While angels and VCs come to mind first for companies seeking funding, lesser known are the number of government and government sponsored funds that are also available to tech start-ups. Read the Overview article to get an idea of the funding options available through the Government.
An overview of Government of India funding options available to tech start-ups
For a first-time entrepreneur in a technology play, funding is a crucial challenge that can make or break the fledging business.
While finding funding is crucial for all start-ups, technology companies need investors with special skills who can assess the inherent risks of a technology business. These risks could be those associated with a new cutting-edge technology or a radical business model. Either ways, a special class of investors is needed.
While angels and VCs come to mind first for companies seeking funding, lesser known are the number of government and government sponsored funds that are also available to tech start-ups. Close to 50 different schemes are available through government Ministries and Departments including Department of Scientific and Industrial Research, Ministry of Micro Small Medium Enterprises, Department of Bio-Technology and state-level organizations.
Types of funding available
Funds from these institutions can be obtained for diverse activities, including:
- Creation of lab models
- New product development/prototype creation
- Product enhancement
- Funding for participation in trade fairs and exhibitions
- Funding for patenting of innovations
Government sponsored funds fall into multiple categories:
- Technology development funds
- Funds for patent protection
- Technology in-licensing funds
- Technology scale-up/validation funds
- Market entry funds
- Expansion Funds
Some of the funds are available specifically for projects in areas like biotechnology and renewable energy and are managed by their respective ministries. For example, the Small Business Innovation Research Initiative (SBIRI) scheme offered by the Ministry of Bio-technology offers soft loans upto Rs.10 crore as early stage funding for high-risk, innovative ideas/products for commercialization.
Funds that grow with you
Some of the government sponsored schemes are tailored to grow alongside funded companies – they offer phased funding that can be tapped at different times. One such fund is the Department of Scientific and Industrial Research (DSIR)’s Technopreneur Promotion Programme (TePP).
| Scheme | Funding | Purpose |
| Micro Technopreneurship Support (TePP) | Limit of INR 75,000 upto 90% of approved project cost | Grant for creation of lab models/computer models |
| TePP Project Fund (TPF) Phase 1 | Limit of INR 15,00,000 upto 90% of project cost | Grant for conversion of inventions into working prototypes |
| Phase II Supplementary TePP Fund (STF) | Limit of 7,50,000 upto 90% of total project cost | Grant for product value-addition, IP protection, design related work |
| Phase II Seamless Scale up Support for TePP projects (S3T) | Limit of INR 45,00,000 upto 50% of project cost | Grant for project enhancement, patent protection and limited production for test marketing |
Incubator-related Funds
More than 30 different Technology Business Incubators (TBIs) have been set up in India, many of them over the past 3-4 years. There are incubators that focus specifically on one area – such as biotechnology or start-ups focusing on technology solutions for rural markets, but there are also many that have a wide mandate. For instance, the Indian Angel Network supports companies focusing on a wide range of areas – IT, ITES, Internet/Web, Telecom, Mobile VAS, Education Technologies, Healthcare Technologies, Retail Technologies, Cloud Computing and Cleantech.
The TBIs are spread across the state and most (including the one set up by the Indian Angel Network) have been set up by institutions in participation with the National Science & Technology Entrepreneurship Development Board (NSTEDB), which is part of the Department of Science and Technology. The NSTEDB has a structured programme for setting up TBIs in association with institutional partners.
TBIs set up under the NSTEDB programme typically offer services such as (individual offerings may vary):
- Shared infrastructure, office space and common facilities
- Training including short courses
- Assistance on technology related IPR issues, legal and quality assurance services
- Marketing assistance
- Assistance in obtaining and clearances,
- Assistance in preparation of business plans
- Facilitation for participation in technology shows/ technology clinics/ trade fairs
In effect, there appears to be a wide range of funding options to explore within the government. Industry executives who have tapped these avenues point out that some of the programmes could be structured better so that the funded companies have greater flexibility in structuring the investment. But the single biggest challenge before some of the government-run institutions that offer the funding is the lack of in-house skills in assessing and structuring the investments. This could come in the way of meeting the government’s macro objective of creating an environment where start-up innovations thrive. With the basic groundwork of creating a country-wide institutional framework in place, it is time then to make this ‘infrastructure’ work better to service the industry for which it was created.
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