Growth Comparison of startups and MSMEs

Growth Comparison of startups and MSMEs

Both startups and MSMEs are defined for specific purposes, but the government of India sponsors both organizations to promote the entrepreneurial spirit and growth-related aspects.

It is not surprising that the term “start-up” is integrated quickly into the nails of the business world. If you live in a technical industry or large technical center, you are probably familiar with the start of the boot store ideas and culture. 

 The term startup is synonymous with “new business,” but many people have not yet understood the difference between start-ups and MSMEs. To understand the growth aspects of both of them, firstly, understand the difference between these two entities? 

What’s a Startup?

A startup is described as an organization that expands a repeatable and scalable enterprise model. Startups commonly pursue novel thoughts that generate significant employment, productivity improvements, and transformational technology to force the economy and lifestyles. 

The Startup is integrated as a non-public restrained organization or registered as a partnership organization or a restrained legal responsibility partnership. The turnover is much less than Rs. a hundred Crores in the preceding economic years.

An entity will be considered as a startup up to ten years from the date of its incorporation.

An MSME

An MSME is an “independently owned and operated enterprise. The Micro, Small, and Medium Enterprise is designed for earnings and sells acknowledged merchandise to acknowledged clients in neighborhood markets. ” 

 The MSMEs are, in addition, sub-divided right into Manufacturing and Service Enterprises. For manufacturing, the funding levels from Rs. Zero to Rs. 10 crores, and in the case of Service enterprise, the funding varies from Rs. Zero to Rs. Five crores. 

An enterprise wishes to check-in as MSME to get the advantages furnished through the Ministry of Commerce in availing ability improvement and training, lengthy and medium time period loans, running capital loans, seed loans, and bridge loans.

The similarity

Startups and MSMEs (small businesses) can look like outsiders in the business world. Both are small businesses built from scratch by entrepreneurs to fill market gaps. Both aim for growth, profitability, and survival. So far, it’s very similar, but there are some small but essential differentiators. 

 Startups may be reminded of a young, excited, enterprising, cheerful image of the mind ready to bring their ideas to the world, but that’s not necessarily inaccurate. Not everything looks exactly like Mark Zuckerberg, but the idea behind startups is to snowball in a competitive industry, using all the innovations they can collect. 

It adapts to and changes with market conditions. Startup unpredictability is another critical feature, as one in ten startups can succeed, and the rest can fail. In contrast to todays start-up model, the CEO may have tried some business ideas in the past and failed while constantly working towards the next big idea.

Wherever SMEs are much more structured. Small businesses are designed from the beginning to pursue sustainability. Their developers analyzed the market, found gaps, found consumers, and contacted them. SMEs often grow slowly and usually use known formulas that have proven reliable. While the mind behind the startup is about to explode into the scene, small businesses tend to stay local and work to stay at a sustainable level for a long time.

The contribution to Economy

MSMEs are a significant driver of economic growth and proved to be the backbone of the Indian economy, with a contribution – 29% of GDP and 50% of exports. Having tackled various issues – inadequate funding, regulatory bottlenecks, infrastructure flaws, and outdated technology, the MSME sector has overcome demonization and GST implementation. It is now ready to survive the Covid 19 crisis. 

Pandemics worked as game-changers for the MSME sector – organizations went digital, digitalized supply chains, and came up with better versions of themselves. It is imperative that MSME companies digitally redesign their workplaces, rethink their business practices, and identify the right growth path, especially during the blockade. 

 According to a survey conducted by Endurance International Group, an IT services company specializing in web hosting, 30% of MSMEs have opened corporate websites or are engaged in e-commerce since the lockdown. 

More than 50% of MSMEs are using video conferencing. A notable example is an excellent collaboration between Mother Dairy and IBM, which allowed 500 Mother Dairy employees to work from home using a virtual computing environment and Mother Dairy’s data center rice field.

The MSME needs to employ technology with digitally enabled solutions to post on its e-commerce portal, attract customers, increase revenue, and quickly access digital payments. MSME needs to look for new supply chains and innovative delivery mechanisms. The immediate goal is not to increase profits but to survive the crisis. 

In addition, as more foreign stakeholders seek to be based in India, MSMEs need to adopt global best practices and produce internationally competitive products. Facilitating innovation is essential to achieving skill improvement and developing unique technical know-how. It is worth noting that the Government of India (GOI) has launched the MSME Idea Portal ideas.msme.gov.in. 

This is the MSME Bank of Programs, Ideas, Innovations, and Research, where individuals can submit ideas, innovations, and research related to MSME. Sector. The MSME Portal also facilitates the influx of venture capital and foreign cooperation.

The mutual benefit from the govt. schemes for both the sectors

According to the local circle’s survey, an MSME deals with funding or loaning as a top challenge. An additional 25% worried about finding growth, and as a top challenge for 2021 – companies worried about their survival. 

Approximately 21% of the companies have benefited from various government schemes such as Startup India, MSME Samadhan, interest-free or soft loans, Make in India, and Aatmanirbhar Bharat over the last 12 months.

About 18% in 2018, 20% in 2019, and 21% in 2020 say they have benefited from various government programs. 

 Start-ups and MSMEs have suffered from the complex burden of difficult Indian tax policy for many years. As a result, they often seek status in tax-preferred countries.

According to a survey, about 10% of these companies are seriously considering expanding overseas. Another 18% are considering this option but have not yet evaluated it. In addition, a majority of 57% answered “no” to the same question.

Can the MSMEs do better than start-ups sometime – Can MSMEs turn into Unicorns someday?

Currently, our country is advancing with about 70 unicorns (Unicorns are startups of a $1 billion valuation). These companies collectively cover a wide range of sectors, including but not limited to e-commerce, fintech, information technology, and edtech. More than half of these startups have achieved this fascinating status in the last two years. 

Micro, Small, and Medium Enterprises (MSME) are at the other end of the spectrum. These are manufacturing and service companies that invest and sell up to a specific limit. These were first highlighted in the Small and Medium Enterprise (MSMED) Development Act of 2006, but the government continues to focus on promoting them and increasing the sector’s competitiveness. 

The most apparent difference between a valuable startup and MSME is the people who run these companies. Unicorns usually exemplify advanced skills and risky individuals running shows, hence being allotted funds by bigger ventures. This apparent difference in seeing a company as a high-quality company is attractive enough for private equity funds to be interested. 

 It doesn’t take too much effort to understand that all unicorns or high-quality startups are focused on technology. The lack of technology is a major drawback to MSME. Only by using technology can companies expect consistent revenue growth several times each year. 

MSME is mostly manufacturing-focused and will eventually become a node in the supply chain, providing solutions to startups without much profit.

The government is at the forefront of driving the development of MSME through various programs. Initiatives such as Udyam registration, 59-minute loans, Mudra loans, and credit guarantee fund schemes have given MSME access to capital. 

However, financial inclusion and access to cheap credit have been the biggest challenges. However, public policy must not encourage industrialization through foreign intervention at the expense of MSME, accounting for about 30 percent of GDP. This is really to absorb the ambition to build Atmanirbhar Bharat.

In addition, district-level public programs are believed to be promoted using dedicated task forces to increase penetration and bring about more significant change. 

Various small scale sector enterprises produce goods and services limited to the region’s geography. Production leads to indigenous foods and commodities, Ayurvedic medicines, supplements, and handicrafts. 

These SMEs have the potential to create markets for products both inside and outside India. Furthermore, initiatives like the GeM Portal (Government eMarketplace) are the first step in the right direction. It allows the owner to identify needs and reach goals of creating new markets. 

It’s never too late to realize that the MSME has a future that will be the country’s most valuable business. This sector needs proper upbringing and attention to grow. If the challenges faced by MSME are addressed appropriately, India could soon witness a thousand unicorns raising the bar on India’s quest to become a developed economy.



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