India has gone on to become the third-largest startup hub in the world and startups are playing an important role in making Indian cities live up to the standards of Silicon Valley. But what is a startup and when does a startup stop being a startup? This depends on various factors.
What constitutes a startup?
According to the Ministry of Commerce and Industry, an entity that is registered as a private limited company as defined in the Companies Act, 2013 or registered as a partnership firm under section 59 of the partnership act, 1932 of a limited liability company under the LLP Act of 2008 in India is called a startup if:
Its period of existence from the date of incorporation is less than 10 years,
Its annual turnover does not exceed Rs 100 crore in a financial year.
It is working towards innovation, development, improvement of products or processes or services.
Or, if it is a scalable business model with a high potential for employment generation or wealth creation.
But should the number of years a startup has been around be a deciding factor, or should it based on growth and profitability?
Some factors that decide when a startup has leaped.
In technical terms, a startup stops being a startup as soon as it crosses 100 crores turnover or ten years of incorporation.
You enter in the corporate culture when your team grows to 50-100 people.
An entity struggling with its business model continues to remain a startup until it decides on a business model they want for the long term.
Once a company has raised angel or seed funding and done two rounds of large venture capital or private equity investment, it is not a startup anymore because it has found its business model and is just expanding. These companies are in growth mode, not startups.