Seed Funding — A myth for Northeast Job-Creators!
By Aiborlang Andrew Chyne
Prime Minister’s Employment Generation Programme or PMEGP would give you nothing less than six months of moratorium by the bank. For startups or cofounders, six months is just too less for a venture to get the revenue generated, given the climatic conditions of the North East region.
For instance, if someone is starting a guest house, he or she would probably go for a PMEGP loan of Rs 10 lakh in the services sector with a repayment period of five years. If the subsidy is 25 per cent, it means that one has to repay just the remaining 75 per cent of the total loan, which means Rs 7,50,000 is the amount that has to be repaid in five years if the rate of interest is 11 per cent.
Which means the interest itself would be Rs 82,500 per year and, for five years, the interest alone would be Rs 4,12,500. Hence combining the principal amount plus interest rate, total repayment amount for five years would be Rs 11,62,500 and the Equated Monthly Instalment (EMI) from the seventh month onwards would be Rs 19,375 if the moratorium given by the bank is for six months.
If the monthly EMI is Rs 19,375 for running a guest house in tourist hubs of Guwahati (Assam) or Shillong (Meghalaya), one needs to take into account that we have got just five months approximately of good weather, free from heavy showers of rainfall. Out of five months, we would have just three months of peak season namely December, January and February, which means in three months, we need to recover one year’s repayment amount of Rs 2,32,500 as EMI to the bank.
Personally, I doubt whether a founder or cofounder would make a revenue of at least Rs 2,32,500 given the online aggregators such as Oyo or Booking.com having their own pricing mechanism. Normally, tourists go for a good package and I think for someone with rich experience in hotel industry with zero savings when one works in Mumbai or Delhi, he or she would find it difficult even to take a leap. I would still prefer a moratorium of 12 months to be given by the bank keeping in mind the socio-political environment of Northeast India.
Businessmen of Northeast India are cash-surplus but they are not coming forward as seed investors because they would rather invest in pressure groups of different students’ union than entrepreneurs. The reasons would be many but the respective state government needs to come up with certain policies to attract seed investments.
For instance, a zero rate income tax for five years to Non-Tribal businessmen who are into seed-funding. In one way, it is a loss of revenue for the state’s treasury but it is also encouraging economic activity in other avenues created by millennials. In other words, businessmen would be taxed depending on the ventures that he or she has invested as seed-investors for businesses at an idea stage primarily. If investments are happening at an idea-stage, this would encourage our Northeast youth to be more innovative with their concept for a business model.
The Startup India or Standup India initiative for Northeast through Northeast Venture Fund is not a seed funding venture but an investment for business at a revenue stage. This happens the same with Prime Startup Hub of Meghalaya.
In other words, Meghalaya Chief Minister Conrad Sangma and his team have just copied the investment model of Bangalore Startup hubs or Gurgaon Startup culture.
I’m not familiar with the entrepreneurship policy of the previous Congress-led government under Dr Mukul Sangma except the failure of entrepreneurship policy in our state, Meghalaya during his tenure. Geographically and sociologically, Northeast India needs an innovative Startup policy that encourages and rewards youth for their out-of-the-box thinking. I wish and hope that my content is being read by the right people!
Aiborlang Andrew Chyne is a Branding Consultant (Northeastern Region Market) from Shillong in Meghalaya.