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. The Summit was organized by World Trade Center Mumbai and Sardar Patel Technology Business Incubator along with All India Association of Industries (AIAI) in Mumbai.
Mr. Satish Kataria, Co-founder, Fandora (India’s first content Intellectual Property Tokenisation platform) shared insights on emerging tools for startup funding at this Summit. He said, “Tokenomics is the emerging avenue for raising equity and debt funding or revenue-based funding by start-ups and asset owners in India. At present, this is a regulatory grey area. We need clear regulation, investor awareness and technology adoption to develop tokenomics in the country. Tokenomics refers to the fragmentation of real world assets into digital units or tokens, which can then be sold to investors through blockchain platform. Tokenomics helps various asset owners to raise funds from a broad base of investors, ranging from financial institutions to high networth investors. These digital units are also liquid as they can be traded just like stocks and bonds in the secondary market.”
India has 1.2 lakh growth-stage startups and MSMEs that can benefit through this tokenized fund-raising platform.
Earlier in his welcome remarks, Dr. Vijay Kalantri, Chairman, WTC Mumbai suggested, “India needs 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.”
Dr. Kalantri called for 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.
In his remarks, Mr. Devansh Lakhani, Startup Fundraising Expert and Director, Lakhani Financial remarked, “Byjus, Pharmeasy, Ola, Pinelabs, Swiggy all have got their valuation marked down by approximately 30% which shows investors want to back profitable investors and not loss making ones.”
Speaking on this occasion, Mr. 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.”
Mr. Shrikant Patil, CEO & MD, DigiAlly outlined the importance of product-market fit to develop the right product for the right customer segment at sustainable cost. Mr. Patil remarked, “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 the ability to absorb these misalignments and start over, for start ups and SMEs PMF is a survival game - especially when the scrutiny from investors in tightened during the recent past.”
Start-up entities can also set up structures in foreign countries to raise funding from global investors. However, they need to be wary of regulations applicable for offshore entities. Sharing insights on managing regulatory procedures while setting up offshore entity, Ms. Priya Kapasi, Principal Associate, Treelife advised, “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.”
The summit was attended by start-up founders, investors, start-up mentors, coaches, financial institutions and other ecosystem players in the start-up industry.
In Photo - Dr. Vijay Kalantri, Chairman, WTC Mumbai addressing the audience. Dignitaries on the dais (From left to right): Ms. Rupa Naik, Executive Director, WTC Mumbai; Mr. Shrikant Patil, CEO & MD, DigiAlly and Mr. Vikram Pandya, Director- Fintech, S P Jain School of Global Management.