When investor fundraising fails, grant programs may succeed
By Monika Ghosh
Funding is one of the main challenges that entrepreneurs encounter. New businesses often fail due to lack of investment. While most startups rely on investor funding, other ways of raising funds like crowdfunding, angel investment and startup grants are also gaining popularity in India.
According to the National Association of Software and Services Companies (Nasscom’s) Indian Startup Ecosystem Report 2018, startup funding in India grew 108% in 2018, from US$2 billion to $4.2 billion. More than 400 startups expanded globally in 2018 according to the report, including travel and hospitality company Oyo, cab aggregator Ola, edutech platform Byju’s, and more. However, there was a continuous decline in funding at the seed stage from $191 million in 2017 to $151 million in 2018, according to the report.
Although India is fast defining itself to the world as a global startup hub, with branches of international venture investors like Sequoia Capital and IDG Ventures based in Bengaluru, a natural imbalance between supply and demand for funding still exists. Luckily, for entrepreneurs searching for alternatives, India has plenty of private and government-backed grants that can help to make up the deficit.
Startup India Initiative:
The Startup India Initiative was launched on January 16, 2016 under the direction of Indian Prime Minister Narendra Modi. The initiative aims to build a robust ecosystem to support and nurture innovations and startups in India.
The broad action plan of the initiative focuses on providing support through simplification, including easier compliance, simpler exit processes for failed startups, legal support, fast-tracking of patent applications, and an official website to reduce information asymmetry. It also provides funding assistance and incentives in the form of exemptions from Income Tax and Capital Gains Tax for eligible startups, a fund for infusing more capital into the startup ecosystem, and a credit guarantee scheme.
The initiative also has numerous incubators and Industry-Academia partnerships to provide necessary resources to startups, and serves as a networking platform for investors, innovators and entrepreneurs in India. The Government of India created the ‘Fund of Funds for Startups’ (FFS) with $1.3 billion for investment in startups under the Startup India program.
PRISM’s Technopreneur Promotion Program (TePP):
PRISM, or Promoting Innovations in Individuals, Start-ups and MSME (Micro, Small and Medium Enterprises), earlier known as Technopreneur Promotion Programme (TePP), is another government initiative spearheaded by the Department of Science and Technology.
The Department of Scientific and Industrial Research (DSIR) provides Grant-in-Aid to Indian innovators for prototype development and commercialization, subject to various evaluations and a technical, financial and commercial viability analysis. It also provides innovators with the necessary support for patenting, as well as technical and strategic support in idea development.
PRISM offers a maximum support of US$2,600 for development of prototypes, proof of concepts and models, while offering up to $26,600 for testing and trial, patenting and technology transfers. The grant also provides funding of up to $66,600 for scaling up technology-based innovations, including patenting, design registration, trademark registry and Research and Development (R&D) proposals.
Nasscom’s 10,000 startups program was established in 2013 with the aim of providing incubation, funding, and support for 10,000 technology startups in India in 10 years. Selected startups receive help for fundraising from venture capitalists, government funds, and angel investors, among others. The startups also participate in acceleration programs, are mentored, and are encouraged to foster strategic partnerships with Nasscom’s network.
Nasscom’s four-pronged program includes Incubate, a warehouse program which provides access to a wide-reaching network of investors, mentors, industry experts, and enterprises; Virtual Incubate, a program that supports nearly 400 early- to mid-stage startups startups every year; NASSCOM Industry Partnership Program (NIPP), which facilitates engagement between large corporations and innovative technology ventures through mentorship and events; and Integrate–also known as the Global Acceleration program–which fosters global market focused B2B startups in their growth and maturity phase.
Over 6 years, more than 5,800 startups have graduated from the initiative. It has also held over 3,500 events and programs for startups, and supported 400 startups in the global ecosystem with more than 150 original product concepts.
The Ryerson Futures Network operates accelerator programs around the world under the brand Zone Startups. It offers a wide range of services and resources including funding and mentorship; access to talent, corporate partners and advisors; marketing and promotional opportunities; networking opportunities; and even soft-landing support for expansion to North American markets. They also provide seed capital for high potential startups. The grant fund size is between US$66,000 and $400,000.
UnLtd India is an organization that helps early-stage social entrepreneurs who are passionate about bringing about socioeconomic change to India by solving the country’s key issues. It supports social entrepreneurs up to the first five years of their lifecycle. UnLtd India has incubated startups across sectors including Environment, Agriculture, Sports, Health, Gender Equality, Energy, Education, Water and Sanitation, Inclusive Development and Housing.