Rs 7,300 Crore Committed To 86 AIFs To Boost Startups, Online Portal Soon To Facilitate Deals

The Startup India mission appears to be firing on all cylinders, with Rs 7,300 crore committed to 86 alternative investment funds (AIFs) and over Rs 9,500 crore invested in more than 600 startups under the Fund of Funds for Startups (FFS) scheme.

The AIFs are financial instruments that further invest in venture capital, hedge funds, private equity, and so on. They were introduced in 2012 by the Securities and Exchange Board of India (SEBI).

The Indian ecosystem now has 73,205 startups, from more than 645 districts across all 28 states and eight Union territories, registered with the Department for Promotion of Industry and Internal Trade (DPIIT), nearly 50 per cent representation from tier 2 and 3 cities, more than 100 unicorns, of which 44 emerged in 2021, as well as a 13,000-plus-strong startup presence in the Government e-Marketplace (GeM) fulfilling over 1.1 lakh orders worth Rs 5,600 crore.

To add to the momentum, Indian startups raised over $19 billion in funding in the first half of the calendar year 2022 — the highest in nine years — compared to the $10 billion received in the first six months of 2021, Shruti Singh, Joint Secretary, DPIIT, said 8 July, quoting a private report.

The surge in the growth of startups has drawn the government’s attention to developing a robust investment mechanism within the country to cater to the needs of emerging startups. The FFS scheme provides equity funding support for the development and growth of innovation-driven enterprises with a corpus of Rs 10,000 crore managed by the Small Industries Development Bank of India (SIDBI).

“We wanted to encourage domestic funding for our startups and ensure the returns flow back into the country. We are seeing a good response to that,” Singh told Swarajya.

As part of the FFS mandate, the government participates in the capital of SEBI-registered venture funds, who invest twice the amount in startups. Under the Startup India Seed Fund scheme, Rs 365.75 crore has been disbursed to 99 incubators and Rs 76 crore has been approved for 436 startups. The total corpus earmarked for providing seed funding to startups through incubators is Rs 945 crore.

India’s recent progress and successes come at a time when the startup landscape has shifted substantially, with the country surging close behind the United States (US) and China.

According to Startup Genome, an innovation policy advisory and research firm, overall, China’s ecosystems have declined in the rankings, a reflection of the relative decline in early-stage funding in comparison to other ecosystems.

As a further enabler to the Indian ecosystem, the DPIIT will also roll out an online platform in two months to facilitate funding for startups with the support of SIDBI, which will allow AIFs to register and help startups in approaching investors and accessing early-stage funding.

The need is understandable. Government data shows the Startup India mission gaining traction in states and across the country. As on 5 July 2022, among the leading states with DPIIT-recognised startups, Maharashtra is ahead with 13,541, Delhi with 8,670, Karnataka with 8,902, Uttar Pradesh with 6,688, Gujarat with 4,942, Haryana with 3,995, Tamil Nadu with 3,965, Haryana with 3,995, Telangana with 3,882, Kerala with 3,284, and Madhya Pradesh with 3,284.

Elsewhere, West Bengal has 2,313 DPIIT-recognised startups, Rajasthan has 2,303, Odisha has 1,330, Bihar has 1,238, Andhra Pradesh has 1,135, Chhattisgarh has 786, Jharkhand has 675, and Assam 605.

Among others, Jammu and Kashmir has 380, Chandigarh has 257, Goa has 308, and Himachal Pradesh has 205.

Sector-wise analysis of data shows IT services continuing domination with 9,041 DPIIT-recognised startups in its fold, followed by healthcare and life sciences with 6,839, education with 4,848, professional and commercial services with 3,671, food and beverages with 3,411, agriculture with 3,408, and construction with 2,684 startups.

In the technology and emerging spaces, finance technology has 2,321 startups, technology hardware has 2,260, green technology has 1,706, renewable energy has 1,933, non-renewable energy has 1,434, artificial intelligence has 1,388, enterprise software has 1,405, and internet of things has 1,274 startups.

Among the other sunrise areas, retail has 1,748 startups, marketing has 1,486, automotive has 1,446, human resources has 1,439, while the media and industry has 1,155 startups.

Other industries showing promise are transportation and storage with 1,213 startups, travel and tourism with 1,131, textiles and apparel with 986, fashion with 906, and telecommunication and networking with 702.

Aware of the importance of international forums like the Dubai Expo to fill in the critical gaps in funding the booming Indian startup sector, the government is empowering these businesses to be able to leverage the global exposure and compete better.

The next, big global opportunity is the SLUSH annual event in Helsinki, which brings together entrepreneurs, investors, corporate professionals, policymakers, and venture capital firms in Finland’s capital on a common platform, making SLUSH one of the world's largest startup-focused events.

Indian startups that get selected will get a complimentary startup pass to Slush 2022 and an opportunity to showcase their proposition.

The government is also betting big on domestic initiatives like 50 regulatory reforms by the Centre to enhance ease of doing business, raising capital, and reducing compliance burden.

A recognised startup now gets blockchain-based recognition, self‐certification under nine labour and three environment laws, relaxations in public procurement, and access to stakeholders and programmes through Startup India online hub.

As support for their intellectual property protection, filing of applications of startups has been fast-tracked; startups get 80 per cent rebate in filing of patents and 50 per cent rebate in filing of trademark vis-à-vis other companies.