Unicorn is a privately held startup company that is valuеd at USD $1 billion or more. The term was first coined by Aileen Lee, founder of Cowboy Ventures when she referred to the 39 startups with a valuation of over USD 1 billion as unicorns.

The term was initially used to emphasise the rarity of such startups. The definition of a unicorn startup has remained unchanged since then. However, the number of unicorns has gone up.

A recent report suggests that 87% of the unicorns products are software, 7% are hardware and the rest 6% are other products & services.

Unicorns are scarce and difficult to find. In 2013, only 39 companies were identified as unicorns, but by the end of 2021, that number had increased to 959. In 2024, CB Insights estimates that there will be around 1,200 unicorn companies worldwide, while Crunchbase lists over 1,400.

Features of a Unicorn Startup

To be a unicorn is no cakewalk and each unicorn today has its own story with a list of features that worked in its favour. We have listed down a few pointers that are commonly seen across all the unicorns:

Disruptive innovation

Mostly, all the unicorns have brought a disruption in the field they belong to. Uber, for example, changed the way people commuted. Airbnb changed the way people planned their stay while travelling and Snapchat disrupted the usage of the social media network etc.

The ‘firsts’

It is seen that unicorns are mostly the starters in their industry. They change the way people do things and gradually create a necessity for themselves. They are also seen to keep innovation up and running to stay ahead of competitors which might later boom.

High on tech

Another common trend across unicorns is that their business model runs on tech. Uber got their model accepted by crafting a friendly app. Airbnb made the world seem smaller by making the best of the world wide web. 

Consumer-focused

62% of the unicorns are B2C companies. Their goal is to simplify and make things easy for consumers and be a part of their day to day life. Keeping things affordable is another key highlight of these startups. Spotify, for example, made listening to music easier to the world. 

Privately owned

Most of the unicorns are privately owned which gets their valuation bigger when an established company invests in it. 

According to CB Insights, there are 1,200 private companies around the world valued at over $1 billion. India has 16 of these companies, taking 4 percent of the overall share. Also, India is just a shade below the UK, which has 19 unicorns with a 5 percent overall share.

Can Only a Startup be a Unicorn?

The answer is yes. Unicorn is a term given only to startups having a billion-dollar valuation. Startups that exceed the valuation of USD 10 billion are grouped under the term ‘decacorn’ (a super unicorn). Dropbox, SpaceX, and WeWork are some reputed examples of decacorns.

There is an exclusive term for unicorn startups based out of Canada – ‘narwhal’. This means that any Canadian startup with a valuation over USD 1 billion is called a narwhal. Hootsuite and Wattpad are examples of narwhals.

Multiple other terms are used for startups having different lеvеls of valuations. These include:

• Minicorn: A startup with a valuation over USD 1 million, indicating growth potential.

• Soonicorn: A startup poisеd to еntеr thе unicorn club soon, backеd by invеstors.

• Centicorn / hectocorn: A startup valued at over USD 100 billion.

Also read: How to register a start-up in India

List of Notable Unicorn Startups in India in 2024

1. Flipkart

Founded in 2007 and listed under one of the largest e-commerce brands across India, Flipkart is the success story of two friends – Sachin Bansal and Binny Bansal. Among all the other e-commerce startups in India, Flipkart stands ahead with a current valuation of more than USD 40 billion.

2. PayTM

Paytm is owned by One97 Communications and was founded by Vijay Shekhar in 2010 when mobile phones had just entered the life of a common person in India. Gradually, One97 Communications moved from a mobile top-up service to a bus and train ticket booking and bill payment enabler. It later converted into a full-fledged payment service provider for businesses and was named PayTM. With a current valuation of around USD 7.5 billion, PayTM has certainly come a long way.

3. Razorpay

A Bangalore-based FinTech startup, Razorpay was founded by Harshil Mathur and Shashank Kumar. In 2021, the company raised around $375 Million in its Series-F round with a valuation of $7.5 Billion.

That funding round was co-led by Lone Pine Capital, Alkeon Capital, and TCV and also saw participation from existing partners like Tiger Global, Sequoia Capital India, GIC, and Y Combinator.

The founders started the company with the simple vision of helping every business accept digital payments. Over the years, they have grown to enable payouts, business banking, payroll, and credit & loans for businesses.

4. Meesho

Founded by Sanjeev and Aatrey Barnwal in 2015, Meesho provides a reselling platform for small and medium businesses. It allows them to start their online ventures through social media channels like Facebook, Instagram and WhatsApp. This Bangalore-based company has supposedly registered 100K registered suppliers to over 26K postal codes across 4,000+ cities. It has generated over INR 500 crores (USD 60 million at the current conversion rate) in income for individual entrepreneurs.

5. PharmEasy

PharmEasy was founded by Dhaval Shah and Dharmil Sheth in 2015. It provides a whole suite of services, such as sample collections for diagnostic tests, teleconsultation, medicine deliveries, etc. It also provides solutions for pharmacies to use procurement combined with delivery and logistics support. So far, PharmEasy has connections with over 60K brick-and-mortar pharmacies and 4K doctors in 16K postal codes across India.

6. CRED

Founded by Kunal Shah in 2018, this Bangalore-based FinTech startup entered the unicorn club at a whopping valuation of USD 2.2 billion. CRED is a members-only club that rewards you for timely credit card bill payments by offering enticing offers and access to high-quality experiences. It is a platform that allows credit card users to manage multiple cards and pay various bills, along with an analysis of their credit score.

7. Urban Company

Founded in 2014 by Abhiraj Bhal, Raghav Chandra, and Varun Khaitan, Urban Company is an all-in-one platform that helps you hire premium service professionals, from masseurs and beauticians to sofa cleaners, carpenters and technicians. Urban Company has built a network of 40,000+ trained service professionals and has served over 5 million customers across major metropolitan cities worldwide.

8. Zeta

Founded by Ramki Gaddipati and Bhavin Turakhia in 2015, Zeta entered the unicorn club in 2021 after raising USD 250 million in its Series C funding round. Zeta offers a neo-banking platform for issuing credit, debit, and prepaid products, allowing companies to launch engaging retail and corporate products. Zeta also offers digitized solutions to enterprises in need of automation.

9. BharatPe

The company was founded in 2018 by Ashneer Grover and Shashvat Nakrani. BharatPe launched India’s first UPI QR code for merchants and has now expanded into other financial services. Currently serving over 10 million merchants across 400+ cities in India, BharatPe is a leader in UPI offline transactions.

10. Mindtickle

Mindtickle provides a data-driven sales readiness and enablement solution that accelerates revenue growth and brand loyalty. With Mindtickle, revenue, and sales leaders can continually assess, diagnose and develop the knowledge, skills, and behaviors required to engage buyers, accelerate sales, and drive growth effectively.

The implementation of the Goods and Services Tax (GST) in India has impacted how start-ups operate today. Through GST, many indirect taxes have been scrubbed off and are clubbed together under one umbrella. Hence, some GST rules for startups must be followed to bring compliance relief and other advantages for these companies.

Valuations of Unicorn Startups

Unicorn valuations are significant in venture capital and investments bеcausе thеy rеflеct thе high expectations and confidence of investors in thе future performance and potential of thеsе companies.

Unicorn companies typically have some common characteristics that contribute to their high valuations. These include –

• Rapid growth: Thеsе companies arе able to increase their revenue, customеr basе and markеt sharе at a quick pacе. This indicates their scalability and profitability.
• Disruptivе technology: Thеsе companies arе able to create innovative products or services that chаllеngе thе existing market norms. Thus, they offer supеrior value to customers.
• Markеt potential: Thеsе companies arе able to address a large and growing markеt opportunity, either by creating a new markеt or expanding an еxisting one.

These factors make unicorn companies attractivе and valuable for invеstors. Thus, they are willing to pay a prеmium for their sharеs.

The Role of Unicorns in Venture Investing

Unicorn companies, which are valuеd at USD 1 billion or more, еpitomisе innovation and startup growth through private funding or public listings. There are currently 1,200 such companies worldwide.

Thеsе rarе entities have transformed the traditional venture capital ecosystem by attracting massive investments. They have formed a hypercompetitive landscape and accelerated the pace of funding. This has led to higher valuations and increased risk potential among investors. Startups now aim for rapid growth and market dominance, often at the expense of profitability. This dynamic shift has shifted the focus to disruptive technology and innovation.

Investing in unicorns is appealing for venture capitalists due to the potential for significant rеturns. Unicorns oftеn go public or gеt acquirеd at prеmium pricеs, promising substantial gains and influеncе in shaping industries.

Vеnturе capitalists’ stratеgiеs for invеsting in unicorns vary based on the startup’s stagе, sеctor and location. Nevertheless, a few common elements unite their approaches –

• Conducting rigorous duе diligеncе and valuation analysis to identify and assess the potential of startups.
• Providing stratеgic guidancе and opеrational support to help startups scale and overcome challenges.
• Leveraging their nеtwork and reputation to help startups access more funding, talеnt, and customеrs.
• Nеgotiating favourablе tеrms and conditions to protеct thеir intеrеsts and rights as invеstors.
• Collaborating with other invеstors and partnеrs to create synergies and opportunities for startups.

Examples of Unicorns

Thеrе arе hundrеds of unicorn startups around thе world that span various industries and sеctors. Some of the most well-known examples are:

Stripе

It is an American FinTеch company that providеs onlinе paymеnt procеssing sеrvicеs for businеssеs and individuals. It is the most valuable private company in the US, with a valuation of USD 50 billion.

SpacеX

It is an American aеrospacе company that dеsigns, manufacturеs and launchеs rockеts and spacеcraft. It is thе lеadеr in commеrcial spacеflight and has a valuation of around USD 150 billion.

Conclusion

The word ‘unicorn’ has come a long way from being a mythological creature to a regular feature in business and finance discussions. Today, unicorn companies have attained recognition and made a place for themselves in the market. That said, not every unicorn needs to become a successful startup. Thе rеal еssеncе is not just all about startup funding, it is about the continuous hustle and innovation beyond thе valuation milеstonе.

Succеss hingеs on ongoing dеdication to vision, customеr satisfaction, and product improvement. Bеing a unicorn is a stеpping stonе, not thе еndgamе. It should urge startups to pеrsistеntly strive for growth and impact.

Frequently Asked Questions (FAQ’s)

1. What is Unicorn Company Meaning?

Any startup company that is privately held and is valued at over $1 billion and isn’t listed on any stock market around the world comprises the meaning of a unicorn company.

2. How many unicorns arе thеrе in India in 2024?

India is home to 111 unicorns with a total valuation of USD 347+ billion as of 8th February, 2024.

3. Which is India’s first unicorn startup?

InMobi was India’s first unicorn, achieving a valuation of USD 1 billion in 2011.

4. Is Zеrodha a unicorn?

Yes, Zerodha entered the unicorn club in the year 2020.

5. Which is the largest unicorn in India?

The highest valuеd unicorn in India as of February 2024 is BYJU’s. It is an EdTech platform that allows students to learn from the comfort of their homes.

6. Why are startups called unicorns?

Startups with a valuation of USD 1 billion or more are called unicorns bеcаusе thеy wеrе once considered rare and mythical, just lіkе thе mythical creature. Thе tеrm was coined by venture capitalist Ailееn Lee in 2013 to describe highly successful and valuable startups.

7. How can I invеst in a unicorn?

Invеsting in a unicorn startup can be challenging as most of them are private and not availablе for public invеstmеnt. Howеvеr, you can invest in venture capital funds or private еquity funds that have еxposurе to unicorn startups. Another option is to invеst in the initial public offеrings (IPOs) of unicorn startups when they go public.

The post What is a Unicorn Company? Meaning, Full form, Importance in Investing & Top Unicorns in 2024 appeared first on Razorpay Learn.

A business PAN card refers to a permanent account number (PAN) specifically issued for businesses or entities in India. Business PAN cards are typically required for tax filing, opening bank accounts, legal compliance, claiming tax deductions, and conducting other financial activities on behalf of the business entity.

Business PAN Number Example

PAN has a typical format of ABCFu1234D. The first three characters, i.e. ‘ABC’ in the above number is an alphabetic series ranging between AAA and ZZZ.

The 4th character, i.e. ‘T’, represents the PAN holder’s status. The alphabet ‘F’ represents Firm, ‘T’ represents Trust, , ‘H’ for HUF, ‘P’ for Individual, ‘C’ for Company etc.

The 5th character, i.e. ‘U’, represents the first alphabet of the PAN holder’s last name.

The next four characters are sequential digits ranging between 0001 and 9999. The 10th character, i.e. ‘D’, is an alphabetic check digit that runs from A to Z.

How to Apply for a Business PAN Card in 2024?

How to Apply for a Business PAN Card Online?

Here’s the procedure for obtaining a PAN card online:

STEP 1: Visit the NSDL Website

Directly Visit the NSDL website Form and fill out Form 49A 

STEP 2: Select Application Type and Category

For the option of ˜Application Type’ select (New PAN – Indian Citizen), and select the category as “Firm”. Fill in all the details like company name, date of application, etc.

STEP 3: Provide Company Details

Provide the business legal name under Last name, Date of Incorporation, Official Email ID and registered mobile number. Ensure that the details match the official records, as any discrepancies may lead to application rejection or delays.

Step 4: Enter Full Name of the Applicant

Enter details of your Firm once again in the “Last Name” section and the Name that you would like to be Printed on the PAN Card.

Step 5: Enter Source of Income

Select the primary source of income for your business from the dropdown. Specify whether the income arises from sales, services, investments, or other revenue streams.

Step 6: Enter your Office Address

As you are registering for a Business PAN card, enter the full address of your office and all necessary details.

STEP 7: Mention the Assessing Office Code (AO Code)

Fill in the assessing officer code (AO code). It can be found in the AO code search panel on the NSDL website. Select Indian Citizen or Foreign Citizen as applicable along with state where your business is registered.

STEP 8: Upload Documents for Proof of Identity

Upload copies of the required documents including essential ones like certificate of incorporation. For address proof and date of birth proof upload partnership deed and pay the fees. Ensure these documents are clear, complete, and in the specified format.

STEP 9: Enter details of Authorised Signatory or Partner

Under declaration, enter details of name of applicant, authorised signatory/partner, city and date of application and Submit the form.

Step 10: Send Signed Acknowledgement and Documents to NSDL Head Office

After these steps, you will get an acknowledgement number to track progress details regarding your PAN card. Send a signed acknowledgement form and all documents official including partnership deed to the NSDL head office within 15 days.

How to Apply for a Business PAN Card Offline?

Here’s the procedure for obtaining a PAN card offline:

• STEP 1: Download the Form 49A from the NSDL website.
• STEP 2: Fill out the form and attach the necessary documents.
• STEP 3: Submit the form and documents to the nearest NSDL centre. The website provides the address of the nearest centre.
• STEP 4: The centre will issue a letter of acknowledgement.
• STEP 5: Post verification of your details, you will receive the business PAN card at the mentioned company address. The cost of this whole procedure is Rs.107.

Which Types of Businesses Require a PAN Card? 

There are many documents you need to start a business in India and a PAN card is among the most important ones. Any individual or corporation (Indian or foreign) involved in business in the country needs to get registered and have a company PAN card. 

Additionally, if your company is generating money from outside India but was registered in India, has a permanent establishment, or even has an office in India, will need a PAN card.

If you come under any of the following entities, you should have a business PAN card:

• Company
• Partnership firm
• Association of persons
• Limited Liability Partnership (LLP)
• Body of Individuals
• Trust
• Incorporation
• Limited company
• Private firm
• Association
• Foreign institutional investor
• Hedge fund

Read More: Documents You Need to Start a Business in India

Documents Required for Business PAN Card (Indian Company)

Here are the key documents required for obtaining an Indian Company PAN Card:

• An identity or address proof
• A copy of the certificate of incorporation
• A copy of a no objection certificate (NOC) issued by MCA (Ministry of Corporate Affairs)

Documents Required for Business PAN Card (Foreign Company) 

Here are the key documents required for obtaining a Foreign Company PAN Card:

• A copy of the registration certificate issued by Indian officials to set up an office in India
• A copy of the certificate of registration from the applicant’s native country, duly attested by Apostille, the Indian Embassy, the High Commission, or even by authorised officials of overseas branches of scheduled banks registered in India.
• A bank draft to pay the issuance fee to the tax department to get a corporate PAN card. Ensure that the payment is made in Indian currency. You can also draw a foreign currency draft in favour of NSDL. 

The corporate PAN card issuance fee payment is mandatory, and the accepted payment method is a bank draft payable in INR (Indian rupee) to PAN or UTIITSL (UTI Infrastructure Technology And Services Limited), Protean eGov Technologies Limited, with Mumbai as the destination. When making this payment, you must know how to choose a payment gateway that aligns with your business needs.

Business PAN Card Processing Time and Fees 

Getting a PAN card for your business is one of the crucial steps to ensure that you maintain financial integrity. Detailed below are the processing time and fees associated with applying for a business PAN card.

Related Read: What is GSTIN Number & Why It Is Required?

Estimated Processing Time for Business PAN Card Issuance

The estimated processing time for a business PAN card issuance is around 15 days. 

Business PAN Card Fee Structure

Business PAN Card fees for e-PAN Card

Why Should Your Company Have a PAN Card?

Your company’s PAN card enables invoice payments, remittances, and tax returns. Like individuals, companies need to provide their Tax Registration Number (TRN) to payers, which is obtainable only after acquiring a PAN.

Below are some of the key reasons to have a company PAN card:

• For any tax-related transactions and documentation, you need to present your business PAN number so that the Income Tax department can track your transactions, thereby avoiding any potential troubles.
• If you are a foreign company, you need a corporate PAN card to operate to avoid the highest possible tax rates otherwise.
• The company PAN card helps you in the payment of your invoices without deduction, filing of tax returns, remittances, and much more.
• If you need a TRN (Tax Registration Number), having a PAN is mandatory.
• According to the amendments made under Section 206AA in 2009, every foreign company must have its PAN to continue doing business with a company in India.
• The Indian government has the right to charge you 30% or more of your invoiced payments in case you do not have a PAN.

Apostille Process for Documents 

An apostille is a certificate that authenticates the origin of a public document so that it can be recognised in foreign countries. It verifies that the signer’s signature, capacity, and seal/stamp on a document are genuine. In the context of foreign companies seeking a PAN card in India, apostilled documentation proves the organisation’s legitimate existence and operation outside India. 

Requirements for Obtaining Apostilles

Here are the key requirements:

• Notarisation: Documents must be certified by a notary public.
• Original Seals and Signatures: Every seal and signature on the document must be genuine.
• Translation: The original foreign language documents have to be translated into English, besides a notarisation that the translation is actual should be added.

Steps Involved in Obtaining Apostilles

Follow the below steps to obtain apostilles:

1. Identify Relevant Office

For U.S. federal, apostilles are provided by the U.S. Department of State. The documents must be authenticated by the competent state authority where the document was executed.

2. Submission Process

The original documents in the notarised and authenticated way should be submitted to the appropriate office together with any necessary forms and fees.

For countries which are signatories to the 1961 Hague Convention, apostilles can be obtained from specific authorities such as the U.S. Department of State for federal documents and the state authorities for state-issued documents. It is worthwhile to seek guidance from local officials or legal experts on the authentication processes that are unique in the countries that are not a part of the Hague Convention.

Advantages of a Business PAN card

The PAN for business is an essential instrument that serves as a basis for financial transactions, besides ensuring compliance with financial regulations. As a primary benefit, it helps track all the financial transactions mandated by the Income Tax Department.

Not having a PAN card can potentially result in higher rates of tax and non-eligibility for specific tax-related procedures. A PAN card is necessary for filing income tax returns, opening a bank account and making investments. Additionally, it enables businesses to claim tax breaks and benefits.

It is important to know how to get a business PAN card. Applying for a business PAN card is comparable to the process of applying for an individual PAN card, and the difference lies in some details like the need for a Certificate of Registration in case of a business PAN Card. While the issuance processing time is estimated to be approximately 15 days, the fee structure varies for different organisations.

A business PAN card is indispensable for businesses in India as it assists in smooth transactions, adherence to tax laws, and receiving approval for TRN (tax registration number). There are additional benefits of a PAN card, including eligibility for tax rebates and incentives.

The absence of a PAN card may lead to higher tax rates and ineligibility to meet specific tax-related prerequisites. Legal business operations necessitate getting two vital documents including GST (goods and services tax) and PAN numbers. The process of how to get a GST number for a business is very important for businesses to run their business smoothly.

Common Challenges and Solutions for Business PAN Card

After knowing how to apply for a business PAN card, you must know about some of the key challenges and their solutions to avoid unnecessary hassles:

1. Incomplete Documentation

• Issue: Submit all the necessary documents to prevent slowing down the application process.
• Troubleshoot: To guarantee a hassle-free process, ensure all the documents, including your ID, address proof and business registration certificate are valid and updated.

2. Incorrect Information

• Issue: Avoid providing wrong information in the application as it may result in discrepancies and multiple complications.
• Troubleshoot: You should verify that all information is correct before submitting to prevent any errors. Compare the names, addresses, and other supporting ID documents to confirm the correctness and accuracy of the details.

3. Mismatch in Business Details

• Issue: When the information on the form differs from the data that is registered with the other government authorities, it may lead to confusion and delays.
• Troubleshoot: You must be consistent with all business details mentioned in different documents and registrations like GST. Verify and rectify any possible discrepancies in your registered details before requesting any services.

4. Non-compliance With Legal Requirements

• Issue: Not being able to fulfil the eligibility criteria or the legal requirements can lead to an application being turned down.
• Troubleshoot: Know the eligibility criteria and legal obligations for your business entity. Resolve any non-compliance issues before applying to boost chances of approval.

5. Address Discrepancies

• Issue: If a business address is provided with conflicting data, it may need clarification and delay the application process.
• Troubleshoot: Use the registered address listed officially and update the address in case of any changes. Check that the address on the documents needed to start a business matches the one mentioned in the application to eliminate discrepancies.

6. Non-verification of Documents

• Issue: Authenticate supporting papers during the application process to avoid rejection or delay.
• Troubleshoot: Cross-check all documents regardless of clarity, readability, and anything that is specified to be acceptable. The document copies must be clear and legible to avoid any inconvenience.

7. Incorrect Business Category

• Issue: Selecting the wrong category or type of business entity can lead to complications and delays.
• Troubleshoot: Understand the correct category based on their business structure and choose accordingly. Review the guidelines provided by the authorities to ensure the proper selection of the business category.

8. Digital Signature Issues

• Issue: Technical issues or errors related to the digital signature can cause delays or rejection of the application.
• Troubleshoot: Ensure that the digital signature is valid and meets the specified requirements. Resolve any technical glitches before applying to ensure a smooth process.

9. Delayed Processing

• Issue: Delays in processing the application can cause inconvenience and frustration.
• Troubleshoot: Apply well in advance of any deadlines to avoid last-minute delays. Regularly check the status online, and contact the relevant authorities for updates and clarification in case of undue delays.

10. Communication Gaps

• Issue: Lack of communication or updates on the application status can lead to confusion and uncertainty.
• Troubleshoot: Stay proactive by checking the application status online. If there is a need for communication, reach out to the designated authorities for updates and clarification. You must stay informed throughout the application process.

Tips on PAN Card for Business 

It is essential to know some tips on how to get a PAN card for business. Read all the instructions provided in the PAN card application form and submit the required supporting documents. The application form should be filled out using block letters and a black pen, preferably for the offline form so that the information is easy to read and understand. To ensure compliance with regulation, the CEO or the authorised signatory must sign the form.

Use the customer care services in case you have any questions related to the application process. There is a variety of payment methods available for Indian and foreign companies, and it is crucial to choose the right one based on the company’s status. This will minimise issues that may arise during the application process.

Related Read: How to Check Aadhaar and PAN Card Link Status Online?

Frequently Asked Questions (FAQs)

1. What is the PAN Card fee?

The fee for applicants residing in India is INR 110, which includes a processing fee of INR 93 plus a GST of 18%. For citizens outside the country, the cost is INR 864, exclusive of GST.

2. How can I get a hard copy of my PAN card?

To get a hard copy of your PAN card, you can submit a request through the official NSDL or UTIITSL websites. The physical PAN card will be processed and dispatched to the address provided in your application form. Additionally, an E-PAN for a private limited company in PDF format will be sent to the e-mail ID mentioned in the application form.

3. How can I get PAN details?

You can get the PAN card details by taking the company PAN number, searching for the name of the PAN card holder, by date of birth, or by address.

4. What is the business PAN format?

The PAN format for businesses is similar to that for individuals. It is a 10-digit alphanumeric number, which the Income Tax Department allows. The initial three characters are alphabets, followed by four digits, and terminated with a single alphabet. This PAN number is often used for GST search by PAN.

5. How can I get a PAN card in 2 days?

Currently, there is no option of getting a PAN card within two days. Generally, processing the PAN card takes around 15 days. The applicants are encouraged to apply in advance to enable them to receive the PAN card in time.

6. How do you identify a PAN?

A PAN card is an alphanumeric 10-digit number issued by the income tax department. The first three characters are invariably letters. The fourth type of character stands for the entity that owns it (individual, company, etc.). The rest of the characters are a mixture of figures and symbols. 

7. What is the full form of PAN?

The PAN is an abbreviation for permanent account number. It is a unique identification (UID) number issued by India’s Income Tax Department.

8. Why is a PAN card required?

A PAN card is necessary for different financial processes such as filing income tax returns, opening a bank account, and making high-value transactions. It assists the government in tracing financial transactions and avoidance of tax.

9. Is PAN for business mandatory for GST registration?

Yes, a PAN card is a mandatory document for obtaining GST registration. Additionally, understanding how to register a business in India is crucial for new entrepreneurs.

10. What is the Apostille Convention?

The Apostille Convention is an international pact that makes the procedure of verifying documents to be used in other nations a lot easier. It eliminates the need for extra certification by endorsing the original document with an apostille certificate.

11. From where can I download the PAN application form?

You can get the PAN application form either from the official website of either NSDL or UTIITSL.

12. Who is eligible for a business PAN card?

Businesses, which include sole proprietorships, partnerships, companies and other legal entities, are entitled to apply for a business PAN card.

The post How to Apply and Get a Business PAN Card in 2024? appeared first on Razorpay Learn.

A private limited company is a privately held business entity held by private stakeholders. The liability arrangement, in this case, is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them.

Private limited company definition as per Section 2 (68) of the Companies Act, 2013 is A Company having a minimum paid-up share capital as may be prescribed and which, by its articles

1. Restricts the right to transfer its shares

2. Except in case of One Person Company, limits the number of its members to two hundred

3. Prohibits any invitation to the public to subscribe for any securities of the company.

With the startup ecosystem booming across the country and more and more people looking to do something on their own, there is a need to be well-acquainted with different business registration types, i.e. sole proprietorship, limited liability company, and private limited company. 

Private Limited Company Examples

Here are some examples of private limited companies in India

• Google India Pvt. Ltd. A subsidiary of Google LLC
• Amazon Retail India Private Limited: An online shopping platform
• Microsoft Corporation (India) Private Limited: An information technology company with its registered office in Delhi

Characteristics of a Private Limited Company

Following are some of the main features of a pvt ltd company: 

1. Members

The act mandates that a minimum of two shareholders are required to start such a company, while the limit for maximum number of members is fixed at 200. 

2. Directors

The Act mandates that a private limited company must have a minimum of two directors, while the maximum number of directors is 15.

3. Limited Liability Structure

In a private limited company, the liability of each member or shareholder is limited. Therefore, even in the case of loss under any circumstances, the shareholders are liable to sell their assets for repayment. However, the personal and individual assets of the shareholders are not at risk.

4. Separate Legal Entity

This is a separate legal entity and continues in perpetual succession. This means that even if all the members die, or the company becomes insolvent or bankrupt, the company still exists in the eyes of the law. The life of the company will be perpetual, not affected by the lives of its shareholders or members unless dissolved by way of resolution.

5. Minimum Paid-Up Capital

A private limited company is required to have and maintain a minimum paid-up capital of ₹1 lakh. It could go higher, as prescribed by MCA from time to time.

Requirements to Start a Private Limited Company 

Every business type has its own set of requirements before it is incorporated.

The requirements for registering this are as stated below: 

1. Members and Directors

As mentioned above, to get itself legally registered, a private limited company means it must show a minimum number of two and a maximum number of 200 members. This is a statutory requirement as mandated by the Companies Act 2013.

The directors should meet the following conditions:

• Each of the directors should have a DIN i.e. director identification number, which is given by the Ministry of Corporate Affairs
• One of the directors must be a resident of India, which means he/she should have stayed in India for not less than 182 days in the previous calendar year.

2. Name of the Company

Choosing the name of the company is often a technical task. A private limited company is required to cover three aspects while deciding a name for itself: 

1. Main name
2. Activity to be carried out
3. Mention of ‘Private Limited Company’ at the end. 

Pro tip: It is not always necessary that the name the business owner is looking for will be available, as no two companies can have the same name. Therefore, it is a requirement that at the time of registration, every company has to send 5-6 names for approval to the Registrar of Company (ROC). Moreover, the submitted names should not have a close resemblance with any other company’s name. 

3. Registered Office Address

After the company has been registered, the permanent address of its registered office must be filed with the registrar of the company. The registered office of the company is where the company’s main affairs are being conducted and where all the documents are placed.

4. Obtaining Other Documents

For electronic submission of documents, every company must obtain a digital signature certificate that is used to verify the authenticity of the documents. Moreover, in a company employing professionals (secretaries, chartered accountants, cost accountants, etc.) for varied activities, certifications by these professionals are necessary. 

Different Company Registration Options

Entrepreneurs in India can choose from several company registration options, each catering to different business needs and offering unique benefits:

1. Sole Proprietorship

It is Ideal for individual entrepreneurs, this option allows complete control over the business but lacks limited liability protection.

2. Partnership Firm

It is suitable for businesses run by two or more individuals who wish to share profits and responsibilities. It is governed by the Partnership Act 1932.

3. Limited Liability Partnership (LLP)

This type of partnership integrates the flexibility of a partnership with the limited liability of a company. It is regulated under the LLP Act 2008.

4. One-person company (OPC)

This type of company allows a single promoter to enjoy corporate status and limited liability, making it ideal for solo entrepreneurs.

5. Private Limited Company (PLC)

This type of company offers limited liability to shareholders and is ideal for medium—to large businesses looking to raise capital.

6. Public Limited Company

It is suitable for large businesses, allows trading shares publicly and limits shareholders’ liability to their share value.

Related Read: All You Need to Know About Limited Liability Proprietorship

List of Documents Required for Private Limited Company

The documents required to incorporate a Pvt Ltd company include:

1. Identity Proof

Document verifying the identity of individuals such as PAN card and passport of Indian and foreign directors, respectively.

2. Address Proof

Document confirming the residential address of individuals such as utility bills or rental agreements.

3. Director Identification Number (DIN)

Unique identification number allotted to directors by the Ministry of Corporate Affairs.

4. Digital Signature Certificate (DSC)

Electronic signature ensuring the authenticity of documents filed electronically.

5. Memorandum of Association (MoA)

Legal document defining the company’s objectives and scope of operations.

6. Articles of Association (AoA)

Document outlining the rules and regulations governing the internal management of the company.

7. Declaration by Directors and Subscribers

Formal statement by directors and subscribers confirming compliance with legal requirements for company incorporation.

8. No Objection Certificate (NOC) from the landlord

Consent from the landlord permitting the use of premises as the company’s registered office.

9. Shareholding Pattern of the Proposed Company

Overview of the distribution of shares among shareholders in the company.

10. Proof of Registered Office Address

Documentation confirming the address where the company is registered and operates from.

How to Register Pvt Ltd Company?

To register a private limited company in India the following steps are mandatory:

1. Choose a Unique Name 

Choose a unique name that reflects your business’s identity and vision and is not in use by another company or trademarked by someone else. You can check for name availability on the Ministry of Corporate Affairs (MCA) official company registration website or the relevant regulatory authority in your state or union territory.

2. Obtain Digital Signatures 

For a Pvt. Ltd. company registration, obtain Digital Signature Certificates (DSC) for your company’s proposed directors and shareholders from any authorised agency or vendor registered with the MCA or the Certifying Authority (CA) under the Information Technology Act, 2000. Digital signatures are essential for filing online documents with government authorities and verifying your identity and authenticity.

3. Obtain Director Identification Number (DIN) 

Apply for a Director Identification Number (DIN) online through the MCA portal by filling out the form DIR-3 and uploading the required documents, such as identity proof, address proof, and photographs for each of the directors of your company. The MCA assigns a unique identification number to every individual who intends to be a company director.

4. Prepare Memorandum and Articles of Association 

The MOA is a document that defines your company’s main objectives, scope, and activities whereas AOA lays down the rules and regulations for the management and administration of your company. You can prepare the MOA and AOA online through the MCA portal by using the SPICe+ form and the templates provided by the MCA.

5. Get Consent and Declarations 

The directors must consent to act as directors by filling out the form DIR-2 and attaching their DSC. The shareholders must provide their declarations of compliance with the Companies Act, 2013 and the rules made thereunder by filling out the form INC-9 and attaching their DSC.

6. Apply for Company Name Approval 

Submit the name approval application with the required documents to the Registrar of Companies (RoC) of the state or union territory where your company will be registered. You can apply for name approval online through the MCA portal using the SPICe+ form and paying the prescribed fees. 

7. File Incorporation Documents 

You can file the incorporation documents for LLC online through the MCA portal using the SPICe+ form and pay the prescribed fees. You need to attach documents, including the MOA, AOA and a few more, like AGILE-PRO, INC-14, 1NC-15, etc., along with the SPICe+ form.

8. Pay Registration Fees 

The registration fees vary depending on the amount of authorised share capital and the state or union territory where your company is registered. You can pay the fees online through the MCA portal using the SPICe+ form and the payment gateway.

9. Verification and Approval 

The RoC will carefully assess the documents, and if they meet all requirements, they will issue the Certificate of Incorporation which can be downloaded from the MCA portal. It is a legal document that confirms the existence and registration of your company. 

10. Obtain PAN and TAN 

Apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) online through the MCA portal using the AGILE-PRO form and the payment gateway. PAN is a 10-digit alphanumeric code used to identify your company for tax purposes. TAN is a 10-digit code used to deduct and collect tax at source from payments made by your company.

11. Open a Bank Account 

Open a bank account in your company’s name and deposit the minimum capital required. The minimum capital for a pvt. ltd. company is ₹1 lakh. 

12. Obtain Business Licenses 

Licencing and permit requirements can differ depending on the nature of your business.

You may need to obtain them from various authorities, such as:

• Trade licence from Municipal Corporation or Panchayat
• Environmental clearance from the Pollution Control Board
• Industrial licence from the Department of Industrial Policy and Promotion (DIPP)
• Quality certification from the Bureau of Indian Standards (BIS)
• Trademark, patent, or design registration from the Intellectual Property Office (IPO)

13. Compliance with Taxation 

Register for GST and comply with other tax obligations. You must register for GST if your annual turnover exceeds ₹40 lakh (₹20 lakh for special category states). 

14. Commence Business Operations

After diligently completing the above procedure, your Private Limited Company is ready to commence its operations. 

Read More: How to register a Private Limited Company online in India?

What Are the Registration Costs for a Private Limited (Pvt Ltd) Company?

The registration charges for a Private Ltd. Company depend on share capital, number of directors, stamp duty of the state where you want to register the company and other fees.

What Is the Registration Timeline for a Private Limited Company?

The answer is not very simple, as it depends on various factors such as the availability of the company name, the documents required, and the workload of the government authorities. Therefore, the overall timeline for registering a private limited company in India can take around 12-18 days, depending on the time taken to complete each step and the workload of the government office processing the application.

Advantages of Private Limited Companies

1. Limited liability

In a private limited company, there is a limited liability, which means the company’s members are not at risk of losing their private assets. If a company fails, the shareholders are liable to sell their assets for payment.

2. Less number of shareholders

Unlike a public company that requires seven shareholders, a private limited company can be started with just two shareholders.

3. Ownership

As the company’s shares are owned by investors, founders, and management, the owners are at the liberty of transferring and selling their shares to others

4. Uninterrupted existence

As mentioned earlier, the company stays a legal entity until it is legally shut down, the company runs even after the death or departure of any member.

Disadvantages of Private Limited Companies

Now that you know what is Pvt Ltd company, its benefits, and how to register a company in India, let’s understand the disadvantages. 

One of the disadvantages it gets with Pvt limited company is the compliance formalities for shutting it down. It often ends up getting too complicated and time-consuming. 

FAQs

1. What is Private Limited Company Definition?

A private limited company (Pvt Ltd) is a business entity that limits the liability of its owners and restricts the transferability of its shares.

2. What is Pvt Ltd full form?

The full form of PVT LTD is a private limited company. It is also known as a LTD company.

3. Is a private company better than a public?

Private companies have the upper hand over public companies concerning investment in long-term strategies, keeping the values of their shares and financial figures discreet, freedom, and flexibility of operations.

4. What are the minimum and maximum numbers of members in a private company?

The minimum number of members in a private company is 2 directors and 2 members are required. All these members have limited liability, and the maximum number of members has increased from 50 to 200.

5. How much does it cost to form a private limited company?

The cost of establishing/registering a Pvt Ltd Company generally varies from INR 6,000 to INR 30,000, depending upon the number of Directors, members, the authorized share capital, and professional fees.

6. What is compulsory for a private limited company?

Under Section 134, all private companies must hold an annual general meeting. These companies are required to hold their meetings within six months of closing their Financial year.

7. What are the rules for a Private Limited Company?

It should have a minimum of 2 Directors and 2 Members < The company members should hold an annual general meeting < The maximum number of Members cannot exceed 200.

8. What is an example of a private Ltd company?

A private limited company is distinguished by its separate legal identity from its shareholders and directors, thereby limiting their liability to the value of the shares they own. An example of a private limited company is Google India Pvt. Ltd., which is a subsidiary of Google LLC.

9. What is the difference between LLP and Pvt Ltd?

LLP is a partnership where the partners have restricted liability and are not liable for the actions of other partners, whereas, in a Pvt Ltd company, the shareholders have limited liability and can transfer their shares to others. LLP has less compliance and tax burden than Pvt Ltd and less scope for raising funds from external sources.

10. What is the minimum turnover for a Pvt Ltd company?

There is no minimum turnover prerequisite for a Pvt Ltd company in India. However, certain threshold limits under the Companies Act 2013 trigger different compliances for Pvt Ltd companies, such as certification of annual return, corporate social responsibility, internal audit, appointment of auditor, etc. These threshold limits are based on the paid-up share capital, turnover, net worth, net profit, loans, borrowings, deposits, etc., of the Pvt Ltd company.

The post Private Limited Company (Pvt Ltd): Definition, Meaning, How to Register & Documents Required appeared first on Razorpay Learn.

An MVP stands for minimum viable product, is an early basic version of a product released with enough features to be functional. MVPs can be a landing page or prototype (typically a piece of technology or computer program). Early customers of a business can use the MVP and provide feedback for product development in the future.

The company does this to validate a product idea early in the development cycle. This approach helps businesses validate demand before investing heavily in full-scale development. The goal is to provide immediate value, minimise development costs, and gather user feedback for future product enhancements.

What an MVP is Not?

A minimum viable product is often misunderstood. It is not just a basic prototype or a finished product. Also, an MVP isn’t the final version of the product, which would have many more features and be polished based on what users say. An MVP is made to address its users’ main needs and start quickly while also learning about the market’s response to the product. It is the first step that helps shape the full development of the product.

Minimum Viable Product Examples

Let’s have a quick look at some examples to understand how MPV is being practised in real life!

1. Airbnb

Today, whom we call the founders of Airbnb, once faced a hard time when they had to accommodate guests coming over for a conference. All the hotels in the city were full and there they discovered Airbnb! The idea was to host the guests in their own apartments on ‘air’ beds. 

They Began by renting out personal apartments, validating the concept before scaling the service.

2. Foursquare 

Foursquare is a pioneering location-based social networking platform that enables users to explore and share insights about various venues. It revolutionised the way people interact with their surroundings, offering a dynamic interface for discovering businesses and attractions and fostering community engagement through shared experiences.

Foursquare began with a single feature: checking in at locations. This minimalist approach rapidly attracted users, generating valuable feedback to grow the platform.

3. Amazon

Initially founded as an online bookstore in 1994, Amazon has evolved into a global e-commerce behemoth. The core proposition of offering books at competitive prices has remained consistent, while the platform’s feature set and product range have expanded exponentially. Amazon’s inception as a focused online bookstore serves as a prime example of an MVP strategy that scaled into a vast enterprise.

4. Instagram

When Kevin Systrom began his venture, he developed and secured funding for a mobile application named Burbn. This application was designed to enable users to check in and share their views of various locations.

However, the app did not achieve immediate success, and Kevin realized that users were more interested in the photo-sharing functionality. Consequently, the Burbn team redirected their focus to a single feature: photo sharing. Today, we recognize the significant role that ‘Instagram’ plays in our lives.

What Is the Purpose of a Minimum Viable Product (MVP)?

An MVP serves as a functional prototype that customers can interact with and provide insights into their behaviour, preferences, and pain points. 

It helps the company validate its assumptions about the product and target market via the following steps:

• The MVP must address a specific problem that your target audience faces.
• The company conducts intensive research to understand the market and identify its competitors.
• The company outlines the journey they want their users to take with their product.
• They decide on the minimal features to solve the problem and provide value.
• They then develop the MVP, focusing on the core features to solve the problem effectively.
• The company releases the MVP to a small group of users and gathers feedback.
• They then use the feedback to make improvements and further refine their product or service.

Recommended Read: What is a Niche Market? Examples, Benefits and Strategies

What are the 5 Types of MVP?

1. Landing Page MVP

This MVP type uses a simple webpage to gauge interest and validate market demand for a product concept. By incorporating lead capture forms and call-to-actions (CTAs), businesses can effectively measure user engagement and interest levels.

2. Concierge MVP

Businesses manually provide services to customers to test a product idea. This approach is valuable for gaining deep customer insights through personal interaction.

3. Wizard of Oz MVP

In this model, businesses simulate backend operations to present the facade of a complete product. It’s a cost-effective method for validating complex product ideas without full development.

4. Single-Featured MVP

This MVP focuses on one core feature: assessing user reaction and collecting feedback. It’s useful for validating the product’s specific functionality or value proposition.

5. Pre-Order MVP

This MVP allows businesses to confirm market demand and acquire initial funding by offering the product for pre-order. It provides a clear value proposition and a reliable delivery timeline to customers.

How to Define Your MVP (Minimum Viable Product)? 

Follow these strategic steps to guide your development process.

1. Make sure your MVP matches your business goals.

Before deciding which features to include, the first step in developing your MVP is to ensure it aligns with your team’s or company’s strategic goals.

Consider these goals: Are you aiming to achieve a specific revenue target in the next six months? Do you have limited resources? These factors might influence whether it’s the right time to develop a new MVP.

Determine the purpose of this minimum viable product. For instance, will it attract new users in a market related to your existing products? If this aligns with your current business objectives, then this MVP plan might be strategically viable.

However, if your company’s current focus is on your core markets, you might need to postpone this idea and instead focus on an MVP designed to provide new functionality for your existing customers.

2. Identify the key problems you want to solve or the improvements you want to offer for your users.

After you have confirmed that your MVP plan aligns with your business goals, identify the specific problems or improvements your product will provide users. These solutions should only be a subset of your overall product vision. You can document them as epics, user stories or features. Your MVP will only include a small set of features.

Decide which functionalities you want to include in your MVP. These decisions should be based on a number of factors, such as:

• User Research
• Competitive Analysis
• The speed at which you can iterate on certain functionalities after receiving user feedback
• The relative cost of implementing various user stories or epics

3. Turn your MVP’s features into a clear development plan.

It’s now time to develop a development plan. After considering your strategic elements and choosing the limited functionality of your MVP, you should create a development plan.

Remember that “V” stands for viable. The product should allow customers to finish a task or project, and offer a quality user experience. The MVP must be more than a bare-bones user interface, with unfinished features and tools. It should be a product that can be sold by your company.

How to Build a Minimum Viable Product (MVP)?

STEP 1: Planning Your MVP

1. Identify Your Target Audience

Understanding who your ideal customers are and their primary needs is crucial.

2. Focus on the Core Problem

Pinpoint the exact problem your MVP will solve. 

3. Prioritise Features

Concentrate on essential functionalities that prove your product’s concept. Avoid overloading your MVP with features; simplicity is key.

STEP 2: Building Your MVP

1. Consider Low-cost Solutions

Utilise cost-effective methods, like mockups or basic prototypes, to demonstrate your product’s potential without extensive resources.

2. Focus on Usability

A user-friendly MVP, even with minimal features, is vital for early adopter engagement and feedback.

STEP 3: Testing and Learning

1. Launch Strategies

Launch your MVP using various channels, like social media, targeted ads or beta testing, to reach your audience effectively.

2. Gathering Feedback

Collect user feedback diligently through surveys and interviews to understand the user experience and expectations.

3. Analyse and Adapt

Use the feedback to refine your MVP, focusing on enhancements that align with user needs and product goals.

4. Set of Documents

Have a set of product requirements documents to launch the product without any hassle.

Conclusion

If you are planning on starting something new, you should definitely create an MVP. The best part is that once you launch an MVP, you can collect realistic feedback and make changes to your product or service. We hope this article will help you through your business journey. 

Takeaway? It is recommended to continue to test, learn and measure and keep testing until the product or service is finalised. 

Recommended Read: Startup Funding In India: An Overview 

Frequently Asked Questions (FAQs)

1. What is a MVP in Simple Terms?

Minimum viable product (MVP), is a product with just enough features for early users to be satisfied.

2. Why is MVP important?

MVP is crucial because it allows testing a product concept in the market with minimal resources, reducing time and financial risks.

3. What are the 3 elements of MVP?

The three elements of an MVP are its minimum feature set, viability in the market and being a tangible product.

4. What are the characteristics of MVP? 

MVPs are characterised by having just enough features to be functional, focusing on core customer needs, and being designed to gather user feedback for future improvements.

5. What are the key principles when creating an MVP? 

Focus on core features, maintain simplicity and user-friendliness, and adopt an iterative development process based on user feedback.

The post What is a Minimum Viable Product (MVP)? Purpose, Types and Examples appeared first on Razorpay Learn.

Memorandum of Association (MoA)

MoA is an important business legal document that defines India’s structure, aims, and scope of activities. An MoA is critical to ensure that the company is legally compliant.

It safeguards the rights of shareholders and prevents illegal endeavors by giving stakeholders clarity and openness. It also specifies the maximum share capital the business can issue and the scope of members’ liabilities, whether restricted by shares or guarantees.

The key components of MoA include the following:

• Name Clause: States the registered name of the company

• Situation Clause: Provides the full address of the registered office

• Object Clause: Specifies the company’s objectives

• Capital Clause: Outlines the authorised share capital

• Liability Clause: Defines the liability of members

Articles of Association (AOA)

An AOA is a fundamental legal document for businesses that defines a company’s internal governance structure and sets forth its guidelines in line with the company’s goals and policies. It also establishes its directors’ and shareholders’ rights and obligations. An AOA governs the company’s daily operations and stakeholder engagement and ensures an effective and efficient management structure.

 The key components of AOA include:

• Share Capital: Details of total capital amount, types of shares, and rights attached to each type of shares

• Shareholder Rights and Responsibilities: Outlines the shareholders’ rights, responsibilities, and obligations to the business and each other

• Management Structure: Guidelines on the appointment, powers, and duties of directors and other key managerial personnel

• Decision-Making Processes: Procedures for conducting board and shareholder meetings, including voting rights and quorum requirements

• Transfer of Shares: Regulations on how shares can be transferred or sold within the company

• Dividend Distribution: Policies regarding the distribution of profits to shareholders

• Auditor Provisions: Outlines the appointment, powers, and responsibilities of auditors

Director Identification Number (DIN)

A DIN is a unique identification number provided to serving and aspiring company directors by the Central Government of India. It is mandatory compliance for all companies registered under the 2013 Companies Act. This unique number is required to submit the company’s legal documents and filings with the Registrar of Companies (RoC).

DIN aids in verifying the qualifications of directors, avoiding fraudulent activity, and guaranteeing the integrity of firm leadership.

To obtain a DIN, you need to follow these steps:

1. Form Selection: Choose the SPICe form if you’re applying for a new company or the DIR-3 form for an existing company. Start collating sufficient identity and address proofs as well.

2. Obtain a Digital Signature Certificate (DSC) before actually applying for DIN: Form DIR-3 must be signed by the applicant and digitally validated by a company secretary, managing director, director, CEO, or CFO of the company.

3. Registration Fee Payment: Pay the registration fee digitally through NetBanking, credit card, debit card, pay later, or NEFT. Register using the MCA21 portal to obtain a login ID. Log in and use the ‘eForm upload’ link from the ‘eForms’ menu to upload the DIR-3 eForm. The unique number will be issued upon successful verification.

Shareholder Agreement

A shareholder agreement is an enforceable contract by a company’s shareholders defining their rights, obligations, and operating guidelines. It is one of the crucial documents required to start a business since it protects the shareholder, resolves disputes, and facilitates smooth decision-making.

The key aspects of a shareholder agreement include:

• Share Distribution: Clarifies the allocation of shares

• Share Classes: Defines the types of shares and their rights

• Preferential Rights: Grants rights given to certain shareholders over others

• Board Powers: Outlines decision-making authority of the board of directors

• Transfer Regulations: Sets rules governing the transfer of shares

• Termination and Exit: Highlights exit procedures and sale of shares

A corporate lawyer or expert can help determine whether a shareholder agreement is meeting both legal and the company’s standards.

Founders’ Agreement

One of the essential documents required to start a company is the Founders’ Agreement, which should be created in the early phases of a company’s establishment. It outlines the rights, obligations, and responsibilities of the founders of a business venture, including decision-making processes, ownership percentages, and dispute resolution mechanisms.

It is crucial to ensure smooth operations, and it is recommended that it is legally vetted and stamped to ensure legal validity and enforcement.

The main features of a typical Founders’ Agreement include:

• Roles and Responsibilities of Each Founder

• Ownership Structure with equity distribution and percentage ownership among co-founders

• Vesting Schedule with a timeline over which founders earn their ownership stake

• Intellectual Property Rights addressing ownership and usage rights of any intellectual property developed

• Dispute Resolution Mechanisms to resolve conflicts or disagreements

• Non-Compete and Confidentiality Clauses ensuring data confidentiality and non-engagement in competing businesses

Certificate of Incorporation

The Registrar of Companies issues a Certificate of Incorporation confirming the establishment of a newly formed company. It is an assurance that it is legally compliant and can now be formally acknowledged as a separate legal entity. A separate legal identity unlocks important commercial operations, including contract signing, opening of bank accounts, and more.

The certificate includes:

• Business Name: Official company name registered with the Registrar of Companies

• Purpose Statement: Brief description of the company’s main business objectives

• Registered Address: Official contact address of the company

• Share Capital Details: Information about your authorized share capital, including the number and value of shares issued

To obtain a Certificate of Incorporation, follow these steps:

• Choose a unique and available business name

• Register with the Ministry of Corporate Affairs (MCA), and submit necessary legal documents for business and forms, including the SPICe+ application

• Prepare the MOA and AOA

• Submit the application and supporting documents to the RoC

• The certificate will be issued once approved by MCA

The certificate will include the CIN, company name, and other relevant details.

Trademark Registration

Trademark registration is the legal process by which you can obtain exclusive rights to a unique name, design, or symbol associated with a company or product. It is essential to safeguard a company’s intellectual property, prohibit others from using similar markings, and increase brand awareness and trust among customers.

Trademark registration covers more than just logos and products; it also helps protect company identity, and branding components like taglines and business papers. This guarantees the complete safeguarding of all business-related assets.

Go to the Trade Marks Registry’s online portal to access the original trademark registration application and fill out the form with all the relevant information.

Follow these steps to obtain and download a trademark registration certificate:

• Open the official Trade Marks Registry website

• Click on the ‘Trade Mark Application / Registered Mark’ option

• Enter the Application Number under the “National / IRDI Number” option

• Click on the trademark number and click on ‘View Registration Certificate’

• Your trademark certificate will open in a new tab

• Click on the download icon to save the certificate in a PDF format

No objection certificate (NOC)

NOCs are issued by any relevant entity to convey that there are no objections to the details in a given document. They are critical documents for startups and businesses in India.

You need an NOC to ensure no legal or contractual barriers impact the business plan and that all stakeholders have provided consent for it.

To obtain a NOC:

• Identify the appropriate stakeholder or authority and request the NOC

• Send in an application and the required documents

• Depending on the business, region, and requirement, different rules and regulations may apply

• Once the application has been completed and accepted, you can get the NOC certificate

Company PAN Card

A company Permanent Account Number (PAN) is a uniquely identifiable number provided by the Income Tax Department of India to registered businesses. It serves as a crucial identification for businesses for tax-related activities. You can use the company PAN card for various financial transactions, including opening bank accounts, filing taxes, and performing business operations. It promotes accountability and transparency in company transactions while ensuring compliance with tax legislation.

To apply for a company PAN card, you can visit the National Securities Depository Limited (NSDL) website or the UTI Infrastructure Technology And Services Limited (UTIITSL) website, and submit the required documents. Learn about how to apply for a company business card.

TIN

Every business in India is given a unique 11-digit identity number known as a TIN or Taxpayer Identification Number. It is required for many types of tax filings, including Value Added Tax (VAT), Central Sales Tax (CST), and Tax Deducted at Source (TDS).

It is provided automatically during company registration and you can apply for it both offline and online. The state’s Commercial Tax Department is the issuing authority, and processes may differ by each state.

Goods and Services Taxpayer Identification Number (GSTIN)

The GSTIN is a unique identification number provided to Indian businesses registered under the Goods and Services Tax (GST) regime. It is used for a variety of GST-related activities, including filing returns, obtaining input tax credits, and paying taxes.

You can register for a GSTIN online through the GST portal. The procedure includes filling out an application form, submitting the necessary documents, such as PAN, proof of company address, and bank account information, and undergoing verification by GST authorities.

To learn more about getting GSTIN, click here.

 Related Read: How to Get GSTIN Number Online?

Non-Disclosure Agreement (NDA)

A legally enforceable agreement that establishes a confidential relationship among two or more parties is called a Non-Disclosure Agreement (NDA), often referred to as a Confidentiality Agreement. It describes the conditions for sharing and using private information.

NDAs are essential when starting a business in India since they shield confidential information from being revealed to other parties. They guarantee that confidential information is solely used for its intended purpose and contribute to the development of mutual trust.

The essential components of an NDA are:

• Describes the purpose, cause, and management of confidential information

• Specifies ownership of the confidential information

• Describes the obligations and limits of the recipient

• Defines boundaries for the protection of information, including exceptions

• Outlines remedies for breach of confidentiality

• Indicates confidentiality duration and data disposal terms

Startups and businesses commonly use NDAs before meeting with potential investors to protect confidential data during negotiations.

To obtain an NDA,

• Select the type of NDA you need (mutual, non-mutual, or multi-party)

• Draft the NDA, covering key elements such as purpose, disclosure of confidential information, ownership of materials / no warranty, term, return of confidential information, or any other general factors you wish to include

• Alternatively, consult an attorney to draft a customized agreement based on your needs

Employee Offer Letter

Employment contracts explain what employees can expect, their obligations, and how challenges will be addressed transparently. These legal company documents address a variety of topics, including employment information and confidentiality requirements. A legal professional should create these documents to ensure compliance.

The key parts are:

• Terms of employment, including job details, duties, work hours, and termination conditions

• Employee commitments and expectations

• Intellectual property rights

• Leave and benefits, including vacation days, holidays, and workplace rules

• Standards for employee performance

• Conditions for employee shares in the company (if applicable)

Incorporation Documents for Foreign Nationals

In order to guarantee compliance with regulatory standards, foreign nationals starting a business in India need to provide extra documentation, including:

• Passport valid for the next 6 months

• Valid business or employment visa

• Proof of address

• Indian government-issued ID, such as a driver’s license or national ID card

• Documents related to the foreign national’s business, such as a business license, registration certificate, or proof of business operations

• Power of attorney

• Foreign national’s consent

• Documents showing the foreign national’s financial resources, such as bank statements or proof of investment

• Declaration in Form INC-9

Privacy Policy and Terms of Use

Terms of service offer a structure to handle user data and interactions. Privacy policies inform users about how their personal information is collected, stored and used by the business. These documents are crucial for promoting consumer trust, enforcing compliance with the law, and encouraging open communication between companies and consumers.

Conclusion

These essential legal documents required for starting a business in India are crucial to maintaining legal compliance in India’s growing business environment and protecting investors, companies, and individuals.

Frequently Asked Questions (FAQs)

1. Do the document requirements differ depending on the business structure (sole proprietorship, LLC, corporation)?

Yes, different documentation requirements apply to different business structures in India. While corporations and LLCs require more detailed documentation, such as yearly reports, tax registrations, and business licenses, sole proprietorships need to provide minimal documents.

2. Do I need a permit to operate my specific type of business?

Yes, a permit may be required for you to run a specific type of business legally in India. Non-compliance with permits or other documents may result in penalties, fines, or legal action.

3. When should I start gathering the necessary business documents?

Start gathering the necessary documentation for establishing a business as soon as possible. You should start collecting documents before initiating the formal registration process to guarantee a smooth and quick application procedure.

4. How long does it typically take to obtain all the required documents?

The specific document and processing speed could influence the time it takes to get all the necessary documents. A business visa typically takes 10–15 days, an e-visa typically takes 3–5 days, and additional documents like PAN, GST, and RoC registrations require 10–30 days.

5. Can I get help with completing the necessary paperwork for starting a business?

Yes, you can get assistance with completing all the necessary documentation for launching a business in India. You can consult a professional who can help you with legal and regulatory compliance.

6. What documents do I need to hire employees?

In order to recruit employees, you must get a formal employment contract, guarantee that all legal criteria are met, and submit an official offer letter with the terms and conditions applied.

7. Are there any ongoing document filing requirements for my business?

Yes, every business in India has to comply with ongoing paperwork filing obligations. These include submitting the required income tax, GST, and other mandatory returns as authorized by law.

8. What happens if I lose or damage an important business document?

If you lose or damage an important business document, your company may suffer serious financial losses, legal issues, and reputational harm.

The post Essential Legal Documents You Need to Start a Business in India appeared first on Razorpay Learn.

This article explores the core principles of market segmentation, exploring its various types and outlining effective strategies for implementation.

What Is Market Segmentation?

Market segmentation is a process of dividing your customers and your visitors into segments based on the qualities they share in common. 

It involves dividing a broad market into smaller groups with shared characteristics, needs, or behaviors. This allows for tailored marketing messages, product offerings, and overall strategies that resonate better with each segment. Unlike a one-size-fits-all approach, segmentation increases the likelihood of success by catering to specific customer preferences. 

There is no set format for segmenting your market. You can choose to build groups based on the type of service or product you offer. Hence, you will have a different definition of a market segment from your competitors.

Understanding Market Segmentation with Example

Let’s look into market segmentation with a familiar example: Nike, the sportswear giant. Nike caters to a vast audience passionate about athletics and fitness. However, they recognize that not all athletes have the same needs or preferences. To effectively reach their target market, Nike utilizes a multi-faceted segmentation approach.

Segmentation Methods:

• Demographic Segmentation: Age and gender play a significant role. Nike tailors its marketing to young athletes (e.g., trendy designs, celebrity endorsements), mid-career runners (e.g., performance-focused footwear, injury prevention tips), and even senior fitness enthusiasts (e.g., comfortable walking shoes, focus on joint health).
• Psychographic Segmentation: Nike understands that athletes are motivated by different factors. They target fitness enthusiasts seeking high-performance gear and a competitive edge. They also connect with casual exercisers prioritizing comfort and style. Additionally, Nike taps into the environmentally conscious market by offering sustainable product lines.
• Behavioral Segmentation: Analyzing buying habits reveals valuable insights. Nike might target frequent online shoppers with exclusive web deals or loyal customers with personalized rewards programs.

By segmenting their market, Nike achieves several key benefits:

• More Effective Marketing: Tailored messages resonate better with specific audiences, leading to higher engagement and conversion rates.
• Enhanced Product Development: Understanding segment needs allows Nike to develop products catering to specific athletic pursuits or performance levels.
• Strategic Resource Allocation: Marketing resources are focused on segments with the highest potential return on investment.
• Stronger Customer Relationships: Nike can build stronger connections by understanding and catering to the unique needs of each customer segment.

This example demonstrates how market segmentation empowers Nike to reach a broad audience effectively, ultimately driving brand loyalty and sales growth.

Types of Market Segmentation

As discussed, market segmentation involves dividing your audience into groups with shared traits. 

Here are some common approaches:

1. Demographic Segmentation

This is the most commonly used form of segmentation. As the name suggests, this includes dividing the audience on parameters like age, gender, marital status, occupation, education level, income, family size and so on. This is the most basic form of segmentation since the information here is relatively easy to access and incurs a relatively lower cost for the organisation. 

Example: An automobile company can target luxury cars to high-income earners and budget-friendly options to younger demographics.

2. Behavioural Segmentation

Another way to segment the market is by observing the consumers’ behaviour. This can include simple habits like their online shopping behaviour, the most visited day and time of the week, and actions taken on the company’s website, among other activities. 

Segmenting the audience based on their real behaviours helps to create messaging that caters to those behaviours. 

Example: An online store might send personalized recommendations based on past purchases or offer loyalty rewards for frequent customers.

3. Geographic Segmentation

Geographic segmentation means categorising the market based on location. Like the demographic form of market segmentation, geographic segmentation is basic but highly useful. Especially, when the company wants to target an advertisement at a particular group of people based on nationality or language. 

Example: A clothing company might offer winter wear in colder regions and focus on lighter clothing for warmer climates.

4. Psychographic Segmentation

Along the lines of demographic segmentation, market segmentation based on psychographics deals with more intangible characteristics like mental and emotional sides. These attributes might not be as easy to get as demographics are, but they provide valuable insight into the motive of the audience. 

Example: A sports brand might target fitness enthusiasts with performance gear and casual exercisers with comfortable clothing. Psychographic characteristics include interests, beliefs, values, attitudes and lifestyle choices.

5. Firmographic Segmentation

It’s a strategic method in B2B markets to group organizations based on shared traits, akin to how B2C markets use demographic segmentation for individuals. Firmographic segmentation, on the other hand, targets organizational attributes like industry type, company size, revenue, and location, unlike demographic segmentation which focuses on individual consumer characteristics.

Example: A software company might offer a simplified version for small businesses and a comprehensive solution for large enterprises.

Benefits of Market Segmentation

• Enhanced Message Targeting: By segmenting the market, businesses can develop targeted messaging that resonates directly with the specific needs, preferences, and pain points of each audience group. This eliminates generic marketing campaigns that may fail to capture audience attention.

• Optimized Resource Allocation: Market segmentation fosters a data-driven approach to marketing resource allocation. By identifying the most receptive segments, businesses can prioritize marketing channels and tactics that deliver the highest return on investment (ROI). This ensures resources are not wasted on ineffective campaigns with a broader, less targeted audience.

• Increased Customer Engagement: Targeted messaging, tailored to the specific interests and challenges of each segment, leads to a more engaged audience. When customers feel understood and acknowledged by a brand’s communication, they are more likely to pay closer attention and respond positively.

• Improved Conversion Rates: Market segmentation allows businesses to focus their marketing efforts on attracting the right set of potential buyers – those most likely to convert into loyal customers. By understanding the characteristics and behaviors of high-value customers, businesses can tailor their offerings and messaging to resonate with this specific group, ultimately leading to higher conversion rates.

How to Get Started With Market Segmentation?

Market segmentation isn’t a one-time fix; it’s an ongoing strategy that requires continuous refinement. This 6-step guide will equip you to begin your market segmentation journey:

1. Gather Customer Data:

The most important aspect here is to look at all the available data. Explore all the possible channels and create a dump of them.

• Data Source Identification: Leverage the comprehensive power of diverse data sources, including website analytics platforms (e.g., Google Analytics), customer relationship management (CRM) systems, customer surveys, social media audience insights (e.g., Facebook Audience Insights), and even valuable insights gleaned from customer service interactions.
• Data Consolidation: To ensure optimal data utilization, avoid the fragmentation of valuable information. Integrate data from various sources into a central data repository, such as a data warehouse or customer data platform (CDP), for ease of access and analysis.

2. Define Segmentation Goals:

Sit back and think of end goals – business goals & marketing goals. Think about the audience and what gets you the maximum revenue. Further, reduce your list to the required number of segments. 

• Business Objectives: Clearly define the overarching business goals that your segmentation strategy aims to achieve. Are you seeking to stimulate sales growth (e.g., attaining a revenue increase of X% within Y months)? Perhaps your objective is to enhance customer retention by reducing churn rate by Z%.
• Marketing Objectives: Establish marketing goals that target brand awareness through increased website traffic or amplified social media engagement. You might aim to improve lead generation or conversion rates for specific marketing campaigns.

3. Choose Segmentation Criteria:

The next step is to choose the required segmentation for your business goal:

• Demographic Segmentation: Utilize demographic data points such as age, gender, income level, educational attainment, family size, and location (zip code, city, region).
• Psychographic Segmentation: Delve deeper by incorporating psychographic data encompassing interests, values, lifestyle choices, and personality traits. Consider conducting customer surveys or focus groups to gather these valuable insights.
• Behavioral Segmentation: Analyze behavioral data encompassing purchase history, website browsing patterns (e.g., most-viewed pages), app usage patterns, email open rates, and customer service interactions.
• Firmographic Segmentation (B2B): For business-to-business markets, leverage firmographic data encompassing industry type, company size (number of employees), revenue, and location. Explore industry reports or business databases for this information.

4. Develop Buyer Personas:

• Transcend Demographics: Move beyond a solely demographic approach to create comprehensive buyer personas for each segment. Enrich these personas by incorporating details such as needs, wants, challenges, pain points, decision-making processes, and preferred communication channels (email, social media, phone).
• Data-Driven Persona Creation: Leverage the data gathered in steps 1-3 to craft a vivid picture of your ideal customer within each segment. Imagine their daily lives, motivations, and online behavior.

5. Craft Targeted Marketing Campaigns:

• Tailored Messaging: Develop messaging that resonates profoundly with the specific needs and preferences of each segment. Highlight how your product or service effectively addresses their unique challenges.
• Content Creation: Develop targeted content (e.g., blog posts, infographics, videos) that speaks directly to the interests and pain points of each segment.
• Channel Selection: Strategically leverage the right marketing channels to reach each segment effectively. Utilize email marketing for personalized offers, social media advertising for specific demographics, or targeted website content based on user behavior.

6. Track and Analyze Results:

• Metrics for Measurement: Monitor key performance indicators (KPIs) for each campaign, ensuring alignment with your overall segmentation goals (e.g., sales conversions, website traffic, lead generation, customer engagement metrics).
• Data-Driven Optimization: Analyze the data to gain a comprehensive understanding of what elements are yielding success and which require improvement. Utilize these insights to refine your segmentation strategy, messaging, and content for each segment over time.

By diligently following these steps and continuously analyzing your data, you can establish a robust market segmentation strategy that allows you to tailor your marketing efforts for maximum impact and customer engagement.

Limitations of Market Segmentation

Market segmentation is a useful tool for businesses to target their marketing efforts to specific groups of customers. However, it has some limitations that should be considered before implementing it.

1. Increased Up-Front Marketing Costs

Businesses may need to invest in market research and advertising to effectively reach their segmented target markets. This can be expensive and may not yield immediate results, leading to increased financial risks.

2. A More Complex Product Line

As businesses try to meet the specific needs and preferences of each segment, they may end up offering a wide range of products or services. This can increase operational costs and may be challenging to manage.

3. A Higher Risk of Misassumptions

While businesses may use data to create customer segments, they may not always accurately capture the needs and behaviours of the segment. This can lead to misassumptions about customer preferences, leading to ineffective marketing strategies.

4. Increased Reliance on Reliable Data

Without accurate data, businesses may not be able to create effective segments, leading to ineffective marketing strategies. This requires significant investments in data collection and analysis to ensure that the segments accurately reflect the needs and preferences of the target customers.

How to Ensure Successful Market Segmentation?

To reap the full benefits of market segmentation, it’s crucial to implement the strategy effectively. Here are some key considerations:

1. Measurable Segments Criteria

The chosen segmentation criteria should be quantifiable. This allows you to measure the size, demographics, and purchasing power of each segment, ensuring a data-driven approach. Measurable characteristics are directly related to purchasing behavior and can be used to assess the potential profitability of each segment.

2. Accessible Target Audiences

Accessibility in market segmentation refers to the ease with which a business can reach its segmented target audiences. Aligning marketing strategies ensures that messages are delivered through channels that the target audience prefers.

3. Substantial Market Potential

Segments must represent substantial market potential. This means they should be large enough and have sufficient purchasing power to justify the marketing efforts. Targeting a segment that is too small or lacks the economic means to purchase could result in wasted resources and lower ROI.

4. Actionable Segments

Actionable segments can be effectively targeted with marketing strategies that elicit differential responses. This means that the segments are defined to respond uniquely to certain marketing initiatives.

5. Adaptation and Continuous Improvement

The market is dynamic, and customer preferences evolve. Therefore, market segmentation should not be static; it requires continuous monitoring, adaptation, and improvement to remain effective. Businesses must stay agile and responsive to changes in the marketplace to maintain a competitive edge.

Conclusion

Market segmentation is a powerful tool that allows businesses to target their ideal customers with laser focus. By dividing a broad market into smaller groups with shared characteristics, companies can develop targeted marketing campaigns, create products that resonate with specific needs, and ultimately, achieve greater success.

Frequently Asked Questions (FAQs)

1. What are the 4 types of market segmentation?

The four types of market segmentation are psychographic, which considers motivations and personalities; demographic, which focuses on basic characteristics like age and income; behavioural, which is based on actions and behaviours; and firmographic, which is used for B2B characteristics.

2. Is market segmentation a one-time process?

No. Market segmentation is an ongoing process. As you gather more data and customer insights, you may need to refine your segmentation strategy and adjust your marketing efforts over time.

3. Why Is Market Segmentation Important?

Market segmentation is critical for two main reasons:

• Increased Effectiveness: Tailored messages resonate better with specific audiences, leading to higher engagement and sales.
• Competitive Advantage: Understanding customer needs allows you to develop targeted offerings and gain an edge over one-size-fits-all competitors.

4. What is the process of segmentation?

Market segmentation involves several steps, including determining the segment’s needs, identifying it, assessing its attractiveness, and deciding on the most profitable segments to target with tailored marketing strategies.

5. Can a Business Target Multiple Market Segments?

Yes, businesses can effectively target multiple market segments. It allows businesses to:

• Reach a larger market and diverse needs.
• Increase sales by tapping into more customer groups.

The post What is Market Segmentation: Example, Types, and Benefits appeared first on Razorpay Learn.

What is Market Research?

Market research is a process of gathering information about your target audience, consumers, and competitors. This process typically involves several steps, such as identifying the research objectives, determining the research method, developing the research instrument, collecting data and reporting the findings. The data gathered in market research includes demographics, psychographics, behavioural data, market trends, competitor data, and customer feedback.

The information helps businesses to develop their marketing and business strategies. Additionally, market research will help in the development of products or services to enhance the user experience.

Key Objectives of Market Research

• Market research helps companies identify the people interested in their products or services. 

• Beyond existing customers, market research helps discover potential buyers who have yet to be targeted.

• Companies use research to evaluate the impact of their promotional efforts. By assessing engagement levels across different platforms, they can fine-tune their strategies.

• Keeping an eye on market trends allows businesses to adapt and stay competitive.

• Research helps identify risks and validate concepts before launching new products or services.

Types of Market Research

1. Primary Research

It involves collecting original data directly from sources or through first-hand experiences. It is tailored to answer specific research questions.

The following are the methods to do primary market research:

• Interviews: One-on-one discussions providing in-depth insights.
• Surveys: Broad data collection through questionnaires
• Focus Groups: Group discussions to gauge consumer opinions.
• Observations: Behavioral assessments in natural settings
• Experiments: Controlled studies to establish cause and effect

Each method offers unique benefits, such as detailed personal insights from interviews or large-scale survey data.

2. Secondary Research

It utilises existing data compiled by others, often for different purposes.

The following are the methods to do secondary market research:

• Literature Reviews: Analysis of academic and industry publications.
• Statistical Analysis: Examination of existing datasets.
• Meta-analysis: Combining results from multiple studies.

These methods help identify trends and benchmarks without the time and cost of primary data collection.

3. Qualitative Research

This approach seeks to understand underlying reasons and motivations through non-numerical data.

The following are the methods to do qualitative market research:

• Interviews: Deep dives into personal experiences.
• Focus Groups: Collective views on a topic.
• Ethnographic Studies: Cultural immersion for context understanding.

Qualitative methods provide rich, narrative data that reveal the ‘why’ behind behaviours.

4. Quantitative Research

This research quantifies data to analyse variables and patterns statistically.

The following are the methods to do quantitative market research:

• Surveys: Structured questionnaires for numerical data.
• Experiments: Testing hypotheses in controlled settings.
• Observational Studies: Systematic tracking and recording of behaviours.

Quantitative methods are ideal for confirming hypotheses and generalising findings to larger populations.

5. Branding Research

This approach assesses how a brand is perceived and positioned in the market.

The following are the methods to do branding market research:

• Brand Audits: Evaluating brand elements and performance.
• Customer Surveys: Gathering perceptions and experiences.
• Competitive Analysis: Comparing brand positioning against competitors.

Branding research informs strategic decisions to enhance brand equity and market presence.

6. Customer Research

Customer research explores customer needs, behaviours, and satisfaction levels.

The following are the methods to do customer market research:

• Surveys: Direct feedback on customer experience.
• Interviews: In-depth discussions on customer journeys.
• Segmentation Analysis: Grouping customers based on characteristics.

Customer research guides product development and marketing strategies to meet customer expectations better.

7. Competitor Research

This approach analyses rivals to understand their strategies and market standing.

The following are the methods to do competitor market research:

• SWOT Analysis: Identifying competitors’ strengths, weaknesses, opportunities, and threats.
• Market Positioning: Assessing competitors’ market share and brand perception.
• Product Comparisons: Evaluating competing products or services.

Competitor research helps businesses identify market gaps and opportunities for differentiation.

8. Product Research

This research informs the development and improvement of products.

The following are the methods to do product market research:

• User Testing: Real-world product usage to gather feedback.
• Market Analysis: Studying market demand and trends.
• Concept Testing: Evaluating product ideas before full development.

Product research ensures that new products meet market needs and have a competitive edge.

How Does Market Research Work?

Market research is essential in business. Its primary purpose is to evaluate the viability of a new product or service before they are made available to the general public.

The research aids in the systematic gathering and analysis of data. This helps businesses gain valuable insights that directly influence product design, marketing strategies, and even the company’s overall direction.

Market research process is divided into several stages:

1. Research starts with data collection. Information is gathered from various sources such as market trends, consumer behaviour, and competitor analysis.
2. Next comes analysis. It is conducted to make sense of the data using statistical tools to identify patterns and correlations.
3. The final stage involves drawing conclusions and making informed decisions based on the insights gained, particularly concerning the target market’s preferences and needs.

The marketing research process is not just a preliminary step. It is a crucial research and development (R&D) phase component. It helps businesses avoid costly mistakes by ensuring that the product or service is aligned with market demands.

Surveys and questionnaires are common for gauging consumer opinion when conducting market research. Conversely, product testing allows for direct feedback on the user experience. The process also involves interviews and focus groups.

5 Steps to Conduct Market Research Process

Now that you know what market research is, its importance, and the ways to conduct it,

let’s discuss the six quick market research steps.

1. Define your target audience

Before you start understanding how your customers operate, you need to quickly understand who your customers are. Create a buyer persona and keep it handy.

Please note: It’s absolutely okay to have a number of buyer personas! 

2. Understand their behaviour 

After knowing well who your target audience is, find out what are the best ways to get in touch with them to get true answers. Evaluate their active hours, tonality, preferences, and so on.

3. Choose a method to get insights

Now is the time to take one of the most important decisions: to choose how to conduct the research. After following step #2, this should get easy. For example, if you find that your target audience opens their emails regularly and responds to them, you can choose to run a survey. However, if you find that the internet penetration to your target audience is very low and they understand their local dialect, then choosing ethnographic research comes in handy.

4. Collate the responses

This is where all your efforts come down to. It can be an Excel sheet, a Google document, or a particular software, documenting every fact is a must. Make sure to protect your data and share it only with the relevant people.

5. Form hypothesis & take actions

After you have a heap of information, it’s time to study the data and build a hypothesis. There might be instances where you will realise that you need to change the entire sign-up flow or change the language or take a different approach. How well you follow this step reflects the success of your business to a large extent. 

What Information is Gathered for Market Research?

Market research can involve gathering various types of information, depending on the objectives of the project.

These are the common types of information gathered in market research:

1. Demographic data: Age, gender, income, education, and occupation 
2. Psychographic data: Attitudes, values, and lifestyles of the target audience 
3. Behavioral data: Buying behavior such as purchase frequency, purchase history, and brand loyalty 
4. Market trends: Information on emerging technologies, new competitors, and shifts in consumer behavior 
5. Competitor data: Strengths and weaknesses of competitors, like pricing strategy, marketing tactics, and products.
6. Customer feedback: Customer satisfaction, customer pain points, areas for improvement, etc.

A Market Research Example

The importance of market research cannot be overstated. As mentioned, it allows companies to test new products and gather consumer feedback.

For instance, consider a startup aiming to launch an innovative fitness app. Before investing heavily, the company conducts market research by releasing a prototype to a select group of users. The feedback collected reveals a strong interest in personalised workout plans, suggesting a positive market response.

If the market research yields positive results, indicating consumer interest, the company can confidently move forward, knowing their product meets a market need. Conversely, if the feedback is less favourable, the company can refine its offering, ensuring it resonates with potential customers’ needs and desires.

Importance of Market Research

1. Understanding Customer Needs

Market research helps you understand your target customers’ specific needs and preferences. By analysing consumer behaviour and feedback, you can modify your products and services to satisfy customer demands better.

2. Identifying Market Opportunities

Market research pinpoints gaps and opportunities in the market. By studying trends, customer pain points, and emerging technologies, you can discover new niches or untapped segments.

  Related Read: What is a Niche Market? With Examples & Strategies

3. Mitigating Risks

Market research allows you to assess potential risks and challenges. By understanding market dynamics, competitive threats, and regulatory changes, you can develop strategies to mitigate risks and protect your investments.

4. Optimising Marketing Strategies

Effective marketing relies on accurate data. Market research provides insights into consumer preferences, channel effectiveness, and messaging strategies. This information helps you optimise marketing efforts for better results.

5. Improving Product Development

Market research informs product development by identifying gaps in existing offerings and uncovering unmet needs. By listening to customer feedback and analysing market trends, you can devise products that resonate with your audience.

6. Enhancing Customer Satisfaction

Understanding customer satisfaction is crucial for retention and loyalty. Market research helps you measure customer satisfaction and identify problems consumers may face, like using the product or the payment gateway of your platform. You can then make the required modifications to enhance the overall customer experience.

7. Monitoring Competitor Activities

Staying informed about competitors is essential. Market research tracks competitor strategies, pricing, product launches, and customer sentiment. This knowledge enables you to remain competitive and adapt to changing market dynamics.

8. Supporting Decision-Making

Data-driven decisions are more reliable. Market research provides relevant data for strategic decision-making, whether entering a new market, launching a product, or adjusting pricing.

9. Forecasting and Planning

Market research helps anticipate future trends and demand. By analysing historical data and market indicators, you can make informed forecasts and develop effective business plans.

10. Measuring Performance

Evaluating performance is critical for growth. Market research provides benchmarks and KPIs to measure success. Regular assessments help track progress and make necessary adjustments.

History of Market Research

Conclusion

Conducting market research can prove to be an eye-opener and a fact-checker to a number of individuals and organisations. Even if you think you understand your target audience in and out, a detailed study will likely uncover new channels and opportunities for you. It is always the best choice to conduct market research in the initial phase of starting or building anything as it leaves a lot of room for improvement.

Frequently Asked Questions (FAQs)

1. What Is a Market Study?

A market study is a comprehensive analysis that examines various aspects of a specific market within an industry. It involves collecting and interpreting data on competitors, consumers, and market trends to make informed business decisions.

2. Why Should You Do Market Research?

Market research is crucial for understanding consumer behaviour. It helps identify market opportunities and mitigate risks. It informs strategic decisions, helping businesses tailor their products and services to effectively meet customer needs.

3. When Should You Conduct Market Research?

Market research should be conducted when launching new products, entering new markets, or experiencing a decline in performance. It is also essential for setting goals, problem-solving, and staying ahead of competition.

4. What are the 4 types of marketing research?

The four main types of marketing research are primary research, secondary research, qualitative research, and quantitative research. Each type has its methods and tools for collecting and analysing data.

5. How can market research help with product development and innovation? 

Market research identifies consumer needs and preferences. It helps develop products that align with market demands and stay competitive.

6. What is the role of market research in pricing strategies? 

Market research helps determine the optimal price point for products or services. It assesses customer willingness to pay and competitor pricing, ensuring a balance between profitability and customer value.

7. What are the challenges of market research, and how can they be overcome? 

Common challenges associated with market research include dealing with market uncertainty, data quality, and managing overwhelming data. These can be overcome by investing in specialised research technology and adopting agile research methods.

8. Can I conduct market research on a limited budget? 

Yes, market research is possible on a limited budget by defining clear objectives, leveraging online tools, and focusing on cost-effective methods like surveys and social media listening.

9. Why is it important to identify the primary audience for the research report? 

Identifying the primary audience ensures the research report is tailored to the needs and interests of those most likely to benefit from it. It guides the language, tone, and content of the report.

10. What is the difference between primary and secondary research?

Primary research involves collecting original data directly, while secondary research analyses existing data from other sources. The former is specific to the researcher’s needs, whereas secondary research may not be.

Recommended Reads

• Patent In India: Everything You Need To Know
• The Beginner’s Guide To Effective Email Marketing 

The post What is Market Research: Definition, Types and Process appeared first on Razorpay Learn.

Angel investors are wealthy individuals who financially back start-up ventures or small businesses in return for ownership equity or convertible debt. Usually, these investors are accomplished businesspeople, entrepreneurs, or high-net-worth individuals looking to invest in new and promising opportunities. Angel investors are instrumental in the initial stages of a business since they provide more than just money; they also offer valuable insights, mentorship, and industry connections. This guide provides an in-depth understanding of angel investors, covers what is angel financing and how angel investing works, and also determines the benefits and drawbacks of angel financing.

Angel Investors Meaning

An angel investor is an affluent individual who provides financial backing to early-stage startups or small companies. They generally invest their funds in return for ownership equity in the business or, more frequently, in convertible debt that can be converted into equity. Angel investors are often described as intermediaries between friends and family and investment capitalists. They are critical to the growth of startups and invest in early-stage companies with little to no demonstrated market history. Angel investors not only invest in the companies they acquire but also help entrepreneurs develop a network of contacts and offer advice and mentoring.

Who Are Angel Investors?

Angel investors can come from diverse backgrounds, but some of the most popular profiles are the following:

1. Successful Entrepreneurs

Entrepreneurs who have succeeded in their business are among the most famous angel investors. They are attracted by the possibility of helping the next generation of entrepreneurs and applying their experience and knowledge for the greater good of young companies.

2. Industry Experts

Other frequent categories of angel investors are people with significant experience in a specific industry or sector. They may want to invest in a company operating in an industry they know well and leverage their network connections and specialised knowledge to help these companies survive and thrive in their market.

3. Affluent Individuals

Angel investors can also be doctors, lawyers, and other high-earning professionals willing to invest their money in a startup and make a considerable profit. This type of angel investor is also interested in diversifying their investment portfolio.

Examples of Angel Investors in India

Now, as you are already aware of the definition of an angel investor, let’s see some examples:

1. Anupam Mittal

Anupam Mittal is the founder of Shaadi.com and People Group. He has backed multiple startups, including Ola, CarTrade, and BlueStone. He has used his extensive experience and network to support startups that have the potential to make it big.

2. Kunal Shah

Kunal Shah is the founder of Freecharge and CRED. He has invested in more than 150 startups across the country, proving his ability to spot and believe in interesting ideas and concepts in multiple sectors.

3. Girish Mathrubootham

Girish Mathrubootham is the CEO of Freshworks, a leading customer engagement software firm. He has also backed several other startups and businesses, with which he shares his deep expertise in building successful tech businesses.

4. Harshil Mathur

Harshil Mathur is the CEO and co-founder of Razorpay. Inspired by his deep-rooted knowledge of the fintech landscape, he has used angel investing to promote startups in the fintech space and other related sectors.

5. Vijay Shekhar Sharma

Vijay Shekhar Sharma is the founder of Paytm, the first and largest digital payments platform. As a result, he has also invested his money in many startups.

6. Sanjeev Aggarwal

Sanjeev Aggarwal is the founder of Urban Ladder, a well-known furniture and home decor brand. Sanjeev has participated in many startups as an angel investor and invested in finTech and consumer-facing startups.

What Does an Angel Investor Look For?

It is difficult to evaluate the parameters that an angel investor looks for. However, broadly, it is the team, the problem statement, and the short-term and the long-term roadmap that matter the most. Some of the questions that angel investors have on top of their mind are:

• Does the founder know their business in-depth? Or are they only making passionate & assumptive statements?
• Is the idea disruptive in nature and solving an existing problem? How is it going to overtake the existing competitor in the market?
• Is there a planned roadmap for the next 6-12 months? If yes, how effective is it?
• Is the problem big enough to solve?
• Will the customers pay to get their solution?
• Will it make a difference to customers, if that solution is removed from their life?
• Is there a measurable set of customers already there?
• Will there be repeat purchases?

As mentioned, these questions are generic in nature. The overall call to invest also varies based on personal relationships, past experiences, and so on.

Types of Angel Investors

There are two main ways to categorise angel investors: one by their investment style and the other by their level of involvement.

1. By Investment Style

• Lead Investors: The first group of angel investors to invest in a company are called lead investors, and they are often the most important ones. Lead investors invest a significant amount and are more actively involved in guiding the startup’s evolution.

• Co-investors: Also referred to as co-lead investors, they invest along with a lead investor and invest much less than lead investors. They increase the total funding and bring diverse perspectives.

• Syndicates: A group of angel investors who combine their money to make a single, more significant joint investment is known as a syndicate. This enables them to participate in more significant offers that individual angels might not be able to.

2. By Involvement Level

• Active Angels: These are always actively looking for potential startups and make frequent investments each year. Such individuals are often involved in mentoring and providing guidance to the companies in which they have invested.

• Sleeper Angels: These are angels who invest less frequently but may have a smaller portfolio of startups in which they have invested.

• Aspirational Angels: These are aspiring angels who are just getting started. They may even be making their first investments.

• Super Angels: These investors have high net worth and often invest larger sums, sometimes matching venture capital levels. In several respects, these individuals may perform as mini venture capital firms, with aspects and teams designed to help their investments.

• Ultra High Net Worth Individuals (UHNWIs) With Investment Advisors: This includes highly wealthy people with high net worth who depend on advisors to invest their capital, which may consist of angel investing.
• Single and Multifamily Offices: These are private wealth management firms that manage investments for wealthy families. They allocate a portion of their client’s assets to angel investing.

How Does Angel Investing Work?

As you already know what is angel investing, let’s dive deep into its working process. Angels invest small amounts compared to venture capitalists, but they can provide valuable mentorship and connections to the company. Although angel investing in India is high risk, successful investments can provide significant returns on investment. Angels also benefit from tax incentives and favourable treatment of capital gains.

What Are the Origins of Angel Investors?

Angel investing is a concept that has existed for years and can be linked to specific periods in history and economic situations. Several landmarks have been recorded in the years that have defined and confirmed how essential angel investors are in the startup environment. The formation of the National Venture Capital Association in the 1970s was a significant landmark, as it institutionalised and encouraged angel investing. Moreover, the establishment of angel investment networks and the involvement of more high-net-worth people in this area as angel investors assisted in the evolution of this type of investment.

Notable examples of successful angel investments in India include Flipkart, Ola Cabs, and Paytm, which received early-stage funding from prominent angel investors like Sachin Bansal, Bhavish Aggarwal, and Vijay Shekhar Sharma.

How to Find Angel Investors in India?

There are several ways to find angel investors in India:

• Personal Connections: One of the best ways to find an angel investor is through personal and professional connections or referrals. Ask any known person to refer or introduce an individual interested in investing in a startup. Sometimes, the best investors in a startup come from personal connections.
• Networking Events: Attend startup events, conferences, and networking meetups taking place in the city or region. These events are often visited by angel investors seeking attractive investment opportunities.
• Angel Investor Networks: India has various angel investor networks, such as the Indian Angel Network, Mumbai Angels, Hyderabad Angels, Chennai Angels, and more. Research these networks to understand their investment criteria and apply to be a part of their portfolio.
• Online Platforms: Online platforms connect startups and investors. In India, some of the most popular ones include LetsVenture, AngelList, and Venture Catalysts. Create a profile and make sure to highlight the startup’s potential to attract the investor community.
• Incubators and Accelerators: Individuals can join startup incubators and accelerators that offer funding, mentorship, and networking opportunities.
• Industry Associations: Find industry-specific associations that suit the startup and have pools of investors interested in the industry. Become a member and participate in their events often.
• Social Media and Online Forums: Use platforms, such as LinkedIn, Twitter, and startup forums interested in the industry by sharing updates about the startup and connecting with potential investors.
• Pitch Competitions: Participate in pitch competitions and startup challenges. Winning these competitions will secure financial support and make a startup more visible to potential backers. These events may showcase the startup’s capabilities and help attract angel investors.
• Financial Advisors and Consultants: Consult financial advisors or consultants with expertise in startup financing. Some advisors may be related to angel investors or can give valuable advice on fundraising tactics.

How to Approach Angel Investors?

Approaching angel investors requires careful planning and execution to make a positive impression and increase the chances of securing funding. Here are some steps to effectively approach angel investors:

• Research: The first step before approaching any angel investor is to research their background, investment preferences, and past investments. Determine the sectors they prefer, their areas of focus, the industries they target, and their investment criteria. It will help in customising the pitch and increase the chances of attracting the attention of investors.
• Warm Introductions: It is advisable to seek mutual connections or trusted advisors who can introduce the entrepreneur to investors. A warm introduction through a trusted person can increase the entrepreneur’s credibility and the likelihood that investors will read the pitch.
• Craft a Compelling Pitch Deck: Develop a visually well-designed pitch deck and ensure to highlight the startup’s unique value proposition, market opportunity, business model, traction, team, and financial projections. Make the presentation short and direct; the description must show what’s unique and special in the startup that makes it a likely investment.
• Show Traction: Investors need to see some traction and validation in the startup; this could include customer testimonials, user metrics, revenue growth partnerships, product/milestones, etc. It may reduce investor perception of risk.
• Be Transparent and Honest: Be honest about the risks a person might face when building a startup. Honesty is an essential element of trust, and as an entrepreneur, establish trust with potential investors. Be transparent about the challenges and risks and clearly articulate how to eliminate them.
• Highlight the Exit Strategy: The investors will want to get insights about how they will get their returns on investment in the future. Explain the exit strategy, whether through acquisition, IPO, or other means, and how investors are assured of getting a good return on their investment.
• Follow-Up: The next step after making the first pitch is to follow up with the investors to give them any information or details they may request. Moreover, express appreciation for their time. Also, periodically update them on the progress and milestones achieved.
• Be Open to Feedback: Finally, be open to getting feedback, even if the investors seem uninterested in investing. They can give valuable advice that an individual can use to improve his/her pitch for the next opportunity.

Eligibility Criteria for Angel Investors

To qualify as an eligible angel investor in India, an individual needs to meet one of these three conditions:

1. Individual Investor

Individuals must have at least ₹2 crore in total assets, excluding the value of their main home.

On top of that, he/she needs to have one of these:

Experience in making early-stage investments.

Experience as a successful entrepreneur who has started multiple businesses.

At least 10 years of senior management experience in a company.

2. Body Corporate (Company)

The company must have a net worth of at least ₹10 crore.

3. Alternative Investment Fund (AIF) or Venture Capital Fund (VCF)

The AIF or VCF must be registered with the Securities and Exchange Board of India (SEBI).

The landscape of angel investors has become increasingly diverse over time. Angel investors now come from diverse backgrounds, including successful entrepreneurs, industry experts, and high-net-worth individuals, contributing to a more vibrant and dynamic start-up ecosystem.

What Are the Sources of Angel Investing?

Usually, angel investors are individuals with enough financial resources who derive their funds from personal savings, success in prior businesses, and active membership in individual angel investor groups. In this regard, angel investing continues to thrive as various funding sources inspire investor interest in entrepreneurial ventures and innovative startups. Thus, this analysis helps entrepreneurs and investors explore potential sources of capital for their investments.

Angel Investment profile

Angel investors exhibit distinctive characteristics and preferences crucial for entrepreneurs and investors to understand. These include risk tolerance, investment horizons, and industry preferences. Additionally, angel investors demonstrate a keen eye for identifying promising opportunities, whether it’s successful entrepreneurs reinvesting in the next generation of startups or high-net-worth individuals seeking to fuel innovation. Their industry preferences span a wide range, from tech and healthcare to consumer goods and fintech, reflecting the breadth of their investment interests.

Advantages and Disadvantages of Angel Investors

Advantages of Angel Investors

One of the biggest advantages of working with an angel investor is that they take higher risks than any other traditional institutions, like banks. There are also a few cases wherein an angel investor does not have to be paid back in case the startup fails and the product or service does not get an adoption. The best part is that, usually, an angel investor is an experienced business person who has many years of experience. They bring a lot of knowledge to the table for a startup, which can boost growth for them.

Disadvantages of Angel Investors

The primary disadvantage of working with angel investors is that they usually purchase a stake in the startup. Because of this, they expect a certain amount of involvement in decision-making and more as the company moves forward. It leads to conflicts, which might affect the entire business at times.

Differences Between Angel Investors and Venture Capitalists

Although angel investors and venture capitalists significantly support startups, they differ in their funding patterns. Angel investors are usually high-net-worth individuals with a personal interest in helping startups and investing their money in early-stage businesses. They also provide mentorship and advice to ensure the success of their investment.

Venture capitalists, on the other hand, are responsible for managing pooled investment funds that invest in already established startups in the growth phase. They evaluate an investment opportunity for its scalability potential and other factors. These institutions invest in big numbers and use a more structured approach.

Conclusion

From less than 50 angel investors a decade ago, the Indian startup ecosystem has now recorded more than 2000+ angel investors. With an idea that can simplify the lives of people, add value, and become a part of the human ecosystem, the opportunities are limitless. Find USP, create an outstanding pitch, and go out to find the angel!

Frequently Asked Questions

1. Is Angel Investing Profitable?

Angel investing can be profitable, but it is also a high-risk investment strategy. Many startups fail, so there is a high likelihood that an angel investor may lose their entire investment. However, successful investments can provide significant returns, sometimes exceeding a 10x return on investment. While returns can take several years and are not guaranteed, some angel investors have earned significant wealth through successful investments. Overall, angel investing can be a profitable investment strategy, but it is important to carefully consider the risks and potential rewards before investing.

2. How does an angel investor get paid?

Angel investors make money through a variety of methods, including equity ownership, convertible debt, or royalties. If the company succeeds, the angel investor can sell their equity stake for a profit or receive dividends. Some angel investors may also negotiate a buyout or acquisition of the company. However, if the company fails, the angel investor may lose their entire investment.

3. What percentage do angel investors take?

The percentage of equity that an angel investor takes in a company can vary widely and is negotiated on a case-by-case basis. Generally, the percentage of equity that an angel investor takes is determined by the amount of money they invest. The more money an investor puts in, the higher the percentage of equity they will typically receive. Angel investors typically aim for a return of at least 10 times their initial investment, so they may negotiate a larger percentage of equity in exchange for their investment.

4. Who needs angel investors?

Startups and early-stage companies usually need the support of angel investors.

5. What is the average investment size of angel investors?

On average, angel investments are typically between ₹3 lakh and ₹20 lakh per investor. However, when pooled collectively as a group, these investments can run into several crores. It’s important to note that these figures can vary widely depending on the specifics of each deal and the investors involved.

6. How involved are angel investors in the management of the startups they invest in?

Angel investors are usually actively involved in the management of the startups they fund. Most angel investors provide mentorships with relevant decisions and strategic connections to the founding team.

7. Are there specific industries or sectors that angel investors prefer to invest in?

Angel investors in India invest in industries where they have developed personal expertise, such as technology, healthcare, consumer products and services, and financials.

8. What are some alternative sources of funding for startups besides angel investors?

Startups in India can attract funding from venture capital funds, crowdfunding platforms, small business loans, incubators and accelerators, and even friends and family. Each source has its advantages and disadvantages in terms of investment size, involvement, and terms.

9. Are there any tax implications for startups receiving funding from angel investors?

Yes, there can be tax implications. The startup may need to issue equity or convertible notes to the angel investor, which can affect the company’s ownership structure and future financing options. There are also potential angel tax credits and deductions available for both the startup and the angel investor, depending on local regulations in India.

The post Angel Investors: Meaning, Definition & How Does It Work appeared first on Razorpay Learn.

Suddenly, you worry that someone else will copy your idea and you will lose your identity. Well, sit back and relax because we have come a long way when it comes to safeguarding an individual’s right to his or her invention. You can establish sole ownership over your inventions by registering for a patent under Indian laws. Read this article to know this in detail.

What is a Patent?

A patent is a legal document that is granted by the government of the state or the country, depending on the national rules. It gives an inventor of a particular thing the exclusive right to make, use, and sell his or her creation for a specified period.

The basic idea of this system is to encourage the inventors to safeguard their creations. Books, movies, and some artworks cannot be patented. However, one can protect these assets under copyright law. The law of patent is one branch of the larger legal field known as intellectual property, which also includes trademark and copyright law. You can read this guide to learn in detail about what is intellectual property?

Who May Apply for a Patent?

Before learning how to obtain a patent in India, let’s go through who may apply it. In India, to obtain a patent, some qualifications must be met. Both individuals and entities, such as are eligible to apply for patents. The primary requirement is that the applicant must be the creator of the invention.

The concept of inventorship holds importance during the patent application process as it identifies those who contributed to inventing the product. Entrepreneurs driven by the mantra that “innovations fuel startups” play a role in seeking patents by creating goods or services. They must ensure their inventions meet the standards established by the Indian Patent Office and may seek guidance to safeguard their intellectual property rights effectively.

Research institutions also play a part in patent filings in protecting inventions stemming from funded research initiatives. These institutions might have guidelines on ownership and commercialization of discoveries made by their researchers.

  Related Read: What are the Different Types of Startups and Their Examples?

What Inventions are Patentable?

For any asset or invention to qualify for a patent, it must meet three basic requirements:

• It must be novel and one of a kind: This means that the particular invention must be new, and there should not be any existential trace of it
• It must be unique in itself: An improvement in the current technology by an individual cannot be patented.
• It must be helpful too: It should add value to the life of the common man, and it must not benefit or support the use of illegal things or must not be used for any immoral purpose.

Some types of inventions (or discoveries), like Isaac Newton’s law of gravity or Albert Einstein’s formula for relativity, do not qualify for this. Simply put, no one can obtain a patent on a law of nature or any scientific principle.

What Inventions are Non-Patentable?

Even though the idea of a patent is to safeguard the maker’s creation, certain things do not qualify for this according to Indian law (sections 3 and 5 of the Indian Patents Act, 1970):

• Any method of agriculture or horticulture
• Any process under the bracket of medicinal, surgical, curative, or other treatment of human beings, animals, or plants
• An upgrade or discovery of anything that relates to atomic energy
• Discovery of a unique machine, apparatus, or process

Documents Required for Filing a Patent Application

Before getting into the procedure for obtaining a patent,  let’s go through the essential documents needed during this process:

1. Patent Grant Application

The patent grant application is the initial step in the process of obtaining a patent in India. It serves as a formal request to the Indian Patent Office for granting a patent. To file this application, you need to provide the following information: 

• Applicant details including name, address, and nationality
• Title of the invention
• Field of the invention
• Description of the invention
• Drawings (if applicable)
• Abstract of the invention

When submitting your application, remember to fill out Form 1 and pay the required fee. You can choose to submit it using the e-filing system or in person at the patent office.

2. Provisional or Complete Specification

Deciding between a provisional and complete specification is essential. A provisional one offers a description of your invention, while a complete specification covers all the details and claims. It’s recommended to start with a specification to secure a priority date.

Crafting a precise specification is essential for patent protection. Ensure it contains explanations and supporting evidence or data.

3. Statement and Pledge

The statement and pledge are declarations affirming your right to file a patent application. By stating your connection to the invention and confirming the accuracy of all provided information, you establish credibility.

To prepare this document correctly, you should clearly state your connection to the invention and declare that all information provided is genuine and complete.

4. Declaration of Inventorship

Identifying and acknowledging inventors accurately is crucial in the patent application process. Make sure all individuals who significantly contributed to creating innovation are recognised as inventors in the declaration.

5. Authorisation for Representation

The representation authorization allows an agent or attorney to represent the applicant in patent-related issues. Selecting a competent representative is essential for managing the application process.

To grant power of attorney, you need to execute a power of attorney document and submit it along with the patent application. Ensure that the authorised representative is well-versed in Indian patent laws and regulations. After reading the documents, now let’s understand how to get a patent in India.

How to Apply and File a Patent in India?

In India, the Patents Act is the central body dealing with the filing and regulation of existing and new patents. This Act suggests that either the inventor, his assignee, or one of his legal representatives (in case the inventor is deceased) can apply for one in the head office of the Indian Patent Office or the branches of the office, depending on the jurisdiction of the applicant.

In case the applicant is not an Indian citizen, he or she must apply in their respective jurisdiction (where the applicant’s address for service is located). You can check out this guide if you want to know how to Apply for a Trademark in India.

How to Apply for a Patent in India?

You can choose to apply for a patent all by yourself or get help from registered agents. When it comes to the cost of getting a patent, the following two elements come into the picture:

• Government fees for forms and renewals
• If you choose to have an agent, then the charges for the professional 

It is always recommended to get a patent through a registered agent.

Here is the procedure on how to apply for patent in India:

STEP 1: Invention Disclosure

The first step is to disclose your invention to the professional. This is done by signing a non-disclosure agreement. 

Pro-tip: It is recommended to submit each known fact about your invention. Do not hold anything back.

STEP 2: Patentability Search

Usually, a professional charges a fee (approximately INR 10,000 to INR 20,000) at this step. At this stage, your professional performs extensive research for prior evidence in all the possible databases. Further, he or she builds a patentability search report based on your invention. 

STEP 3: Filing an Application for a Patent

This is where the actual process begins. After detailed research about (any) existing history of your invention, you can decide if you want to go ahead with the patent application filing. 

Please note: Your invention must have an ‘inventive step’ as compared with existing prior art pieces to qualify for a patent. It must have either ‘technical advanced’ or ‘economically significant’ or both over any existing piece of art. 

The step where you decide to go ahead with the filing process by writing an application is called patent drafting.

STEP 4: Patent Drafting

This is the fourth step in how to get a patent in India. For this, you can choose to draft the application on your own or take a professional’s help to do this. If you choose to get help, you might have to pay somewhere between INR 20,000 to INR 30,000. 

Please note: This is one of the most crucial steps of the entire process. It requires both technical and legal understanding. If not drafted the right way, all the effort you put in gets wasted. Hence it’s a good idea to take professional help here. 

STEP 5: Filing the Patent Application

It is one of the steps on how to file a patent application in India. After you are done reviewing your patent draft and are satisfied with the scope and details, you are ready to file for a patent. 

You can file the patent application in a prescribed manner with appropriate forms with fees. You need to pay fees of INR 1,600 4,000 or 8,000 (based on the type of application) while submitting the patent application to the patent office. If you do not file a request for early publication, the patent application will be published on expiry of 18 months.

STEP 6: Request for Examination

This is the step where the applicant is required to request the Indian patent office to examine your patent application within 48 hours. Requests for examination fees range from INR 4,000 to INR 20,000 (based on the type of applicant).

STEP 7: Responding to Objections (if any)

The draft and the report submitted to the officers in the patent office are thoroughly examined at this step. At this step, there is a chance for the inventor to communicate his novelty or inventive step over any other piece of art found during the assessment. If all the things are well clarified and solved, the patent application is almost ready to come to action. 

STEP 8: Grant of Patent

If the application meets all the prescribed requirements, it is placed in order for the grant. Usually, the final grant of the application is notified through a journal that is published.

STEP 9: Renewal of Your Patent

One of the last steps on how to obtain a patent in India is the renewal of your patent. Usually, a patent is in force for 20 years. On completion of 20 years, the owner is required to renew the patent by paying a small fee.

These were some important steps to be followed on how to apply for a patent in India.

Advantages of Getting a Patent for Your Business

1. Exclusive Rights

Securing a patent in India gives you ownership rights to produce, utilise and commercialise your invention for a defined period, 20 years from the submission date. This exclusivity safeguards your property from exploitation by others.

2. Market Differentiation 

A patented product or procedure distinguishes your business from competitors, acting as a selling proposition. It highlights your creativity. Can appeal to customers seeking solutions.

3. Monopoly Power

Possessing a patent grants control over the use of your invention in the market, giving you an edge in determining prices and negotiating licensing deals.

4. Revenue Generation

Patents can serve as assets that contribute to revenue generation. You can generate income by licensing the technology to firms, establishing partnerships, or even selling the patent outright.

5. Investor Confidence

Patents boost investor and stakeholder confidence in your business. They showcase your dedication to innovation and offer reassurance by safeguarding your market position.

6. Legal Protection

A patent establishes a framework for protecting your property. In instances of infringement, you have the option to take measures to halt usage and seek compensation.

7. Incentive for Innovation

Providing inventors and businesses with the assurance that their creations will be safeguarded motivates them to invest time and resources in research and development, nurturing a culture of innovation within the company.

8. Strategic Advantage

Utilising patents strategically can help establish a market position by serving as barriers to entry. They make it harder for competitors to imitate your products or processes.

9. Global Protection

In today’s interconnected world of business, patents offer protection that extends beyond boundaries. Patent filings and collaboration agreements play a role in securing intellectual property rights across multiple countries.

10. Enhanced Business Valuation

Possessing a collection of granted patents enhances the value of your business. It showcases future revenue streams and also lays a solid foundation for sustained success.

11. Technology Transfer

Patents facilitate the transfer of technology by enabling businesses to share or license their innovations with others. This opens up opportunities for collaboration and beneficial partnerships.

Challenges of Getting a Patent for Your Business

1. Stringent Eligibility Criteria

Securing a patent in India demands meeting strict eligibility criteria. The invention must be unique, involve inventive steps, and demonstrate applicability. Fulfilling these standards can pose challenges for some types of inventions.

2. Lengthy Approval Process

The patent approval process in India can be time-consuming. Delays may occur during the examination and grant stages, impacting the overall time it takes to secure a patent.

3. Documentation and Technicalities

It is essential to have thorough documentation that meets all standards when filing for a patent. Insufficient documentation or not meeting criteria may result in rejection.

4. Competing Claims and Oppositions

External parties might oppose the grant of a patent while it is being processed. Resolving these challenges can be legally complex and can lead to delays or denial of the patent.

5. High Costs

The costs associated with filing and maintaining a patent in India can be significant, posing obstacles for businesses or startups navigating through the application process.

6. Lack of Awareness

A lack of awareness among businesses regarding the importance of patent protection and the nuances of the application procedure could result in missed opportunities to safeguard property.

7. Enforcement Challenges

Enforcing a granted patent can be challenging in India due to case backlogs within the system and lengthy legal proceedings

8. Limited International Recognition

While inventions are protected within India’s patent system, achieving recognition may necessitate applications in other jurisdictions. This requirement could create hurdles for companies seeking protection for their innovations.

9. Complex Patent Drafting

Crafting a written patent application that effectively describes an invention while meeting requirements can be pretty challenging. It’s vital to engage a patent attorney for a favourable outcome.

10. Rapid Technological Changes

In evolving industries, technological advancements may outpace the patent approval process. This can lead to patents becoming outdated even before they are officially granted or enforced.

Conclusion

When it comes to obtaining a patent in India, having an understanding of the process and requirements is crucial. Starting the application, researching intention, and following the necessary documentation are vital steps. Meeting criteria such as novelty, inventive step, and industrial applicability is vital for obtaining patent approval. Highlighting the importance of patent protection, it serves as a safeguard for intellectual property rights, promoting innovation and supporting research and development efforts.

Patent protection does not just shield inventors and innovators. It also plays an essential role in driving economic growth. It acts as a deterrent against unauthorised use, ensuring that creators benefit from their work. Moreover, patents encourage investment by giving businesses an advantage and fostering an environment of innovation. Securing a patent safeguards not only the invention but also lays the groundwork for long-term benefits, like market exclusivity and licensing opportunities.

In essence, the process of securing a patent in India goes beyond legalities; it’s a step that fosters innovation and safeguards the future success of intellectual pursuits.

Frequently Asked Questions (FAQs)

1. How much does a patent cost in India?

The total cost varies based on factors like the type of patent and the complexity of the invention. Generally, costs can range from ₹10,000 to ₹1,00,000 or more.

2. Can you file a patent yourself in India?

Certainly! You can file a patent application by yourself in India. However, it’s advisable to seek guidance from a patent attorney or agent due to the intricacies involved in the process.

3. Is it worth filing a patent in India? 

Securing a patent in India offers many advantages. It grants protection for your invention, prevents use by others, and opens avenues for commercialising your innovative ideas.

4. Can you apply for a patent online in India? 

Absolutely! The Indian Patent Office provides a platform where you can submit and monitor your patent application. This online system enhances convenience and efficiency by reducing paperwork and streamlining the application procedure.

5. How can you patent your idea for free?

Securing a patent without any expenses is not entirely possible. However, initiatives like Start Up India offer some concessions on fees for startups registered in India. If you want to get your Startup India registration done you can check this guide. 

6. Who is eligible to file a patent?

In India, any individual or legal entity can submit a patent application. The applicant must be the inventor or hold the rightful claim to the invention. Additionally, multiple inventors can seek a patent collaboratively.

7. What are the risks of filing a patent? 

Seeking a patent comes with its set of risks. The application process can be intricate and time-consuming. There is no assurance that your patent will be approved and competitors may challenge its validity.

The post Patent Registration: How to Apply and File a Patent in India in 2024? appeared first on Razorpay Learn.

Inventory management includes aspects such as controlling and overseeing purchases, both from the suppliers and from the customers. This includes maintaining stock, controlling the amount of product for sale and order fulfilment.

What is inventory management?

Inventory management is the process of efficiently tracking, organizing, and controlling a company’s stock of goods. It involves optimizing inventory levels, minimizing costs, and ensuring timely availability to meet customer demand, ultimately maximizing profitability and customer satisfaction.

Why do you need inventory management?

Proper inventory management is the fundamental building block to your company’s longevity. When your inventory is properly organised, your entire supply-chain will be on the right track. Not having your inventory in place can lead to issues like mis-shipments, out of stocks, overstocks, etc. 

Here are quick pointers as to why inventory management is so important:

Avoid spoilage

If your business sells perishable products or the products that come with an expiry date, like food or makeup accessories, it is highly possible that it will spoil if you do not sell it in time. Solid inventory management helps you avoid unnecessary spoilage. 

Avoid deadstock

Deadstock does not only refer to expired material but also the stocks that can no longer be sold because it could have gone out of style or out of the season’s demand. By managing your inventory in a better way, you can avoid issues like these.

Save on storage costs

Oftentimes, warehousing brings in a variable cost. This means you have to pay on the basis of the weight or size of your products. A thorough study of your inventory report over time will help you understand what products are sold best and when and hence, you will save on spending excess on the storage houses.

Improper stocks

Usually, out of stocks and overstocks occur when a company uses manual methods to place orders, without overseeing the state of their inventory. This certainly is not a good predictor for inventory forecasting and hence results in too much stock or too little stock. 

All of these mistakes will not only cost you money but also cost you wasted labour to load and unload in the beginning and then rectifying the mistakes later. Simply put, when you don’t implement proper inventory management techniques and tools, your risk of human error mistakes keeps going up. Not just monetarily, this also makes a direct impact on your customers’ experience. Poor inventory management techniques can cost you negative customer reviews and your loyalty might take a negative hit as well. 

Top inventory management techniques for your business 

Each business must try to remove as much human error as possible. Regardless of whichever inventory management tool you are planning to use, listed below inventory management techniques will help you improve your inventory (and cash flow too)!

1. Set par levels

Make the process simpler by setting a ‘par level’ for each of your product. Par level refers to the minimum quantity of a particular product that must be on hand, all the time. Whenever your inventory stocks dip below a predetermined value, you know it’s time to place an order.

Par product value may differ from product to product and also by how quickly is an item sold or how long does it take to get it sold. 

Setting up a par value will take some time initially- you will have to conduct research for each product based on the season and other factors but after setting it up ones, it will simplify the entire process of ordering!

Remember to keep checking on your par values from time to time, to check if your assumption still makes sense or you need to tweak it a little.

2. First-in first-out (FIFO)

As the name suggests, this principle means that the first stock that comes in goes out first. This is especially important for perishable products so that you don’t end up with spoiled or expired products. It is also a good idea to practice FIFO for non-perishable products. The reason is, if boxes are kept in for long, they are likely to get worn-out. You certainly don’t want to end up with something obsolete that you can’t sell.

In order to have a proper FIFO in place, all you need is an organised warehouse. Typically, this means adding the product from the back and pushing the existing products to the front. 

3. Build & manage relationships

Building a strong and reliable network plays an important role in a healthy inventory. This inventory management technique goes a long way whether you need to return a slow-selling item or restock a fast seller quickly or trouble manufacturing issues or temporarily expand storage space. It is important to have a strong relationship with your suppliers. That way, they will be more cooperative with you and help you find solutions quickly. 

Please note, a good relationship is not just about being friendly. It is about clear, proactive and open conversations. 

4. Regular auditing

Even if you have a tool or software to manage your inventory, it is a good idea to make sure that the screen data matches the actual facts. 

Find out ways to have a quick check on all of your products and if they are in sell-worthy condition.

5. Using the ABC method

Out of all your products, there are some products that need more attention than others. Using an ABC analysis lets you prioritize your inventory management by separating out the products that require a lot of attention from those that don’t. You can do this by listing your products in one of the three categories:

• High-value products with a low frequency of sales (Category A)
• Moderate-value products with a moderate frequency of sales (Category B)
• Low-value product with a high frequency of sales (Category C)

Your Items in category A require regular attention since they have huge financial impact but the sales are unpredictable. The items you list in Category C require less attention since they have a smaller financial impact and they are constantly getting sold. The items you list in Category B fall somewhere in between.

                                        Also Read All You Need To Know About Balance Sheets 

6. Accurate forecasting

One of the most important inventory management techniques is to have precise and reliable forecasting in place. Even though your prediction might not be 100 percent accurate, you will be prepared for something that might happen. Make accurate predictions by looking at the following:

• Current market trends
• Last year’s sales during the current time
• Current year’s growth rate
• Seasonality of your products
• Overall economy

Best inventory management tools

Now that you know what is inventory management, why you need it and have a hold of best inventory management techniques, it’s time you know about the best tools to help you get started. Here are the top inventory management tools to assist your business growth:

• NetSuite ERP
• Zoho Inventory 
• QuickBooks
• Systum
• SellerCloud

With the above mentioned powerful inventory management techniques in place, you can reduce additional costs while helping your business to stay profitable. You can also analyze sales patterns and predict future sales and get yourself and the business prepared for the unexpected. 

It’s time you take control of your inventory management and stop losing money and for the same, we hope this article helps you throughout!

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