Startups are the engines of exponential growth that thrive on the power of innovation. Many of the present day corporates began as startups once till they became shining examples of entrepreneurial spirit. The start-up segment is a key element in India's dream of turning into a $5 trillion economy.
But as every coin has two sides, the startup ecosystem also has a flip side. While we take pride in being the third largest ecosystem for startups in the world, 90-95% of Indian startups fail within the first couple of years. Wondering what leads to such a huge number of failures? Well! Let us tell you that it is not innovation and talent but fund and resource crunch.
While we talk about the success stories of startups and emerging unicorns, many begin in conducive circumstances - getting the right environment to grow. However, we often miss talking about the disadvantaged ones, who don't get even the basic resources to execute their ideas and use the maximum potential of their talent.
Two Key Areas That Need Attention
Many Indian startups are facing a severe fund crunch. Funding in Indian startups declined by 40% in the April-June quarter due to geopolitical tensions triggered by Russia's invasion of Ukraine, slide in tech stock valuations and inflation, according to a report by PwC India. However, such ups and downs are part of the entrepreneurial cycle.
Education and Skill Upgradation
Education, reskilling, and skill upgradation of the Indian workforce are important for transitioning beyond existing capabilities and achieving demographic dividend. It needs to be understood that apart from the domestic policy environment, the global environment and technological aspects are also changing. A shock emanating from any of these changes would be harder on a newbie.
What has the Government done for Startups?
India has emerged as a 'hotspot' for startups. In the year 2021 alone, Indian startups have raised over $23 billion, are involved in over 1,000 deals and 33 Indian startups entered the coveted 'Unicorn Club'. Overall, the country has over 100 unicorns.
Despite this growth, we cannot ignore the fact that these successful startups belong to the 5% advantage startup category. Therefore, the government is equally serious about its weaker children i.e. the 95% disadvantaged startups.
To elevate the disadvantaged startup groups, the central government has launched 50 plus schemes and initiatives supporting startups in the country since 2014. While some schemes ensure direct fund support to the startups, other initiatives include establishing and enhancing the incubation centers at leading institutions like IITs and IIMs.
From launching the Startup India scheme in 2014 to allocating Rs 283.5 crore for Startup India Seed Fund Scheme in budget 2022, the Indian government has launched over 50 schemes for startups in different sectors.
This is not it, some ministries are dedicatedly working to boost the startup ecosystem in India. For example, the Ministry Of Electronics and Information Technology (MeitY) with schemes like Support for International Patent Protection in Electronics & Information Technology, Software Technology Park, and Multiplier Grants, etc is working for the sector.
The Ministry Of Agriculture And Farmers Welfare with NewGen Innovation and Entrepreneurship Development Centre promotes entrepreneurial culture in academic institutions. The Ministry Of Micro, Small And Medium Enterprises (MSME) with Credit Guarantee to strengthen the credit delivery system, NITI Aayog with Atal Incubation Centres, Scale-up Support to Establishing Incubation Centres and 1000 Atal Tinkering Laboratories are aggressively working to help the disadvantaged startup groups.
Infact, the Ministry of Skill Development and Entrepreneurship launched the Udaan Training Programme For Unemployed Youth Of J&K in 2012 with an aim to provide employment-oriented training to the youth of J&K. The Ministry of Heavy Industries & Public Enterprises launched Enhancement of Competitiveness in the Indian Capital Goods Sector in 2015 which is headed by Department of Heavy Industries (DHI).
The Ministry of New and Renewable Energy (MNRE) also introduced schemes like National Clean Energy Fund (NCEF) Refinance, IREDA Scheme For Discounting Energy Bills, and Bridge Loan Against MNRE Capital Subsidy.
Here is a comprehensive list highlighting the policies introduced by the government and its departments over the last few years to support startups across the country.
Top Startup Seed Funding Programmes by the Government Of India
|Name of the policy
|Annual Financial Incentives
|Support for International Patent Protection in Electronics & Information Technology (SIP-EIT)
|Up to INR 15 Lakhs per invention or 50% of the total expenses incurred in filing and processing of the patent application upto grant, whichever is lesser.
|Multiplier Grants Scheme (MGS)
|Limited to a maximum of INR 2 Cr per project and the duration of each project should, preferably, be less than two years. For industry consortiums these figures would be INR 4 Cr and three years.
|Software Technology Park (STP) Scheme
|Sales in the DTA up to 50% of the FOB value of exports is permissible and depreciation on computers at accelerated rates up to 100% over 5 years is permissible.
|Electronic Development Fund (EDF) Policy
|Companies will get risk capital from "Daughter Funds" set up by Electronic Development Fund (EDF).
|Modified Special Incentive Package Scheme (M-SIPS)
|Majorly provides capital subsidy of 20% in SEZ (25% in non-SEZ) for units engaged in electronics manufacturing.
|Scheme to Support IPR Awareness Seminars/Workshops in E&IT Sector
|Organizations are provided with a grant between INR 2 Lakhs to INR 5 Lakhs.
|NewGen Innovation and Entrepreneurship Development Centre (NewGen IEDC)
|Provide a limited, one-time, non-recurring financial assistance, up to a maximum of INR 25 Lakhs.
|The Venture Capital Assistance Scheme
|The quantum of SFAC Venture Capital Assistance will depend on the project cost, location and the promoter's status.
|Both term loans and/or working capital facility up to INR 100 Lakhs per borrowing unit are being provided.
|Performance & Credit Rating Scheme
|The incentives are proportional to the turnover of the MSMEs.
|Raw Material Assistance
|MSMEs will be helped to avail economics of purchases like bulk purchase, cash discount, etc. Also, all the procedures, documentation and issue of letter of credit in case of imports will be taken care of.
|Revamped Scheme of Fund for Regeneration of Traditional
|Funds limited to a maximum of INR 8 Cr to support soft, hard and thematic interventions are provided.
|Single Point Registration Scheme (SPRS)
|Micro and small enterprises will get exemption from payment of Earnest Money Deposit (EMD) and will be issued tender sets free of cost.
|Aspire - Scheme for promotion of innovation, entrepreneurship and agro-industry
|Based on nature of existence of the incubator
|Infrastructure Development Scheme
|For a deposit of six months refundable rent, an office space of 467 sq.ft. to 8,657 sq.ft. is provided.
|MSME Market Development Assistance
|Provides air fare reimbursements based on category entrepreneur lies in (General, women, SC/ST/PwD). The total subsidy on air fare & space rental charges will be restricted to INR 1.25 Lakhs per unit.
|National Awards (Individual MSEs)
|The Selected National awardee is facilitated with a cash prize of INR 1 Lakh, INR 75K, INR 50K in order of ranking.
|Coir Udyami Yojana
|The amount of bank credit will be 55% of the total project cost after deducting 40% margin money (subsidy) and owner’s contribution of 5% from beneficiaries.
|International Cooperation (IC) Scheme
|The incentives vary as per the organization category.
|Credit Linked Capital Subsidy for Technology Upgradation
|Ceiling on loans under the scheme has been raised from INR 40 Lakhs to INR 1 Cr while the rate of subsidy has been enhanced from 12% to 15%.
|Bank Credit Facilitation Scheme
|Atal Incubation Centres (AIC)
|AIM will provide a grant-in-aid of INR 10 Cr to each AIC for a maximum of five years
|Atal Tinkering Laboratories
|AIM will provide grant-in-aid that includes a one-time establishment cost of INR 10 Lakhs and operational expenses of INR 10 Lakhs for a maximum period of five years to each ATL.
|Scale-up Support to Establishing Incubation Centres
|Grant-in-aid support of INR 10 Cr will be provided in two annual instalments of INR 5 Cr each.
|Udaan Training Programme For Unemployed Youth Of J&K
|INR 750 Cr has been earmarked for the implementation of the scheme over a period of five years
|Enhancement of Competitiveness in the Indian Capital Goods Sector
|One time grant up to 25% of the cost of the technology acquisition of each technology. Maximum amount given shall not exceed INR 10 Cr
|National Clean Energy Fund (NCEF) Refinance
|REDA would provide funds received from NCEF by way of refinance to scheduled commercial banks and financial institutions (including IREDA). Maximum refinance amount INR 15 Cr per project.
|IREDA Scheme For Discounting Energy Bills
|Upto 75% of the invoice value pending for maximum six months from the date of application subject to a maximum bill discounting facility of INR 20 Cr. The minimum amount of transaction covering a set of bills shall not be less than INR 1 Cr.
|Bridge Loan Against MNRE Capital Subsidy
|The projects will get up to 80% of the existing pending eligible capital subsidy claim, as verified by the IREDA with a minimum loan assistance of INR 20 Lakhs.
|Bridge Loan Against Generation-Based Incentive (GBI) Claims
|A minimum loan assistance of INR 20 Lakhs is provided under this scheme.
|Loan for Rooftop Solar PV Power Projects
|The quantum of loan from the IREDA shall be 70% of the project cost with minimum promoter’s contribution of 30%. IREDA may extend the loan upto 75% of the project cost.
|Credit Enhancement Guarantee Scheme
|Provide credit enhancement by way of unconditional and irrevocable partial credit guarantee to enhance the credit rating of the proposed bond.
|Dairy Entrepreneurship Development Scheme
|The incentives differ with respect to the cost of the required equipment or establishment of the facilities
|4E (End to End Energy Efficiency)
|Up to 90% of the project cost with minimum loan amount of INR 10 Lakhs and maximum loan amount not to exceed INR 150 Lakhs per eligible borrower can be granted. The MSME unit has to pay only INR 30,000 and applicable taxes and the balance fee will be paid by SIDBI to auditors.
|Pradhan Mantri Mudra Yojana (PMMY)
MUDRA offers incentives through these interventions:
>Shishu: covering loans upto INR 50,000/-
> Kishor: covering loans above INR 50,000/- and upto INR 5 Lakhs
> Tarun: covering loans above INR 5 Lakhs and upto INR 10 Lakhs
|Stand Up India
|Composite loan between INR 10 Lakhs and INR 1 Cr to cover 75% of the project cost can be taken up, inclusive of term loan and working capital.
|Sustainable Finance Scheme
|Suitable assistance by way of term loan / working capital to ESCOs implementing EE / CP / Renewable Energy project provided.
|SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises (SMILE)
|The loan amount granted is based on category entrepreneur lies in. (General, women, SC/ST/PwD)
|Startup assistance Scheme
|The financial assistance provided is need-based, subject to a maximum of INR 200 Lakhs and equity kicker
|Assistance to Professional Bodies & Seminars/Symposia
|The incentives include nominal support for pre-operative expenses
|Ayurvedic Biology Program
|Support is primarily given to encourage participation of young scientists and research professionals in such events along with nominal support for pre-operative expenses.
|Industry Relevant R&D
|The industry share should not be less than 50% of the total budget. Overhead is provided to the academic partner. The SERB share shall not exceed INR 50 Lakhs for a project.
|High Risk-High Reward Research
|The research grant covers equipment, consumables, contingency and travel apart from overhead grants. No budget limit is prescribed for these projects.
|Technology Development Programme (TDP)
|Provided support for project staff salaries, equipment, supplies and consumables, contingency expenditure, patent filing charges, outsourcing charges, etc.
|National Science & Technology Management Information System (NSTMIS)
|Grant-in-aid are provided for projects. Also, overheads on projects are provided at the rate of 10% of the total project cost for educational institutions and NGOs and 8% for laboratories & institutions under Central Government departments/agencies.
|Biotechnology Industry Partnership Programme (BIPP)
|Support is provided for high-risk, accelerated technology development especially in futuristic technologies.
|Industry Innovation Programme on Medical Electronics (IIPME)
|The loan and grant are provided according to the startup stage.
|Extra Mural Research Funding
|The research grant covers equipment, consumables, contingency and travel apart from overhead grants. No budget limit is prescribed.
|SPARSH (Social Innovation programme for Products: Affordable & Relevant to Societal Health)
|The loan and grant are provided according to the startup stage.
|Promoting Innovations in Individuals, Startups and MSMEs (PRISM)
|Support grant is provided under categories such as PRISM Phase I, PRISM Phase II and PRISM-R&D Proposals.
|Rapid Grant for Young Investigator (RGYI)
|RGYI provides startup grants to young investigators across the country working in different settings such as central government funded institutions, state government-funded university departments, scientists at DSIR-approved private institutions etc.
|Biotechnology Ignition Grant (BIG)
|Up to INR 50 Lakhs for research projects with a commercialisation potential with duration of up to 18 months are provided.
India has identified the need to develop innovation and incubation centers to foster a mindset of innovation and entrepreneurship through academic institutions in its large student community. The growing number of schemes supporting incubators at IITs, IIMS and MEity and the continued inclination of young executives towards starting their own ventures is also boosting the entrepreneurship and early stage startup ecosystem in India.
The future of the Indian startup economy totally relies on the infrastructure it gets. The startup ecosystem is largely shaped by the incubation and innovation centers. Incubation center is a collaborative program which is dedicatedly designed to help new ventures test, improve and succeed.
These centers help young entrepreneurs solve the possible problems and overcome the common challenges by providing them the right workspace, infrastructure, seed funding, monitoring, feedback and training as and when required.
The primary function of an incubator center is to provide the right environment to the entrepreneurs to grow their business. Hence, it wouldn't be wrong to say that the incubation and innovation centers are the nerve.