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The govt’s StartupIndia program has completed a year and here are the next set of actions the government is undertaking to drive the success of this program.
NextBigWhat: Who is the core audience for StartupIndia program? The tie-1 entrepreneurs or small city founders?
The core audience for Startup India program is any aspiring Startup and existing Startups irrespective of any state or city.
NextBigWhat: Is StartupIndia program mainly looking at tech driven solutions? Or is it open to others too?
Startup India program is sector agnostic and is open to Startups from all sectors.
How does Startup India program work with AIF?
The Government under the Startup India Initiative announced a Fund of Funds (FFS) with a corpus of 10,000 Cr to fund Startups. The fund for FFS shall be released over two Finance Commission cycles (14th Finance Commission cycle from 2015-2020 and 15th Finance Commission cycle from 2020-25). The total corpus of INR 10,000 crore will be released by 2025 i.e. by the end of the 15th Finance Commission cycle.
SIDBI has been appointed as the fund manager and the money from the Government would be disbursed to SIDBI. SIDBI in turn will invest a certain percentage of the total amount in SEBI registered AIFs after carrying out a due diligence.Once the SIDBI invests the amount in AIFs, they select Startups for investment. Thus, FFS does not fund Startups directly, but through selected AIFs.
Government is not involved in the selection of AIFs from Fund of Funds. Government will increase its contribution to Fund of Funds substantially in 2017-18 and thereafter as per the progress of utilization of funds which typically will increase rapidly with time.
NextBigWhat: How would you define the success of StartupIndia program? What are they key metrics government is measuring this program on?
The key metrics on which the success of Startup India program is being measured are simplification of compliance norms, access to funds, industry-academia partnerships and easing regulatory challenges. The measures undertaken and achievements under the same are as follows:
Compliance Regime based on Self-Certification
- List of 36 industries in “white” category has been published on CPCB’s website. CPCB has exempted such industries from all the applicable self-certifications under 3 Environment related Acts listed in the Startup India Action Plan.
- Ministry of Skill Development and Entrepreneurship (MSDE) has issued advisory to states to allow Startups to self-certify compliance with the Apprenticeship Rules, 1992 of Apprenticeship Act, 1961
- Startups have been allowed to self-certify compliance in respect of 6 Labour laws; 12 states have confirmed compliance to the advisory issued on 12.01.2016 by Ministry of Labour and Employment (MoLE)
Providing Funding Support through Fund of Funds (FFS) with a Corpus of INR 10,000 crore
- The fund of INR 10,000 crore shall be released over two Finance Commission cycles, that is, by the year 2025
- INR 600 crore has been released to SIDBI, INR 500 crore in FY 2015-16; INR 100 crore in FY 2016-17
- Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program to serve as a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas. 500 Tinkering Labs are to be established in schools under the Atal Innovation Mission, of which, 257 Tinkering Labs have been approved. Each school shall receive an amount of INR 20 lakhs over the next four years, INR 12 Lakh each has been disbursed to 220 tinkering labs in FY 2016-17. 6 existing Incubators (out of 232 applications received) have been sanctioned for scale-up grant of INR 10 crore by NITI Aayog.
- Harnessing Private Sector Expertise for Incubator Setup to ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public private partnership.
- Expertise of private sector needs to be leveraged for setting up of 35 new Incubators in existing institutions and 35 new private sector.10 new Incubation Centres have been shortlisted (3658 applications received and 63 shortlisted).
They shall receive a grant of INR 10 crore for 5 years. DIPP has written to 250+ corporate houses for setting up Incubators, and also provided a handbook for guiding support in this regard.
- Building Innovation Centres at National Institutes to propel successful innovation through augmentation of incubation and R&D efforts.16 TBIs (Technology Business Incubators) and 15 Startup Centres are to be jointly set up by DST and MHRD.10 have been approved and 6 are in advanced stage. 15 Startup Centres are being jointly set up by DST and MHRD, and approval for all 15 is in place. Each Startup Centre shall receive a grant INR 50 lakhs per year. An amount of INR 37.50 lakhs (INR 3.75 lakh each for 10 Startup Centres) has been released as 1st installment of the grant for 10 Startup Centres.
- Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras to propel successful innovation through incubation and joint R&D efforts between academia and Industry. The Research Park at IIT Gandhinagr has been sanctioned by DST at a total cost of INR 90 crores and has already disbursed an initial instalment of INR 40 crores.The other 6 Research Park proposals i.e. IIT Guwahati, IIT Hyderabad, IIT Kanpur, IISc Bangalore and IIT Delhi would be directly funded by DHE, MHRD
- Promoting Startups in the Biotechnology Sector to foster and facilitate bio-entrepreneurship.
3 Bio-Clusters have been funded (Kalyani, Bangalore and Faridabad); 1 is under consideration. DBT has sanctioned INR 1 crore under Biotech Equity fund to be given to bio-incubators. The initiative has already helped 3 Bio-incubators that have been selected as recipients of the above mentioned Equity Fund. A total of 20 (out of 50) bio-incubators have been funded by DBT.The impact has been multi-fold as a total of 290 Start-ups have received benefits from these bio-incubators under various programmes like Biotechnology Ignition Grant, IIPME, Sparsh, Grand Challenges, BioNEST, etc. INR 125 crore has been sanctioned by DBT so far. 20 Bio-Connect Offices will begin operations in Q4 FY 2017-18.
Launching of Innovation Focused Programs for Students
MANAK – Million Minds Augmenting National Aspirations and Knowledge scheme to promote research and innovation.
10 lakh ideas will be targeted from 5 lakh schools of all boards across the country in a Financial Year
1 lakh top ideas will be shortlisted for an INSPIRE Award of Rs. 5000/- each
UchchatarAvishkarYojana (UAY) – INR 475 crore for 2016-18 has been earmarked for 3 years, of which INR 75 crore has been sanctioned and INR 52.5 crore has been disbursed.
2500 Startups are expected to be part of the Smart India Hackathon which is a 36 hour nonstop digital programming event
NIDHI – National Initiative for Developing & Harnessing Innovations
NIDHI is an umbrella program by the DST for nurturing ideas and innovations (knowledge-based and technology-driven) into successful Startups. DST has changed the original features of the NIDHI programme and launched it with much bigger and better initiatives.
The 8 components under NIDHI would provide a range of funding support to Startups from idea to prototyping, fellowship, incubation, seed support, acceleration support, etc., i.e. it would support each stage of a budding Startupfrom idea to market. One of these components, Startup-NIDHI, would financially support each of the selected Startups with an ignition grant/award of INR 10 lakh. Guidelines and pro-forma for submission of proposals have been published on the website. Many new proposals of new TBIs, Centres of Excellence, Seed support system to TBIs and Accelerator programs would be processed within March 2017.
Key regulatory issues which have been addressed are as follows:
- Rs. 129 crore has been sanctioned, out of which, Rs. 114 crore has been released by SIDBI to 5 Venture Funds for the FY2016-17
- External Commercial Borrowing (ECB) guidelines for Startups: Startups can borrow up to $3 million or equivalent per financial year, either in rupees, or any convertible foreign currency or a combination of both, for a minimum average maturity period of three years.
- Foreign venture capital investors (FVCI) are now allowed to invest in Startups irrespective of any sector without Reserve Bank of India’s approval
- SEBI (Foreign Portfolio Investors) Regulations, 2014 have been amended to permit FPIs to invest in unlisted Non-Convertible debentures and securitised debt instruments.
The SEBI Board has approved five key amendments to SEBI (Alternative Investment Funds) Regulations, 2012 with respect to ‘Angel Funds’:
- The upper limit for number of angel investors in a scheme has been increased from forty nine to two hundred
- Angel Funds will be allowed to invest in start-ups incorporated within five years, which was earlier 3 years.
- The requirement of minimum investment amount by an Angel Fund in any venture capital undertaking has been reduced from fifty lakhs to twenty five lakhs.
- The lock-in requirements of investment made by Angel Funds in a venture capital undertaking has been reduced from three years to one year.
- Angel Funds are allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other AIFs.
5. What are the immediate plans StartupIndia program is working on? Could you share the roadmap?
Answer: The immediate plans is to work towards faster execution of the Startup India Action Plan, easier access to funds for Startups, easier compliance norms for Startups, and simpler regulations to help Startups register and stay in India.
To further help Startups, a Startup India online hub is being developed which will serve as an online platform where all the stakeholders of the Startup ecosystem (Startups, Incubators, Accelerators, Mentors, VC Firms, etc.) can collaborate and synergise their efforts.
It will host an extensive database of all the stakeholders and facilitate location-wise as well as sectoral mapping, as required. Apart from this the Government envisions greater partnership and collaboration among its Departments and Ministries, states and industry players to fruitfully channelize the momentum gathered so far.