With the third-largest startup ecosystem in the world and home to 84 unicorns and counting, India is gradually getting serious about nurturing, protecting, and encouraging entrepreneurship in the country. The Government of India wants startups & MSME’s contribution to India’s GDP to reach 50% by 2024, from the current 29%, and provide jobs to 15 crore Indians, up from 11 crores currently. Startups and MSMEs are being looked at as the foundation on which the Government's Atma Nirbhar mission and Make In India vision can come to fruition – generating more employment, increasing exports, improving the standard of living for millions of Indians, and making India strong globally. Both government and private investors want Indian entrepreneurs, startups, and MSMEs to succeed and take India to the global stage.
The Startup Ecosystem
With the objective to build a strong ecosystem for nurturing innovation and Startups in the country, the Government launched a Startup India Action Plan that offers the following support to recognized startups through:
Some government initiatives in detail :
In the endeavor to foster a culture of entrepreneurship in the country, the Government of India and the Ministry of Micro, Small, and Medium Enterprises have launched several unique Government schemes and programs designed to empower startups and MSMEs in India.
Ministry of Skill Development and Entrepreneurship
The task of promoting entrepreneurship was earlier given to different departments and government agencies. In 2014, the Government of India decided to dedicate an entire ministry to building this sector as it felt that skill development required a greater push from the government's side. Furthermore, the idea is to reach 500 million people by the year 2022 through gap-funding and skill development initiatives.
With the help of the Startup India initiative, the government of India promotes and assists entrepreneurship by mentoring, nurturing, and facilitating startups throughout their life cycle. Launched in 2016, the scheme has successfully provided a great start to a number of potential startups in the country. The initiative has provisions for various methods to learn and know more about startup growth including research parks, incubators, and startup centers among others. Apart from this, the scheme has also created a ‘Fund of Funds’ which helps startups in gaining access to funding. The primary motive of this is to build an environment in which startups can innovate and evolve without any obstacles. The mechanisms used under the initiative comprise of online recognition of startups, Startup India Learning Programme, Facilitated Patent filing, Easy Compliance Norms, Relaxed Procurement Norms, incubator support, innovation-focused programs for students, funding support, tax benefits, and addressing of regulatory issues.
Atal Innovation Mission
AIM is a scheme of the Government of India which has the objective of promoting the culture of innovation and entrepreneurship, and it serves as a platform for the promotion of world-class Innovation Hubs, Grand Challenges, start-up businesses, and other self-employment activities, particularly in technology-driven areas. To inculcate innovation and creativity in the children at the school level, the government has also launched Atal Tinkering Labs (ATL) across India. Here at these workplaces, the students can take part in various activities and work with tools and equipment to acquire hands-on knowledge of the concepts of STEM (Science, Technology, Engineering, and Math). Another program set up by AIM is Atal Incubation Centers (AICs) with an aim to build innovative start-up businesses as scalable and sustainable enterprises. They provide various facilities with the right amount of physical infrastructure on the basis of capital equipment and operating facilities.
Startup India Seed Fund Scheme
Easy availability of capital is essential for entrepreneurs at the early stages of the growth of an enterprise. Funding from angel investors and venture capital firms becomes available to startups only after the proof of concept has been provided. Similarly, banks provide loans only to asset-backed applicants. It is essential to provide seed funding to startups with innovative ideas to conduct proof of concept trials.
To overcome this challenge, the Department for Promotion of Industry and Internal Trade (DPIIT) has launched the Startup India Seed Fund Scheme (SISFS). With an outlay of INR 945 Crore, the SISFS aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization. It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.
It was observed in the Start-up India 2018 report that once a start-up gains traction, there is a gap in accessing the growth stage funding to scale up the operations. The national average score of this pillar comes out at 2.13 on a scale of 10 in the report which shows that a lot needs to be done to develop a growth stage funding mechanism. Moreover, the report also has mentioned that the enablers such as incubators and accelerators are also important partners in the overall Start-up ecosystem which supports and accelerates the successful development of businesses. As per NASSCOM Strategic Review 2019 report, start-ups in Enterprise software and services like FinTech, EdTech, HealthTech, etc. together comprise nearly 50% of the total number of start-ups. Services like FinTech, EdTech, and HealthTech alone comprise 26-30% of the total number of start-ups. Moreover, advanced technologies like IoT are being used in 15-17% of startups, AI in 54-58% of startups, and AR/VR in 26-28% of startups across segments like Home Automation, HealthTech, FinTech, RetailTech, Real Estate, Edtech, etc. Thus, there is a need to develop accelerators to support these core technologies and future technology services.
The Startup Accelerators of MeitY for pRoduct Innovation, Development, and growtH (SAMRIDH) scheme will support existing and upcoming Accelerators to select and accelerate potential IT-based startups to scale for solving India’s problems creating positive social impact. It will provide support to selected Accelerators for extending Accelerator Services, like customer connect, investor, connect, and other opportunities for international expansion, to startups and even provide the first round of funding of up to ₹40 lakh (with an average of ₹ 30 Lakh per startup per cohort). The programme will invite applications from existing and upcoming Accelerators to become partners with MeitY and provide startups accelerator programmes of 6 months every year. It is proposed to support around 300 tech Start-Ups through about 40 cohorts (size of 8-10 Start-Ups) under the program.
To improve the social and economic aspects of life in rural areas of India, A Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship (ASPIRE) was launched to set up a network of technology centers and incubation centers to accelerate entrepreneurship and also to promote startups for innovation in the agro-industry. The main objectives of the scheme are to:
Create new jobs and reduce unemployment
Promote entrepreneurship culture in India
Grassroots economic development at the district level
Facilitate innovative business solutions for unmet social needs
Promote innovation to further strengthen the competitiveness of the MSME sector.
The Government of India launched Drone Shakti on February 1, 2022. This new initiative is designed to motivate the startups to introduce diverse applications for drones, including drones-as-a-service (DaaS). Furthermore, the government would encourage the use of drones by farmers, focusing on the farmers' use of these drones to survey the lands and spray insecticides along with digitizing land records. Besides, the government also asserted to stand in full support of the drone technology startup in India. It recently flagged off 100 Kisan Drones in diverse parts of the country to spray pesticides and more. In order to promote the made-in-India drones, the government of India banned the import of drones with immediate effect. The drone manufacturing industry, as estimated by MoCA, is expected to receive an investment of over Rs 5,000 crore over the next 3 years, which will include drones and drone components.
How startups are benefiting from these initiatives
From legal support to securing funds, from tax exemptions to IPR filings, these initiatives are bringing a revolution to the Indian startup ecosystem. 4100+ startups have benefitted in the last year through various programs of the Central Government, 960 crores of funding has been given to startups through various schemes and 828 crore funds have been sanctioned for infrastructure.
Here are some success stories on how these schemes are helping startups:
After many years of research and innovations in the water sector, Dr. Shailesh Kharkwal planned to work as a social entrepreneur for eradicating clean water challenges in rural and suburban India. As a start-up company, he was initially worried about conducting business in India. However, the Startup India program of the Government of India helped him a lot and changed his vision and attitude with positivity. Today, he is the Founder & CEO of H2O Mantra Pvt Ltd. His company is growing and providing employment to many people and contributing steadily to the growth of India by doing business through GeM, a startup-friendly interface that provides him easy and open access to customers across the country. Through the guidance of the Startup India Program, H2O Mantra was registered on the GeM portal in July 2018 and it has successfully completed sales of Rs 1.33 Crore to date through the GeM portal.
Avlesh Singh’s WebEngage is a cloud-based SaaS platform for customer engagement and retention for consumer businesses with customers across the Indian subcontinent, Middle East, Europe, and North America. Their marketing cloud service was launched four years ago. They have been very capital efficient in their journey and have grown 75% YoY for the last two years in a row. They have benefited immensely from various initiatives launched by the DPIIT to help startups grow. In January 2020, they raised their Series A from venture capital firms IAN Fund and India Quotient which are backed by the Fund of Funds Scheme for Startups.
Genrobotics was started in 2017 as a Robotics company under Startup India with the vision of providing cutting-edge robotic solutions for those who are facing extremities. They developed the Bandicoot Robot for cleaning sewage in 2018 to end manual scavenging along with the rehabilitation of manual scavengers to Robot operators. They have raised investment from Unicorn VC through the Fund of Fund scheme to scale up the project across India and have now been implemented in more than 10 states. Rashid K, Co-Founder, and Director, of Genrobotic Innovations Private Limited, mentions that his company has also received the IMB Certificate for tax exemption under the Startup India scheme to boost the growth further. Now, Bandicoot Robot has become a part of India’s SWACHH BHARAT ABHIYAN and MAKE IN INDIA initiatives. They have also received the prestigious AMRUT Tech challenge Award from the Ministry of Housing and Urban Affairs, Government of India for developing turnkey technology to clean manholes without human intervention.
Switchme Technologies Pvt. Ltd. was served a notice from the Income Tax department. Though they had adhered to every rule and had every document in place, they were still worried about the time and money that response and subsequent hearings would take up. The quotes that they received from CAs confirmed their fears. Thanks to Startup India’s work on Angel Tax, the exemption came on time and they just had to attach it as a reply.
Startup India and DPIIT have been a huge boon for Ethereal Machines. Thanks to the patent facilitator scheme by Startup India, they have saved lac of rupees when it comes to IPR registration. The entire process of enrolling as a startup and being granted tax exemption was done without any hassle. As Kaushik Mudda, CEO - Ethereal Machines, mentions, the tax exemption is a huge benefit given that it helps funds be diverted towards research and development and building a self-sufficient India. They have also had the chance of exhibiting their technologies on a global platform such as GES, thanks to the support of Startup India. They are a beneficiary of the Fund of Funds Scheme through their investor Blume Ventures. They are presently utilizing the funds to expand their geographical presence and ensure that India’s name is recognized globally as a place from where a deep-tech startup can emerge and succeed. Schemes like FFS benefit homegrown funds who can then further identify and deploy funds to deserving entrepreneurs across the country.
These are just a few of the many success stories that are being scripted with the help of the Government of India’s startup-friendly policies and schemes. The government is not only promoting these schemes to help the present group of startups benefit from them but also motivating the budding entrepreneurs, startups, and students from all domains, who tend to be independent and take the vision of Atmanirbhar Bharat forward.
Slowly and steadily these initiatives are helping build a startup ecosystem that is at par with the best of the best nations. India is heading towards the golden era of entrepreneurship and it needs all hands on the deck to make its dream of Atmanirbhar Bharat a reality. Are you ready to come home and lead the charge?