a legal entity.
• The central or state government must aid the incubator.
• At the time of application, the incubator must have been operating for at least two years.
• The incubator must be able to accommodate at least 25 people.
• At the time of application, the incubator should have at least 5 businesses undertaking physical incubation.
• In the incubator, a full-time chief executive officer with experience in business growth and entrepreneurship should be provided, as well as a skilled staff.
• The incubator is ineligible if it receives funds from a third-party private entity for the incubates.
• If the incubator is not supported by the central or state governments, it must have been in operation for at least ten years, have submitted audited yearly reports for at least two years, and have at least ten unique companies undertaking physical incubation at the time of application.

PROCEDURE TO APPLY FOR SISFS

FOR INCUBATORS:

• Go to the official website and the home page will be seen before you.
• The company will have to click apply now and under that choose incubators.
• The company then needs to create an account by providing basic details such as contact info, id proofs, company name, country, etc.
• Now after creating an account you have to apply for the seed fund scheme and by clicking on that your application form will appear.

• The company has to enter all the required details in this application form like general detail, incubator team detail, incubator support detail, fund requirement details, etc.

• Upload necessary documents and submit it and by this you can apply under SISFS.

FOR START-UPS:

• Go to the official website and the home page will be seen before you.
• The company will have to click apply now and under that choose start-up.

• After that application form will appear before you.
• In this application form have to enter all the required details like your name, email address, mobile number, etc.
• After that, you have to upload all the required documents.
• Now you have to click on submit.
• By following this procedure you can apply as a startup under the startup India seed fund scheme.

OTHER RELATED INITIATIVES BY GOVERNMENT FOR START-UP FUNDING

• Start-up Innovation Challenges: This is an excellent opportunity for any start-up to expand their network and raise funds.
• The National Start-up Awards: aims to recognise and reward excellent entrepreneurs and ecosystem enablers who are fostering innovation and introducing competition into the economy.
• SCO start-up forum: The first-ever Shanghai Cooperation Organisation (SCO) Start-up Forum was inaugurated in October 2020 with the goal of cooperatively developing and improving start-up ecosystems.
• The ‘Prarambh’ Summit intends to create a venue for start-ups and young minds from all over the world to come up with new ideas, innovations, and inventions.

CONCLUSION:

SISFS led by government of India is a great way for start-ups to get funds they need for their business development. Earlier there was no scheme for start-ups but as time moved and there was a wave of start-up companies coming up which had good ideas and models but no money to fund it, the government took the charge and is trying to fund as much start-ups it can.

REFERENCES:

• SISFS Seedfund.startupindia.gov.in, https://seedfund.startupindia.gov.in/.
• Startup India Seed Fund Scheme 2022: Apply Online, Eligibility & Benefits PM Modi Yojana, https://pmmodiyojana.in/startup-india-seed-fund-scheme/#Eligibility_Criteria_Of_Startup_India_Seed_Fund_Scheme.
• https://www.godigit.com/guides/government-schemes/startup-india-seed-fund-scheme-sisfs.

Introduction to startups

A startup is a basic, recently formed organisation that might take the shape of a small firm, a partnership, or a small enterprise with the goal of rapidly expanding a new business model. In other terms, a startup is a fresh, young firm that tries to establish a revenue-generating business model through a dynamic strategy. A startup usually starts with the production of a Minimum Viable Product (MVP), also known as a prototype, to evaluate and create a new endeavour or business technique.

Entrepreneurs also do research and testing in order to have a better understanding of innovations, developments, ideas, market concepts, and commercial possibilities. A shareholder’s agreement (SHA) is therefore required as a first step to validate the ownership, dedication, and contributions of the founders and investors. India is the world’s third-largest business centre, having a flourishing market for a diverse range of goods. However, India’s startup failure rate is exceedingly high. Moreover, 90 percent of startups in India are compelled to close their doors owing to a number of circumstances. The number of startups in India is expanding as individuals become more engaged in business and increased government programmes and working conditions are creating a great climate for enterprises to develop and prosper.

The Startup Ecosystem

Many Indian startups have emerged, particularly in the last couple of years, building optimised businesses (considerably innovation) to overcome a variety of problems we face in everyday life, especially now that India is taking centre stage in global markets due to its high productivity and restructure requirements, capturing value, and large market.

The main characteristics of a start-up company are that it will have no previous history, that its functions have not yet reached a stage of commercial operations, that it will have marginal profits with relatively high losses, that it will have limited promoter capital infused with a high reliance on external sources of funds, and that its investment decisions will be volatile. Investors are worried about when and if enterprises will become lucrative, thus startup funding has dried up.

Characteristics of Millennial Businesses:

Young organisations, as we discussed in the previous part, are various, but they share a few traits. In this part, we’ll focus on those shared qualities and take a deeper look at the valuation difficulties they raise.

●       Functional losses, negligible or no profits: The scant history offered for fledgling enterprises is rendered even less useful by credible indicators that they may have a marginal running factor. For start-up enterprises, revenues are often minimal or non-existent, and expenditures are frequently linked with keeping the business up and operating rather than generating sales. When used together, they result in severe productivity losses.

• Reliance on private equity: In certain cases, emerging businesses rely on non-public equity resources rather than public markets. The progenitor generates practically all of the equity in the early phases (friends and circle of relatives). The demand for extra cash develops as the potential of future success grows, and venture capitalists become a source of equity capital in exchange for a stake of the corporate entity.

• Statements with multiple values: The recurring strikes made by young companies to build value expose value to possible investors, who are always first, to the risk that deals given to succeeding value financiers would erode their confidence. In order to protect their assets, value financial specialists in young companies frequently seek and obtain protection from this outcome as the first demands on monetary standards from investments and in liquidation, as well as ownership or control privileges allowing them to have a say in the company’s activities. As a result, unique value commitments in a young firm will differ depending on a range of circumstances that influence their value.

• Investments have a liquidity problem: In non-institutionalized systems, ownership assets in nascent enterprises are frequently significantly more volatile than investments in their free-market counterparts.

• There are no financial records available: If the option of vocally communicating the clear moral exists, younger businesses have a more muted setting. Many of them only have one or two years’ worth of operational and financial data, and just a tiny percentage have financials for a single year’s worth of time.

Methods to value startups

The three most frequent ways to valuing mature organizations are the Asset Approach, Income Approach, and Market Approach. These methodologies, on the other hand, are not very effective for evaluating start-ups since they frequently have insignificant sales or EBITDA indicators, limited history, no meaningful comparables (at their stage), and long-term income/cash flow predictions are difficult to calculate.

The Venture Capitalist Method, the First Chicago Method, and the Adjusted Discounted Cash Flow Method are three methods for valuing companies.

●       Venture Capital Method: Venture capitalists who are looking to invest in start-up enterprises frequently adopt the Venture Capitalist Method. The key question is how much stock the VC should be obliged to get in return for its investment.

Consider the case below: For a five-year period, a venture capitalist (VC) is ready to invest $1 million in a nascent technology company. The business is reported to be worth $2 million each year. Year 5 net profits and the company equivalent are worth a 10x price earning (PE) amount, and the venture capitalist is aiming for a 20% return on its investment.

●       First Chicago Method: The value of a startup is estimated utilising comparable firms’ substantial quantities in this method (based on existing or exit year financial metrics). The first Chicago approach evaluates three business scenarios: Performance, Loss, and Sustainability, and assigns likelihood to each event based on the company’s stage and statistical factors to arrive at the weighted average value.

To summarise, judgement and qualitative elements such as the founders’ and co-founders’ experience, competence, and passion, the business strategy, the scaling potential of the firm (with or without technology), the competitive landscape, and current traction all affect start-up value. Startup enterprises sometimes operate in the pits of hell, which necessitates assessing the odds of success and failure. Startup valuation is more complicated than traditional valuations in various respects since it frequently requires the validation of the business model. The valuer’s experience is critical in establishing the value because everything in a company is motivated by the future.

●       Method of Adjusted Discounted Cash Flow: DCF (discounted cash flow) is a method of calculating an investment’s profitability based on projected future revenues. The goal of a DCF analysis is to evaluate the current value of an investment based on possible predictions of how much money it will generate.

This includes budgetary control and operational expense actions taken by company owners, such as developing a major factory or buying or renting new equipment, as well as investment choices made by investors in businesses or shares, such as purchasing the company, investing in a technology startup, or purchasing a stock.

The goal of DCF study is to determine how much profit an investor will make after taking into account the time value of money. The temporal value of money states that a dollar now is worth more than a dollar tomorrow because capital may be allocated. As a result, a DCF test is appropriate in any situation where a person is paying money now with the expectation of receiving more money later.

Investors Point of View

The following are the most often asked questions that every investor has on their mind:

1.   How much should I be willing to pay for this kind of income?

2.   Is a substantial return on investment (ROI) attainable to justify the risk I’m taking?

Until 2015, the values of Indian virtual shops and e-Commerce businesses were inextricably linked to the soaring valuations of US digital start-ups, and shareholders were concerned about missing out. For appraising their company, online shopping companies adopted a standard measure. The net sales value of items sold by a marketplace for a certain period is referred to as “GMV.” GMV, on the other hand, is not reported on their financial statements, and genuine sales account for just a percentage of GMV. The GMV or revenue (as stated on the financial statement) is multiplied by a multiple to arrive at the entity’s valuation (x times).

The law of decreasing returns applies

Regulatory Changes

Market value has long been considered as an activity or a method in India, and it accounts for a substantial share of the cases in Mergers & Acquisitions (M&A) since it involves an element of subjectivity that is frequently questioned. In many circumstances, values lack standardisation and generally acknowledged worldwide valuation procedures, particularly in India, where there are no defined criteria for company valuation for unlisted and private enterprises. In India, there is also a wealth of judicial information on the subject. Furthermore, the lack of a definite plan of operation, as well as any regulation under any legislation, is producing several narrative points.

The Companies Bill of 2011, which defined the concept of a Qualified Valuer, also acted as a means of allowing fair valuation in businesses, highlighting the necessity for trained valuers to standardise valuation methods in India, resulting in increased efficiency and accountability.

The Institute of Chartered Accountants of India (ICAI) has proposed Business Valuation Practice Standards (BVPS) to define uniform principles, methods, and protocols for valuers delivering valuation services in India.

Conclusion

Though valuation methodologies may be used to assess a company’s worth analytically, this value is still subjective, dependent on buyer and seller preferences and future negotiations, and expert opinion is an essential dimension of evaluating value. Valuation becomes more of a practise based on the valuer’s industry experience rather than a procedure based on analytical research and frameworks when there are no enterprise valuation criteria. The National Association of Certified Valuation Analysts (NACVA), the Canadian Institute of Chartered Business Valuators (CICBV), the American Society of Appraisers (ASA), the Institute of Business Appraisers (IBA), the valuation standards of the American Institute of CPAs (AICPA), and the ICAI valuation standard all regulate business valuations on a global scale. Nonetheless, due to financial market requirements, the developing world economy, and the shifting structure of financial statements, the creation of valuation practise as a discipline and practise has become a requirement in the current framework due to the increasing importance of valuation in financing and industry decisions, as well as in compliance requirements procedures.

References

• https://www.researchgate.net/publication/341808772_Indian_Startups_Analyzing_Their_Vulnerabilities_and_Prevailing_Challenges
• https://www.researchgate.net/publication/338229862_Valuation_of_a_startup_Moving_towards_strategic_approaches
• https://taxguru.in/company-law/valuation-startups-raising-funds-companies-act-2013.html
• https://www.investopedia.com/terms/d/dcf.asp
• http://www.corporatevaluations.in/research-article/new-start-up-valuation
• https://www.mondaq.com/india/corporate-and-company-law/203572/an-insight-into-business-valuation
• http://people.stern.nyu.edu/adamodar/New_Home_Page/littlebook/youngrowth.htm
• https://www.techopedia.com/definition/27809/minimum-viable-product-mvp
• https://www.investopedia.com/terms/s/shareholdersagreement.asp

Introduction

This article defines an evaluation agreement and explains why it is critical for start-ups. However, the significance of evaluation agreements is not limited to start-ups; it also extends to the start-ups’ potential clients. The article outlines the many provisions that make up an Evaluation Agreement and demonstrates them using a sample clause.

What is an Evaluation Agreement?

It is a pact reached by two or more parties. The parties agree to test and assess a new product or service offered by one of the he terms of the agreement. The agreement’s objective is to evaluate the product or service in question, and if the findings of the evaluation are positive, further talks are held to parties under expedite the product’s sale or subscription. Time and scope constraints apply to such agreements. Time, because the review will be completed in a short period of time, usually a couple of months. Scope, because throughout the evaluation phase, the product given for review is empty of certain of its capabilities.

Why does start-up need Evaluation Agreements?

There are two main reasons for the same:

Getting new customers and pushing the sales numbers:

It is difficult for start-ups to promote their products to potential clients because they have little to no market recognition. The majority of potential customers are hesitant to use new software, especially if it has only been lab-tested. Customers can see and feel their degree of comfort and compatibility with the product given through the Evaluation Agreement, which provides a trial run for such software. If the trial run goes well, both parties will find it much easier to negotiate and facilitate the final transaction.

Testing of the waters

As previously said, most software is developed and tested in a lab environment, and its interaction with real-world conditions is typically unpredictable. A trail run given by the Evaluation Agreement is a critical feedback tool for any new software start-up. This ensures that the start-up has enough room to solve any defects in their product as well as make necessary revisions in response to a potential customer’s specific needs.

Why are companies interested in such agreements?

1. To check whether the product offered is a good fit

Every company faces its own set of problems and challenges. Companies need inventive products to combat them. These items are typically created by new start-ups that have yet to establish themselves. Furthermore, the organisation is unsure whether the product being offered is the right fit for the challenge it is facing. By signing an Evaluation Agreement, the firm is able to evaluate the product and determine how much faith it can have in both the product and the start-up that is providing it.

2. Pursuit of potential avenues for investment

Businesses are seeking for new and unexplored business opportunities in addition to tackling difficulties they are currently facing. A start-up firm usually has the potential to grow exponentially. A corporation will invest in a start-up if it discovers that it has the right idea, the proper execution of that idea, and the right personnel to execute that idea. The Evaluation Agreement assists the organisation in making such a determination.

Types of Evaluation Agreements

Broadly, Evaluation Agreements are of two types:

 1. Short evaluation

There is no purchase/license clause in these agreements. This means that once the evaluation period has ended, the other party will not be able to purchase the software. The parties can choose between two choices. Either the two parties go their separate ways, or they come together to discuss the terms of the start up’s software purchase.

2.Long evaluation

These agreements do include a purchase/license clause that allows the other party to keep using the product after the evaluation period has expired. The purchase and licence clause are the most important portion of the contract. As a result, even before the evaluation time begins, the entire agreement, including the terms of software acquisition, has been fully negotiated. As opposed to Short Evaluation, there is no compelling need to renegotiate the terms at the end of the evaluation period.

Important clauses in an Evaluation Agreement

Some of the most important clauses under an evaluation agreement:

1. Purpose of the evaluation

This is usually found as part of the agreement’s recitals or as a separate section immediately following the Recitals. It specifies the evaluation’s goal, the items and services that are being evaluated, and the goals that the given products and services are attempting to achieve. It also limits the agreement’s scope by limiting how the product can be used by the intended customer.

2. Intellectual property (IP)

• Define what “intellectual property” means in the context of the agreement;
• Define what “intellectual property” means in the framework of the agreement;
• Define what “intellectual property” means in the context of the agreement;
• Define what “intellectual property” means in the
• Make the preceding definition as inclusive as feasible;
• Clearly identify who owns the Intellectual Property.
• Make it clear that the other party does not own the Intellectual Property in question and will have no rights to it after the evaluation time ends.

This is also the clause where the start-up can inculcate all feedback, results, and any other relevant data to be part of the IP. This way the other party becomes duty-bound to revert back such important information to the start-up. Another addition can be an explicit statement declining any share in profits to the other party which has accrued as a result of the above-stated feedback. Most importantly, this section protects the IP of the start-up. The other party gets barred from using or copying the software in any unauthorized fashion.

Return of IP and confidential information

The IP must be returned and all private information must be destroyed following the examination, according to this rule. It’s important to remember that the Confidentiality Clause will remain in effect even if the agreement is resolved. Rather, it will bind all of the parties to the agreement long after it is terminated.

Term of evaluation

This is a straightforward clause. It specifies the start and end dates of the evaluation period. In common language, such a period begins on the agreement’s effective date and ends on a date set forth in the agreement.

Expenses

Who is responsible for any expenses incurred during the evaluation? What will be the method of payment for these costs? When will these bills be paid? This clause provides answers to all of these questions.

Evaluation and review of the process

This clause specifies who will conduct the evaluation and if the review will be supervised by a representative of the start-up. It can also specify the forms and data that must be kept in connection with the evaluation. Such forms and files are critical for a start-up since they provide crucial feedback.

Disclaimer and limitation of liability

These contracts feature a purchase/license clause that allows the other party to continue using the product after the evaluation term has ended. The most significant part of the contract is the buy and licence clause. As a result, even before the review period begins, the complete agreement has been thoroughly negotiated, including the terms of software acquisition. There is no pressing need to renegotiate the terms at the end of the review period, as there is with Short Evaluation.

Conclusion

Evaluation Agreements are a boon to start-up businesses. They are a safety net for start-ups in that they allow them to share their intellectual property without the fear of their IP getting stolen. Start-ups also get invaluable feedback from potential customers. Yet, as indispensable as these contracts seem to be, they are in no way easily negotiated. Small start-ups might face a great deal of resistance from companies in terms of the restrictions on use. Still, the Evaluation Agreement will inevitably play a larger and greater role in the coming years for software start-ups.

References

https://www.wipo.int/edocs/pubdocs/en/licensing/903/wipo_pub_903.pdf

https://www.forbes.com/sites/allbusiness/2018/03/29/a-guide-to-venture-capital-financings-for-startups/?sh=24a5f36551c9

https://www.wipo.int/about-ip/en/universities_research/documents/ip_toolkit/model_agreements.docx

Introduction

As we all know Covid has created a lot of uncertainty in India, like losses of jobs, health risk, etc, and this year’s budget has proven a ray of hope amid the dark clouds of Covid. This year’s budget has focused on four pillars, productivity, financing investments, climate action, and PM Gati Shakti Plan.

Yes, by looking at the data we can see that the fiscal deficit is higher that is 6.9% for 2021-2022 and 6.4% for 2022-2023, and capital expenditure has increased by 35%, but instead of grieving on the increasing deficit, it is necessary that more efforts are being put on digitalization of education, currency, passports, growth of start-ups and small businesses, infrastructure, etc. Can we say that this budget will be ideal, no nothing can be ideal, because the budget for the year 2019-20 has also been made for increasing the growth and economy of the country, but then we got hit by Covid, which was not expected by anyone, so no we can’t say this year or the coming year’s budget will go as planned, as we can say what will happen in future, all we can do is to make efforts and by looking at some highlights given below, we can see that Government is doing a good job at making efforts.

Highlights for Start-ups, Small businesses, and Manufacturing Companies

1. India will not ban digital assets; last year it was in reports that Govt could ban all forms of Cryptocurrency, NFT, non-refundable tokens, assets like bitcoin or Ethereum. India doesn’t have a law to regulate them yet, Digital Assets will be taxed at the rate of 30%. Any income from the transfer of any virtual digital asset shall be taxed at the rate of 30%. If you make profits by investing in crypto or if you transfer these assets to another person you will pay a tax of 30%. Any loss incurred from such transfers cannot be set off against any other income or carried forward to subsequent years. This move of the government will be good and will be bad, good that these assets will not be banned and bad for investors that they will pay 30% tax. A gift of virtual digital assets is also taxable and from the 1st July 2022, on payment of consideration to a resident when the transfer is made for the virtual digital asset, this transfer will be subject to 1% TDS.
2. India is getting its Digital currency; the Reserve Bank of India will issue it in the new financial year that is 2022 to 2023. Introduction of Central Bank Digital Currency will give a boost to the digital economy. It will lead to a more efficient and cheaper currency management system.
3. No change in Income tax rates. You will be paying the same income tax as last year. A small change brought is how you file those tax returns, you can now file the updated return within 2 years of the assessment year, but they will have to pay a 25% penalty on tax and interest due if it is filed in the year after the assessment year, and a 50% penalty in the second year.
4. Tax Incentive to start-ups extended for a year, it is said by Finance Minister that Start-ups have emerged as drivers of growth for the economy. The budget has announced that eligible start-ups established before 31st March 2023 will be given tax incentives for three consecutive years out of 10 years from incorporation, earlier a three-year tax incentive was available to the start-ups established before 21st March 2021. It is said that the extension of tax benefits will further strengthen the business ecosystem of the country.
5. This year’s budget has also extended the last date or period of starting of manufacturing and production by eligible new manufacturing domestic companies, to 31st March 2024, earlier the date was 31st March 2023, this will give them another year to have an option to pay tax at 15% (without claiming any deductions).
6. Room for Startup India Seed Fund Scheme in Budget, The government has allotted Rs 283.5 crore for the Startup India Seed Fund Scheme in the Budget 2022-23, which is greater than the Revised Estimate of about Rs 100 crore. The government has set up a Fund of Funds for Startups (FFS) with a corpus of Rs 10,000 crore. The budgetary allocations for the Fund of Funds for Startups stood at Rs 1,000 crore. The Small Industries Development Bank of India (SIDBI) is the operating agency for the FFS. According to the Budget documents, the allocation for the Startup India program has been increased to Rs 50 crore for 2022-23 from the Revised Estimate of Rs 32.83 crore in 2021-22.
7. Push for Promotion of drones through start-ups, in the Budget 2022, Finance Minister announced that with the help of start-ups several steps will be taken to promote the drones, the mission is called ‘Drone Shakti’ using different applications and Drone-as-a-Service (DrAAS) and this mission’s goal is to make India a drone hub by 2030. There is something called Kisan Drones, they will be encouraged for crop assessment, spraying of insecticides and nutrients on fields, and land records will be put into digital records that is the digitization of land records. And there will be a requirement of skill for using these drones, and for this, courses on drone skills will be given in selected Industrial Training Institutes in various states. For providing digital and hi-tech services to farmers, a scheme will be launched through the Public-Private Partnership mode.
8. The Emergency credit line for MSME has been extended till March 2023, in total 5 lakh crore is available for such firms. The emergency Credit Line Guarantee Scheme had earlier provided additional credit to more than 130 lakh MSMEs. The Govt has extended the scheme by 50,000 crores and now this scheme will provide a total cover of 5 lakh crore. Centre said that Credit Guarantee Fund Trust will be improved by infusion of funds for MSMEs; this will provide additional credit of 2 lakh crore and will result in more job opportunities.
9. Major connectivity push, India wants to spend big on infrastructure, 20,000 crore rupees, it is Prime Minister’s Gati Shakti Plan, to facilitate faster transfer of goods, speed up cargo movement and to improve logistics network. This money will be spent on roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure. The biggest spending will be on national highways. In the next 3 years, India wants to build 400 new trains and 100 carbo terminals. India plans to spend a whopping 100 billion dollars on infrastructure and it is 35% more than 2021 and double what India had spent before the pandemic. And this a direct spending, it means govt will foot the bill for all these projects.
10. Boost for Make In India in Defence, there is a marginal increase in the defense budget, the allocation this year is 5.25 lakh crore rupees, which is more than 60 billion dollars, which is an increase of almost 5% from last year. The bulk of the budget will go to Indian Manufacturers, 68% of the procurement will happen from domestic players, 25% has been set aside for research and development.
11. Up-gradation of Indian Passports, Starting this year, Indians will be issued E-passports. There was the first announcement in 2019. So far the 20,000 officials and diplomats have been issued e-passports and now we will be able to get one. How will this passport be different? These passports come with a chip, a small silicon chip embedded on the back of the passports and this chip will contain all the necessary information, like your name, address, passport number, and data of your last 30 visits. More than 100 countries have such passports.
12. Upgrading India’s Mobile Network, 5G is coming in 2023. Spectrum will be auctioned this year. India also wants to become a hub for 5G manufacturing. Incentives have been announced for equipment makers and there is also a proposal to bring internet to Indian villages. The Govt. is also going to award contracts to lay optical fiber cables around the country.
13. Digital Education, this topic is getting a major push in this budget. India plans to develop a Digital University, the Finance Minister said it will provide students with world-class education. There is another proposal called E-Vidya, under this, the Govt of India had earlier set up 12 TV channels to teach students and now this will be expanded to 200 channels. The idea is to provide supplementary education in different regional languages.

Conclusion

As from the above-mentioned highlights from the Union Budget, you can see that from the first two points that even though there is no law to regularize digital assets, efforts have been made to legalize them in India and soon India will issue its digital currency, digital university, E-Vidya, another year given to start-ups and new manufacturing companies for tax incentive all these shows signs of growth and skill enhancements.

Some people will argue that no direct relief has been given to the salaried and middle-class people in the form of tax so that they can survive inflation, the impact of Covid on income and jobs, our finance minister well said in this aspect that “There are times when you can give relief and there are times when you have to wait a big longer”. There will be many people in the country who will criticize these points in the budget, but they should remember that we are a developing country and all the sectors are like bars in the bar graph, some bars will go up and some bars will look the same as earlier, but it doesn’t mean the growth is stagnant. For the year 2022, India’s GDP is projected at 9.2 percent, if all pieces fall in the expected places, then I think India can achieve its goal.

References

https://www.financialexpress.com/budget/cryptocurrency-tax-news-budget-2022-live-updates-tds-rules-crypto-income-taxation-regulation-for-investors/2421636/

https://blog.forumias.com/push-for-promotion-of-drones-through-start-ups/

https://www.aninews.in/news/business/business/union-budget-2022-23-positive-and-growth-oriented-chairman-texprocil20220202174958/#:~:text=The%20Budget%20has%20also%20extended,tax%20of%2015%20per%20cent.

https://www2.deloitte.com/in/en/pages/tax/articles/union-budget-2022-detailed-analysis.html?utm_source=google&utm_medium=cpc&utm_campaign=fi-detailed-budget-feb2&gclid=Cj0KCQiAuvOPBhDXARIsAKzLQ8Gw1WhNgWXwLlqeUbo4afSE3dPU4pc4nFb71rQ4Rvaa01AZBWxWVX8aAlODEALw_wcB