Corporate tax rebates can help lengthen runway for startups amid funding setbacks: Gokwik

With the funding scenario slowing with the looming global recessionary indications and high inflationary impact possibly hitting India as well, many early stage startups have been struggling to sustain their businesses, it said.

“The government should make efforts in attracting investment in the sector given the slowdown in VC funding. Corporate tax rebates can help more startups get concessions on tax on their profits so that their working capital gives them the runway towards sustainability and growth,” said Chirag Taneja, co-founder of Gokwik.

According to a report by Tracxn, Indian startups have raised a total of $24.7 billion in 2022, 35% lower compared to the same period in the previous year ($37.2 billion). The significant drop in funding is attributed to a decline in late stage investments, which fell by 45% from $29.3 billion in Jan-Nov 2021 to $16.1 billion for the same period in 2022.

Seed stage rounds are currently also experiencing a contraction and have dropped by 38% as compared to the previous year.

Revenue based financing is picking up pace due to unavailability of funding and bank loans, and Gokwik said the government can also help by asking nationalised banks accrued GST credit as collateral towards business loan for the time being.

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“This will bring in the required liquidity into the sector given the uncertainties of another wave of pandemic hitting us,” said Taneja, adding that MAT concessions from 15% to 9% can help early stage startups with working capital.
Macroeconomic pressures coupled with back-to-back tech layoffs and looming global recession have put a brake on the race for tech talent in the country. There should be some reforms on the ESOPs for employees who want to work in the startup sector and protect themselves from the risk of doing so, said the company. For instance, changing applicability of tax on point of sale rather than on vesting period.

GoKwik was founded in 2020 by Taneja, Ankush Talwar, and Vivek Bajpai to solve problems with e-commerce brands, including enhancing customer experience, abandoned cart recovery, increasing conversions, boosting GMV, and reducing the return to origin (RTO).

Their solutions extend to the shoppers’ pre, during, and post-purchase journey. The company has processed over $1 billion in orders in their network and have seen a 520% increase in transactions year-on-year.