The terms MSME and Startup are used interchangeably in the business world. But did you know that both terms have different meanings and functions, even though these are different businesses? These businesses contribute to the Indian economy by creating new businesses, jobs, and ideas for growth.
The Micro, Small and Medium Enterprises generated 1.19 lakh employment in the year 2021-22. Similarly, Indian start-ups have made their mark globally, which makes India the third-largest start-up economy in the world. This article covers the differences between the MSME and Startup.
What is MSME?
The MSME stands for Micro, Small and Medium Enterprises. The classification of these three enterprises was revised on July 1st, 2020 and applies to all. Below is a composite criteria for investment in plant & machinery/ equipment and annual turnover.
- Micro: Not more than Rs.1 crore and Annual Turnover not more than Rs. 5 crores.
- Small: Not more than Rs.10 crore and Annual Turnover not more than Rs. 50 crore.
- Medium: Not more than Rs.50 crore and Annual Turnover not more than Rs. 250 crore
In the last five decades, the MSME has emerged a lot and helped in the industrialisation of rural and backward areas. The most popular examples of MSMEs are Khadi and Village Industries. As per the TPCI (Trade Promotion Council of India), the contribution of the MSME sector is around 33% of the country’s total GDP. Around 120 million jobs have been created across different industries and regions.
What is a Startup?
A startup is a newly set up business, it can be an LLP (Limited Liability Partnership), Private Limited Company or Partnership Firm. You must bring a new product or service to the market to fill the market gap, solve the existing problems and provide a unique solution to it. Usually, startups seek rapid growth because of their creative idea and venture capitalists or angel investors support the startups because they know the power of a great idea.
Also, the government is providing different benefits to startups through its different schemes, one such scheme is the Startup India Scheme. This was launched by Prime Minister Narendra Modi to provide benefits to eligible companies such as tax benefits, easier compliance, IPR fast-tracking and others. To obtain the benefits, the government has an eligibility criteria which should fulfilled by the startups to get the benefits.
Difference Between MSME and Startup
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Point of Difference
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MSME
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Startup
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Meaning
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MSMEs are the type of small businesses which run on a small scale.
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Startups are the starting version of a Private Limited Company, Partnership Firm or LLP.
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Nature
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The MSMEs are classified as per their annual turnover, investment in plant and machinery, or employment size.
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The startups are more innovative and technology-driven ventures.
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People Strength
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In MSME, there is no minimum or maximum person required. A single person can also do all the tasks and the profit will depend on the efforts.
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In a startup, different individuals from multiple fields are included to run a startup. It includes departments such as marketing, finance, HR, development, etc.
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Fund Raising
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The MSMEs, keep the ownership and take the financial help from NBFCs.
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The startups get funding from venture capitalists and angel investors in return for the shares in the business. The ownership of the businesses is divided into different parts.
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Business Objective
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The objective of MSME is to create a business model which is sustainable and has stable growth.
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Startups are set up to disrupt the current market and bring a new idea to an existing problem.
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Risk Factor
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Small business does not take high risk and they choose a path which is already tried and tested by many. They have a lower risk profile.
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The startups are known for their high risk-taking capability because they follow a different path than others.
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Technology
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The MSMEs choose existing technologies to operate their services or build products.
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As the startups create a new product they require advanced technology to achieve their objectives.
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Advantges of Startups
- Creative and Unique Ideas: The startups are based on innovative ideas which have the capability to change the current market and its practices for conducting business. They mostly bring new and different perspectives to deal with a situation. The startups are free to take risks which leads to innovative ideas and break the old norms of the business.
- Agile and Flexible Nature: Startups are small ventures which adapt the changing market conditions quickly. Implementing changes is also not tough because the people in decision-making posts are not high in numbers, so without bureaucratic hurdles the changes will be implemented and followed for growth.
- High Growth: With a unique product or service, the startup has the potential to grow by understanding the effective market, and using the right strategy and marketing to reach the ideal audience. However, this growth attracts the investors to earn high returns on their investments.
- Low Cost: In the starting years, the startups manage to conduct business activities strategically and for that, they use cloud-based services, advanced technology, efficient tools and resources. Through this, they allocate funds to resources cost-efficiently and focus on the business's main activities.
Advantages of MSME
- Subsidy on Patent Registration: To protect unique ideas and innovations, an entity can file a patent application. The MSME can avail 50% subsidy on the application which motivates them to invest more in research and development. Also, protect their work from competitors.
- Free ISO Certification: For creating trust and credibility among the customers obtaining an ISO certificate is important. However, the cost of ISO is higher but MSME can obtain it for free. This helps the MSME to improve the quality of the products which makes them more competitive in the market.
- Timely Payment by Buyers: The buyers often delay the payment to MSMEs, which affects the cash flow and financial stability. To solve this problem government has launched a Samadhan portal, on this portal the MSME can file a complaint against the buyers who delayed the payments. This initiative is helping MSMEs to improve their financial stability.
Conclusion
To conclude, MSMEs and startups are two different entities and they both have different functions. The startups will grow rapidly and for that, they take risks to scale their business whereas the MSME follow the stability and sustainability. Now, you know which license you require for your business MSME or Startup Registration. So, reach out to Registrationwala, and we assist you in obtaining the license as per your requirements.
