Against the plan of providing Rs 2500 crore every year for startup funding, government has released Rs 600 crore in two years. Till date, 75 startups have received a funding of Rs 337 crore under the Startup India initiative.
The action plan for Government of India’s flagship initiative, Startup India, was announced in January 2016. Among other things, the action plan outlines setting up of a fund for providing funding support to startups. The fund was to be set up with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over a period 4 years (i.e. Rs 2,500 crore per year). But the information shared by the government in the Rajya Sabha reveals that only Rs 600 crore has been released by the government so far for this purpose.
The Startup India Initiative
The initiative was launched with a view to build a strong eco-system for nurturing innovation and startups in the country. The initiative aims to empower startups to grow through innovation and design.
A startup is defined as the one that
- has not been incorporated for more than 7 years, (10 years for Startups in the biotechnology sector); and
- is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation; and
- has not formed the entity by splitting up or reconstruction of a business already in existence.
Once the startup registers on the portal, it is granted recognition based on the information submitted and other eligibility criteria. Recognized startups will be eligible for a host of benefits like
- Support for filing patents
- Fast track qualification for certain public procurement in central government ministries
- Tax exemptions for eligible startups
- Funding support from the Alternate Investment Funds (AIF)
- Credit support through SIDBI etc.
What is the current status?
As per information shared by the government in the Rajya Sabha, following is the current status of various plans under the Startup India initiative as of 1st December 2017.
Number of recognized Startups: Government mentioned that 5350 startups have been recognized till 01st December 2017. The number has now increased to more than 5800. The government also mentioned that at least 40000 people are employed in these recognized startups.
Funding Support: The government’s idea for funding was to be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds. Under the Fund of Funds for Startups (FFS),
- Rs 500 crore has been released to SIDBI in 2015-16 and Rs 100 crore in 2016-17.
- SIDBI made a total commitment of Rs 605.7 crore to 17 Alternative Investment Funds (AIFs).
- AIFs have drawn Rs 90.62 crore from the FFS and have invested a total of Rs 337.02 crore in 75 Startups. The names of the investee startups up to September is available on the Startup India website.
The amount released by the government (Rs 600 crore in 2 years) and subsequent funding to startups is a far cry from the government’s initial commitment of Rs 2500 crore every year. Even the 2017-18 budget has a meagre allocation of Rs 10 crore for Startup India and an allocation of Rs 1 lakh for FFS.
Other Benefits: Government data shows that the following other benefits have been availed by the startups.
- 74 Startups have been recognized to avail tax exemption under Section 80 IAC of Income Tax Act.
- 975 applicants have received benefits under the Startups Intellectual Property Protection (SIPP) scheme.
- 15,000 users have registered on the Startup India Online Hub. The hub has resolved 75,643 queries pertaining to starting a business, access to incubation, raising funds, etc.
- Learning and Development module of the Startup India program has been used by 1,89,000 individuals so far.
The information shared by the government also mentioned that the Department of Industrial Policy and Promotion (DIPP) spent Rs 2.7 crore in 2015-16, Rs 4.8 crore 2016-17 and Rs 13.2 crore in 2017-18 on the initiative.