The vision of the government of India, Atmanirbhar Bharat – a self-reliant India, includes building a robust ecosystem to support Indian exporters.&nbsp;

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme is a promising initiative in this direction. It was launched on 01st January 2021 to empower exporters and replace the Merchandise Exports from India Scheme (MEIS) to comply more with the World Trade Organization (WTO) norms.&nbsp;

There are multiple aspects to know about RoDTEP which we have covered in detail in this blog. 

The RoDTEP scheme refunds the amount spent on taxes and duties by exporters. These taxes and duties are levied by the local, state, and central governments and were otherwise not refundable by any other scheme. The refund amount is calculated as a specific percentage of the Free On Board (FOB) value of the product or a fixed amount based on the per unit of measurement.&nbsp;

Consider this very simple example. Consider you run a company that exports T-shirts from India. So while making those T-shirts, you may have to pay the following taxes:

Now, these taxes aren't refunded under GST.&nbsp; With the RoDTEP Scheme, the government gives a refund (say ₹18 in this case) to cover these hidden taxes. This makes exports competitive in international markets by reducing costs.

So, the exporter gets a credit or refund which they can use to reduce future taxes or transfer to someone else.

What are the Features of the RoDTEP Scheme?

The RoDTEP scheme offers two-fold benefits to the exporters: it solves critical bottlenecks in the export trade and enhances India’s competitiveness in the global arena. Here are the main features of the scheme that make it possible:

Refund of Previously Non-Refundable Taxes and Duties

Under <a href="https://www.dgft.gov.in/CP/?opt=meis">MEIS</a>, costs like VAT on fuel, mandi taxes, and electricity duties were non-refundable. RoDTEP rebates all of the above and other embedded costs to zero-rate exports. This decreases the tax burden on exporters and encourages them to sell products internationally.&nbsp;

The process to apply and receive a rebate under the RoDTEP scheme is automated and digitized from start to end.&nbsp; The exporter must log in to their <a href="https://www.icegate.gov.in/">ICEGATE</a> account which is a hub for all electronic transactions between the exporters and the customs department.&nbsp; After logging, they fill out the application form and attach documents like the shipping bill and <a href="https://www.skydo.com/blog/what-is-e-brc">Electronic Bank Realisation Certificate (eBRC)</a>. The refund is credited in the form of electronic scrips which exporters can track through an electronic ledger maintained by the Central Board of Indirect Taxes and Customs (CBIC)

RoDTEP covers a broad range of sectors like gems and jewellery, automobiles, plastic, marine, agriculture, and electronics. In total, it covers <a href="https://content.dgft.gov.in/Website/Appendix%204RE%20RoDTEP.pdf">8,555 tariff lines</a> –&nbsp; a product as defined in the list of tariff rates.

Inclusion of Various Export Entities

To support Small and Medium Companies (SMEs) and boost labour-intensive sectors like textiles, the RoDTEP scheme includes various export entities. These include Domestic Tariff Areas (DTA), Export Oriented Units (EOU), and Special Economic Zones (SEZs).

Who Can Claim Benefits Under the RoDTEP Scheme?

The RoDTEP scheme is available to exporters from various sectors and industries. Here’s a list to help you understand who can claim benefits under this scheme:

Which taxes will be Incorporated Into the RoDTEP scheme?

Here is a list of taxes compensated under the RoDTEP scheme:

How can you claim benefits under the RoDTEP Scheme?

Here is a step-by-step process you must follow to claim benefits under the RoDTEP scheme:&nbsp;

When you are filing the shipping bills, it’s mandatory to make a declaration to claim benefits under the RoDTEP scheme. You can do that by adding a specific code like RoDTEPY to the shipping bill

Register to the ICEGATE portal using a Digital Signature Certificate (DSC). This account will be useful for managing all claims and transactions under the RoDTEP scheme

Before you submit the details, take a moment to verify if the goods are eligible under the RoDTEP scheme. Also, check if the information is accurately captured in the application form

The customs officials will verify the details in the form and approve the claim for eligible goods if everything is right

On successful verification, the customs officials will generate a scroll containing the calculated benefit amount which will be made available to your ICEGATE account. Using these scrolls you can create electronic scrips&nbsp;

You can use the electronic scrips to pay for basic custom duties or transfer to other importers

What Documents Do You Need to Claim Benefits Under the RoDTEP Scheme?

Here are the documents you need to keep in handy to claim rebates for the duties and taxes paid by you during the export:

This is one of the most important documents to claim benefits under the RoDTEP scheme. Submit copies of all the shipping bills related to the export including the claim declaration

An&nbsp;<a href="https://www.skydo.com/blog/what-is-export-invoice">export invoice</a> is a document that contains the product details like name, description, rate, and the Free On Board (FOB) value

Packing list mentions product details like description and quantity. This document is needed because the customs officials use it to verify what has been exported

A <a href="https://www.skydo.com/blog/bank-realisation-certificate-all-you-need-to-know">Bank Realisation Certificate (BRC)</a> is proof that you have received the payment from the buyer in exchange for the goods exported

The bill of lading is useful when you transport the goods via sea freight. The airway bill is for air freight. Both the bills are useful to prove the goods were dispatched

Export Promotion Copy of Shipping Bill

If the nature of goods makes them eligible to make claims under different schemes including RoDTEP, then this document must be retained

Electronic Data Interchange (EDI) Registration&nbsp;

It’s important to show the ICEGATE registration to facilitate the electronic communication between you and customs authorities

This form requires the exporter to declare that they adhere to the RoDTEP guidelines and eligibility criteria

This is not mandatory, but if it’s applicable, then the exporter must produce GST returns to prove compliance with tax rules related to their exports

Letter of Undertaking (if applicable)

This is also conditional and only applies to exporters who are eligible under GST but don’t have to pay IGST

Receive Seamless Export Payments with Skydo

The RoDTEP scheme proves the commitment of the Indian government to simplify international trade for exporters. Skydo is a platform that simplifies international payments for exporters.

Skydo offers a smart, fast, and affordable solution for exporters with low fees and no hidden charges. With Skydo’s instant <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">Foreign Inward Remittance Advice (FIRA</a>), you don’t have to worry about documentation and focus solely on growing your business.&nbsp;

Join the community of exporters who trust Skydo for international payments. Sign up now. 

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Indian service sector is booming and how!&nbsp; From getting vegetables delivered to your home within 10 minutes of ordering, to a New York resident getting their query resolved by support agents in India,&nbsp; the service sector has played a key role in taking India where it is today.&nbsp;&nbsp;

A <a href="https://www.goldmansachs.com/index.html">Goldman Sachs report</a> titled ‘India's rise as the emerging services factory of the world’, forecasts that Indian goods and services exports will reach a whopping&nbsp; $1 trillion by the financial year 2030.&nbsp; With a 17% year-on-year growth in digital services export from India in 2023, the <a href="https://www.wto.org/english/res_e/booksp_e/trade_outlook24_e.pdf">Global Trade Outlook and Statistics</a> highlights that India is among the top five 5 leading exporters of digital services.

Key Industries Fueling Service Export from India

As the tertiary sector in a threefold economy, the service sector is gradually becoming more and more important for development. However, some services may be less visible than others. The server at your local restaurant is as much part of the service sector as your neighbour working in the IT sector.&nbsp;&nbsp;

In 2018, the government of India <a href="https://pib.gov.in/PressReleseDetail.aspx?PRID=1522078">introduced 12 champion service sectors</a>, and it doubled down on its intent by <a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=1898023#">introducing a plan of action</a> to focus on the growth of these champion industries.

#1: Information Technology &amp; Information Technology enabled Services (IT &amp;ITeS)

Outsourcing IT services to foreign companies has significantly propelled the growth of Indian service exports. These include software development services, web hosting, web designing, cloud services, and sometimes even data recovery. According to the ESC <a href="https://www.escindia.in/publications/#_">yearbook 2023</a>, IT Software/Services exports grew by 8.77% from 2021-22 to 2022-23, while software product development exports grew by 13.33%.

European countries, the USA, and Canada are <a href="https://www.skydo.com/blog/how-to-sell-your-it-export-services-to-the-us?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">major markets</a>, but New Zealand, Australia, and Switzerland have also started outsourcing IT work to India.&nbsp;&nbsp;

Major multinational companies like Microsoft, Infosys, Wipro, CISCO, etc, outsource a lot of their IT requirements to India, creating competition for new ventures. However, strategic partnerships, such as <a href="https://www.wipro.com/engineering-construction-operations/it-outsourcing/">Wipro's collaboration</a> with Engineering and Construction (E&amp;C) companies, can help mitigate these challenges.

As per <a href="https://www.ibef.org/industry/tourism-hospitality-india">IBEF</a> 2023 reports, India saw 9,236,108 foreign tourists, a 321.54% increase from the previous year. The top source markets for these tourists include the USA, UK, Bangladesh, Japan and others, based on the <a href="https://tourism.gov.in/sites/default/files/2024-02/India%20Tourism%20Statistics%202023-English.pdf">India Tourism Reports 2023</a>. The post-pandemic travelling boom contributed significantly to boosting the tourism industry in the country.&nbsp;

Professionals like <a href="https://www.skydo.com/blog/chartered-accountants-approve-skydo-for-seamless-gst-refunds?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Chartered Accountants</a> (CAs), Company Secretaries, etc, can also offer services from the comfort of their homes. These services can range from basic data entry and accounting to complex tax filing, financial analysis, and even management of back-office operations.&nbsp;

Due to benefits like significant cost savings and access to highly skilled professionals, countries like the USA, UK, Canada, and Australia hire CAs and certified public accountants (CPAs) from India.

Another emerging sub-category in the financial services export from India is the fintech industry. Millions of foreign entrepreneurs and even private individuals use such software solutions and get financial advice from consultants based in India. In <a href="https://www.statista.com/statistics/1380483/india-value-of-financial-services-export-by-type/#">2021</a>, the financial service exports market in India amounted to over $5 billion.&nbsp;

India's Path to $1 Trillion in Service Exports

As is evident, the service sector encompasses not only products or goods but also individuals- their expertise and skills. From the person who collects your trash to the person who develops groundbreaking applications from their home, individuals from various industries are contributing to the service sector.&nbsp;

With a few strategic approaches, we can easily forge our way to achieving $1 trillion in service exports from India. Here’s how:&nbsp;

The IT sector is one of the highest contributors to this rapid growth of export services, as it accounted for <a href="https://www.ibef.org/industry/information-technology-india">7.5% of India’s GDP</a> in FY23, and it is expected to contribute 10% to India’s GDP by 2025.&nbsp;However, relying solely on one sector, while others also have growth potential, can make the Indian economy vulnerable. Any unforeseen circumstances, such as technological shifts or policy changes in other countries, can significantly impact the IT sector.

By looking beyond this single sector, the focus can be shifted to creating job opportunities for those with lower skill sets. To reach the $1 trillion mark, there must be balanced growth in all sectors that contribute to export services from India. Thus, focusing on emerging sectors like fintech and tourism can fuel the growth.&nbsp;

The USA has been one of India’s largest export partners, followed by China, Singapore, the United Arab Emirates (UAE), the UK, Germany, and Indonesia. However, expanding markets over time beyond these conventional regions will significantly boost the growth of service exports from India.

According to the <a href="https://gtri.co.in/">Global Trade Research Initiative Report</a>,&nbsp;the Netherlands and Brazil also joined this list between April and November 2022. With new markets come new opportunities. Exploring these markets can reveal new trends and customer needs, leading to improved services. Additionally, having a diverse range of export partners increases the stability of export incomes.

Government policies fostering India’s service exports&nbsp;

In 2022, India exported around <a href="https://economictimes.indiatimes.com/news/economy/indicators/services-exports-set-a-new-record-of-254-4-billion-in-fy22/articleshow/91316648.cms?from=mdr">$254.4 billion</a> worth of services, and this number continues to grow. The government is prioritizing support for service exporters alongside manufacturers and introducing new schemes to promote service exports, aiming for a balanced and resilient economy.

Implemented in 2015, <a href="https://www.skydo.com/blog/seis-guide">SEIS scheme</a> is one of the key players in encouraging service exports from India. Under this scheme, service exporters of certain eligible service industries get to benefit from transferable Duty Credit Scrips, which can be used for the payment of basic customs duty and other charges.&nbsp;

Simply put, these are vouchers created from the total foreign exchange earned in a financial year. This helps in increasing the profit margin by cutting off some of the overall cost for exporters. Software development, tourism, financial/accounting, etc service exporters are eligible for this scheme.

Software Technology Parks (STP) Scheme&nbsp;

STP is an export-oriented scheme that promotes the development and export of software from India. This also includes the export of professional services. Business units registered under this scheme get access&nbsp; to various benefits such as:

What does India’s rising service export mean for you?

New markets, government support, and the gradual reopening of pandemic-impacted sectors like tourism and hospitality are driving the growth of the export services industry. This includes untapped regions with growing economies or specialized niches within existing markets. Companies with expertise in financial services, engineering, or education can meet these new demands, boosting overall export volume.

The Indian government is also streamlining regulations, providing tax breaks, and investing in infrastructure to facilitate digital service delivery. We can, for instance, expect the government to offer grants to companies developing new software solutions for the export market in the near future.&nbsp;

Furthermore, software solutions like Skydo strengthen this trend by enabling efficient international payment processing. This makes it easier for companies to participate in the global marketplace and capitalize on growth opportunities.

In conclusion, the growth of Indian service exports is a lasting trend, suggesting the realistic possibility of India becoming a trillion-dollar economy by 2030. By focusing on upskilling, exploring new markets, and introducing new tech to simplify business operations, you can easily become a part of this booming industry. 

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Hours of refining code and designs might feel futile if your client base remains confined to local boundaries. But what if you could push those limits?

With more and more companies investing in web design to unlock brand value and new revenue streams, the potential to tap into global markets is vast. Yet, attracting international clients in a competitive arena demands mastering certain key strategies.&nbsp;&nbsp;

That's why we're here—to share six proven tactics to assist your web development agency in converting global clients.

How do you get International Clients for Web Development?

While timely delivery and quality work are universally demanded parameters, standing out amidst global competition also requires a planned approach. Here are some strategies to focus on:

Deepen Your Understanding of Target Markets&nbsp;

Identify the best countries for finding international clients. While North America and Western Europe emerge as obvious choices, , consider Southeast Asia, the Middle East, Africa, and Latin America for less competition.&nbsp;

Use tools like <a href="https://marketfinder.thinkwithgoogle.com/intl/en_in/">Google's Market Finder</a> to spot promising markets based on internet usage, GDP, and language. Refer to market research from industry associations (e.g., World Wide Web Consortium) or pay-walled resources like Gartner and Forrester.

After shortlisting target countries, research market dynamics:

For example, if targeting the Middle East, research holidays, shopping seasons, and design preferences to tailor your services and strategy, avoiding mispricing and mismatched expectations.

Find clients through directories, communities, trade shows, and platforms like:

This streamlines your prospecting efforts and ability to get in front of the right decision-makers.

Specialize in a High-Demand Web Development Niche

Don't try to offer every type of web development service. You'll get lost among thousands of other agencies vying for international clients.

Focus on a specific niche or domain where your agency has proven expertise and a track record of success. Consider domains like:

Obtain certifications to enhance your credibility within the niche. For the ecommerce niche, get certified on platforms like <a href="https://www.shopify.com/in">Shopify</a>, <a href="https://woocommerce.com/">WooCommerce</a>, and <a href="https://business.adobe.com/products/magento/magento-commerce.html">Magento</a>. For the fintech niche, show case studies demonstrating compliance with regulations like <a href="https://www.pcisecuritystandards.org/">PCI-DSS</a> and <a href="https://gdpr-info.eu/">GDPR</a>.

If focusing on SaaS web apps, create tutorials, code samples on integrating with popular APIs like Stripe, Twilio, etc.

Find it hard to cold outreach to your international prospects? Follow these <a href="https://www.skydo.com/blog/checklist-for-cold-outreach">steps</a>.

Leverage Digital Platforms to Access Global Audiences

Get in front of international clients with the right digital marketing strategies:

1. Build an Optimized Global Web Presence:

Your agency's website should be a powerful lead-generation asset. Optimize it for search engines and ensure a seamless multilingual experience with details like:

2. Showcase Work and Thought Leadership on Social Media:

It’s a no-brainer to use professional platforms like LinkedIn, Twitter, Facebook, Instagram and build an active presence. Mere presence isn’t enough.

3. Utilize Freelance Websites and Digital Marketplaces:

Create professional profiles on top freelance websites like Upwork, Fiverr, and Freelancer.&nbsp;

Highlight your language skills and experience working remotely across time zones. In case you’re worried about Upwork scams, <a href="https://www.skydo.com/blog/how-to-spot-scams-on-upwork">click here</a> to solve all your doubts.&nbsp;

Initiate project bidding, demonstrate your skills, and establish relationships with potential global clients.

Join Slack communities like <a href="https://react.dev/">React Developers</a> and <a href="http://node.js">Node.js</a> Community for niche networking.

4. Appear for High-Intent Search Queries:

Establish an omnipresent digital footprint optimized for international audiences.&nbsp;

It is a natural tendency for Google to find solutions, so why not invest in search engine optimization (SEO) to improve your website's visibility on search engines? This allows international businesses to easily discover your agency when searching for web development services.

Here are some strategies to appear for high-intent search queries

Get in front of international clients with effective digital marketing strategies:

a. Build an Optimized Global Web Presence:

b. Leverage Social Media to Showcase Your&nbsp; Work

c. Utilize Freelance Websites and Digital Marketplaces:

d. Optimize for High-Intent Search Queries:

Participate in Global Web Dev Events and Communities

Don't underestimate the power of in-person networking. Attend industry conferences, trade shows, webinars, and meet-ups, including export promotion council events and trade association meetings.

These forums offer guidance and valuable connections for international scaling.

For European markets, explore events like <a href="https://www.wearedevelopers.com/">WeAreDevelopers</a>, <a href="https://cssday.nl/">CSSDay</a>, etc.

By consistently contributing to discussions, people recognize and become more receptive to your services.

Showcase an Impressive Global Portfolio and Testimonials

Showcase your past work and testimonials on your agency's portfolio website. Highlight successful projects for recognized brands across different countries. Use video testimonials to add credibility, especially for cultures that value personal connections. For example, demonstrate how you use Content Delivery Networks (CDNs) and load balancing for clients with high-traffic global events.

When prospective clients can clearly see your expertise and impact, it builds trust and credibility. And don’t forget to keep your portfolio updated with your latest work.

Bonus tip: Build Processes to Deliver Stellar Global Customer Service&nbsp;&nbsp;

International clients offer invaluable opportunities, but to maximize them, keep these tips in mind:

I. German clients prioritize efficiency and consistency.

II. American clients may have distinct communication styles.

III. Japanese clients value formality and hierarchy.

Use tools like Timezone.io to coordinate working hours across time zones. Consider implementing auto-translation on chat channels using <a href="https://cloud.google.com/translate/docs/reference/rest">Google Translate API</a>. Simple gestures like offering project visibility and prompt resolutions can make a big difference.

Securing those first international clients requires careful planning and perseverance. However, with the internet shrinking distances, reaching and acquiring international clients is more feasible than ever.And when you celebrate landing that first international client, know that Skydo is here to simplify your international payments journey. With a smooth and hassle-free onboarding process, you can receive international payments directly into your bank account without losing a cent to bank fees, forex charges, or any hidden expenses. Join us today to discover the Skydo advantage! 



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India’s service export industry is booming and how.&nbsp; As of 2023, India's service exports soared by an impressive <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-services-exports-grow-11-4-in-2023-unctad-report/articleshow/109602819.cms?from=mdr">11.4%</a>, outpacing China and hitting a remarkable <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-services-exports-grow-11-4-in-2023-unctad-report/articleshow/109602819.cms?from=mdr">$345 billion</a>!

A major driver of this exponential growth is the Indian government's proactive strategy to boost exports. Recognizing the potential of the services sector, the government launched initiatives like the <a href="https://www.dgft.gov.in/CP/?opt=seis">Service Exports from India Scheme (SEIS) </a>to give Indian service exporters a competitive edge in the global market. So, without much ado, let’s dive into the what, why, and who of SEIS.

Understanding SEIS and Its Importance for Service Exports

SEIS, or its full form, Service Exports from India Scheme, was introduced by the Directorate General of Foreign Trade (DGFT) on April 1, 2015. It's a reward-based incentive program designed to boost India's service exports.&nbsp; In this blog, we will be breaking down the details of what these rewards and incentives are, what are the eligibility criteria for availing SEIS,&nbsp; how you can apply for the scheme, and more. &nbsp;You can also find the detailed guidelines for this scheme in Chapter 3 of the <a href="https://content.dgft.gov.in/Website/FTP%20Chapter%203%20as%20on%20June%2030%202019.pdf">Free Trade Policy 2015-20.&nbsp;</a>

The Service Exports from India Scheme (SEIS) supports service exporters by granting them Duty Credit Scrips. These scrips are certificates issued by the government that exporters can use to pay <a href="https://delhicustoms.gov.in/files/tughlakabad-imports/public-notices/SCAN0220.PDF">various taxes and duties</a> associated with exporting services from India. The value of these scrips is<a href="https://nacin.gov.in/resources/file/e-books/Service%20Exports%20from%20India%20Scheme%20(SEIS).pdf"> 3% or 5% </a>of the exporter’s <a href="https://content.dgft.gov.in/Website/FTP%20Chapter%203%20as%20on%20June%2030%202019.pdf">net foreign exchange earnings</a>—the total foreign exchange earned by an exporter minus all expenses incurred.

For example, if a service exporter’s net earnings are Rs. 10,00,000 for a particular order, they can receive Duty Credit Scrips worth Rs. 30,000 to Rs. 50,000, depending on the type of export services.

These Duty Credit Scrips can significantly reduce the cost of exporting services by covering various customs duties and taxes, thereby boosting profit margins. Since the scrips are based on foreign exchange earnings, they also provide a buffer against foreign exchange risks and uncertainties in international trade.

Eligibility Criteria for SEIS Participation

Here are the eligibility criteria for exporters to register themselves for the SEIS scheme:

Note that if you receive foreign remittances against the following activities, you will not be eligible for SEIS:

Here is a <a href="https://nacin.gov.in/resources/file/e-books/Service%20Exports%20from%20India%20Scheme%20(SEIS).pdf">detailed table with major services and rates of rewards</a> under the SEIS scheme:&nbsp;

Application Process for SEIS Benefits&nbsp;

If you're a <a href="https://www.skydo.com/blog/guide-for-tech-exporters-on-global-compliance?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">service exporter</a> aiming to avail of benefits under the SEIS scheme, here's a breakdown of the application process:

4. Last Date For Filling Application&nbsp;

There’s no doubt that it is only onwards and upwards for Indian exporters from hereon. However, despite government initiatives, service exporters often lose a chunk of their earnings due to hefty bank and forex charges on international payments.

At <a href="https://www.skydo.com/">Skydo</a>, we're dedicated to helping exporters retain more of their hard-earned money. With a flat, minimal transaction fee and zero forex or hidden charges, Skydo ensures that receiving international payments is both cost-effective and seamless. Make the switch to <a href="https://www.skydo.com/">Skydo</a> today and feel the difference.

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What are your monthly sales and how much gross margin do you earn? What is your company's valuation? How much cash are you burning every month? — You must be familiar with these questions if you've been binging on Shark Tank India over the past couple of months. Sharks essentially ask these questions to assess a startup's financial performance and profit potential.

Therefore, these questions are pertinent for entrepreneurs, especially if you want to seek investment in the future or expand your business.&nbsp;

Understanding these financial principles helps you make better decisions and negotiate with investors to maximise valuation and minimise equity dilution. Let's see the most popular terms used in Shark Tank and how they apply to your business.&nbsp;

Top 10 Shark Tank terms you should know to maximize valuation while minimizing equity dilution

Valuation is the true value or economic worth of your startup. Sharks invest in a startup in exchange for a certain percentage of ownership or equity. Valuation helps determine the price per share of the company and the worth of the investor’s ownership of the company.

For example, if a shark has 10% ownership in a startup whose valuation is Rs. 1 crore, they get shares worth Rs. 10,00,000.

For early-age startups that do not have sufficient financial data to show their performance, valuation is calculated via multiple means like comparing the valuation of their competitors, the company's ability to prove its potential customer base, the strength of the founding team and more such parameters.&nbsp;

Investors consider various factors such as market size, revenue and financial performance, intellectual property, founder’s expertise and unique selling proposition to calculate a startup's valuation.

Valuation is of two types: pre-money and post-money valuation. The pre-money valuation is the value of your company before seeking investment. Once you seek outside investment, the valuation increases and is called post-money valuation.

For example, if your pre-money valuation is Rs. 1 crore and you receive an external investment of Rs. 70 lakhs, the post-money valuation will be Rs. 1,70,00,000.

Equity means the total ownership of your startup and is calculated in percentage. If you are a sole entrepreneur and haven’t sought outside investment, you have complete ownership or 100% equity in the company.

In the case of two co-founders, the ownership or equity is either divided equally (each founder has 50% ownership of the company) or proportionately based on capital invested, expertise and other factors.&nbsp;

When investors agree to invest in a company, they get a certain ownership or equity in your business. So when a shark says that they want to invest 50 lakhs in a startup for 6% equity, it means that they get 6% ownership in the company whereas the founders are left with 94% equity.&nbsp;

For example, Nascher Miles, a luggage brand, had initially pitched for ₹3 crore funding for 0.75% equity in Shark Tank India season 3. However, they received ₹3 crore funding at 1.5% equity and a ₹200 crores valuation. This means that sharks own 1.5% of the company.

As startups go through subsequent funding rounds, the equity gets distributed to new investors and even valuable employees as <a href="https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/ESOPs-and-Other-Benefits-Plans-for-Employees-in-India.pdf">employee stock option plan (ESOP).</a>&nbsp;

Cash flow is defined as the movement of cash in (while receiving customer payments) and out of the business (for vendor payments or other expenses).

When the cash inflow is higher than the outflow (income is higher than the expenses), the cash flow is termed positive. However, when money moving out is more than the cash coming in, you have a negative cash flow.

Cash flow is different from profits which represents the balance amount after deducting all expenses. Even if your company has generated profits but the customer payments are delayed, you wouldn't have sufficient cash to manage your daily operations such as purchasing new inventory or paying rent. Therefore, a positive cash flow is important for business survival.&nbsp;

Margin is the difference between the selling price and the cost price of a product.&nbsp;For example, if the cost to produce a product is ₹50 and the selling price is ₹75, the gross profit margin will be 33.33%. This margin, also known as the gross operating margin, focuses solely on direct costs such as materials and labour, excluding indirect expenses like overhead or marketing

However, the net profit margin is calculated by deducting taxes, interest, and any other expense from the income.&nbsp;

Higher profit margins indicate a positive financial health of the company. Investors can understand how much a company can earn after deducting the expenses and whether it will have sufficient funds in the future for sustainable growth.

Gross profit means the profit generated after deducting the cost of goods sold from the revenue. Here the cost of goods sold includes direct expenses such as the cost of raw materials and labour costs.&nbsp;

Net profit means the final profit after deducting all the operating expenses, taxes and interests. While gross profits help determine the profitability of a product, net profit provides more realistic information about the overall financial health of a company.&nbsp;

ROI is a performance metric to determine the profitability of an investment.

Startup founders can use this formula to calculate the effectiveness of their investment and other business decisions.&nbsp;

From an investor’s perspective, high ROI means that a startup is likely to generate higher profits for the investors. Investors also calculate and compare the ROI of several startups to find the most suitable startup for investment.&nbsp;

For example, in Shark Tank India Season 1, Aman Gupta, the co-founder of boAt invested ₹20,00,000 in Skippi, an ice popsicle brand and received ₹6 crore return. The ROI on this deal is 2900%.

Learn More: <a href="https://www.skydo.com/blog/what-is-your-role-as-a-tech-startup-founder?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">What is Your Role as a Tech Startup Founder</a>

EBITDA full form is Earnings Before Interest, Taxes, Depreciation, and Amortization. It is used to calculate the net income after deducting the cost of goods sold excluding the money spent on taxes, depreciation, interest and amortization.&nbsp;

It helps investors know and compare the profitability of a company without considering the impact of a particular financing method on a business.

However, solely relying on EBITDA can sometimes show a false picture, especially for debt-funded companies because it does not consider interest payable. Investors can assess the actual revenue after deducting interest and other expenses.&nbsp;

Annual Recurring Revenue (ARR) means the projected annual revenue from existing customers. ARR is usually calculated for SaaS startups working on a subscription-based model. It helps predict future cash flow.

High ARR means better revenue predictability and helps investors understand projected revenue and potential business growth.

Burn rate refers to the rate at which a startup spends its cash reserves or venture capital to cover its operating expenses before it starts generating revenue.

A high burn rate indicates that the company is rapidly exhausting its cash supply. It might run out of capital soon and shut down.&nbsp;

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