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  • Seed Fund support announced by Government for Startups – What should be the focus Next 4 Years?

    Published on March 17, 2020

    By: Anuj Bali

    The decade of 2010-2020 marks a phase of significant change not only in demographics and overall standard of living of Indian population, but also in the mindset of the Youth and their aspirations.

    Startups have emerged as an expression of the New India presented through innovation in the approach and manner of creating these ideas into businesses. This highly poised group of citizens may have begun writing the story of rise of an Economy. This, has been understood by Government, which endeavors to support the Startup ecosystem with benefits in the form of reduced taxation, or exemption from taxes, Incubation setting up, funding support for Fund houses and startups.

    The most recent development has been the announcement of Seed fund support for startups. The indication of this had already been expressed when Startup India team initiated the INR 5 Lakhs price money for innovations.

    Through the allocation of INR 1,000 crores to Niti Aayog under then Atal Innovation Mission and INR 1,000 crores to SIDBI for acting as a Fund of Fund for Startup Investors, there seems to be a clear indication that Government has tried to create the foundation for creating a startup infrastructure in the country.

    Funds are an important part of the Startup journey, as more than 78 percent of the business ideas require an initial capital to initiate operations, and thereafter again for scaling up fast to avoid Competitor with higher capital eradicating them.

    Basis our experience working on these schemes and with startups, a review of the various schemes rolled out by the government:

     

    1. Atal Innovation Mission (Setting up 100 incubators in India under AIC) – The scheme is brilliantly formulated and would benefit the startup ecosystem immensely. However, the speed of disbursals and implementation partnerships have been too slow to show tangible results. Only two phases have been rolled out, not even utilizing twenty percent of the allocated fund.

     

    1. Karnataka and Kerela promised to be on the forefront of startup seed funding since Year 2015. Kashmir has been latest to join. The results of these are yet to be observed.

     

    1. State government lending of INR 10 Lakh for tenure of 10 years has been another such scheme, however, the implementation has not resulted in tangible benefits in the hands of Startups.

     

    1. MUDRA loans & Credit Guarantee Scheme – The process of application and approval are so complex, with no guidance of any team or banking professionals has led to an intangible failure of the same. This scheme has given loads of hopes, but not many real beneficiaries on the ground.

     

    The speed and quality of implementation is what the Government should now focus on for the remaining tenure. The ideas at strategic level are undoubtably pointing towards a better future, however the difficult part still remains to implement the same with quality, timeliness and controls in such a manner that intended infrastructure and support reaches the beneficiary at the earliest and in the simplest of manner. India is a huge country with multiple dynamics, hence the need for administration and control in the implementation phase is of prime importance.

    The author of the article Anuj Bali is the Chartered Accountant and the founder of AnBac Advisors