Startup Saturday Gurgaon’s Dec 2014 Edition held on 13th Dec 2014 at 91 Springboard focused on alternate funding methods for Startups!
Below are few takeaways from the session, compiled by our newest SSGGN volunteer Tashina.
Our first eminent speaker for the session was Dr. Raghunandan Rajaramani, who has 25+ years of experience of which 15+ years is in Entrepreneurship Development and Technology Business Incubation. He is currently the Executive Director of the Indian STEPs and Business Incubators Association (ISBA) an Association of which he was a founder Secretary and later also Vice President. He has been a member of high level expert committee of the Technology Development Board, Govt. of India, Member of the Committee on Service Tax Exemption and is a jury member of the Asian Association of Business Incubators Awards/
Dr. Rajaramani shared below:
Prism Scheme for Funding:
Provides various stages of funding as below:
1. Category I (Up toRs 2 lakh): This is mainly for validation of a model. Individuals as well as startups can apply.
2. Category II (Up toRs 15 lakh): Here 90% pf project cost is given. This is mainly to develop a prototype. At the end of this stage you should have your first customers. Start-ups can apply for this funding.
3. Enterprise level (Upto Rs 50 lakh): Usually applicants who have gone through the second stage of funding can apply for this level of funding.Here50% of project cost is given. Companies who have secured this funding have credibility as they would have gone through and passed the various checks and balances, and accountability requirements for this funding. This credibility has enabled them to attract funding for the remaining 50%, with many companies having raised much more.
To various steps to secure funding under the PRISM scheme are below:
1. Validation process: The ideas are validated by tech angels from a technology standpoint.
2. National Committee: Once ideas are passed by validation process, they are screened and reviewed by the national committee which meets every three months. Once approved, the entrepreneur is given the funds.
3. Outreach Centers: These centers monitor progress. Because the funds are govt/public, accountability is required. Hence robust proof/documentation of spending is required.
The PRISM scheme favours funding in IT so long as there is a large social impact. E.g e-governance etc. It is difficult for IT enterpirses in other areas to get funding under this scheme. The typical turn around time from application to disbursement of funds for this scheme is 6-7 months. More information at: http://www.dsir.gov.in/12plan/prism/prism.htm
Technology Development Board (TDB)
The cess paid on various imports is put into an account and this consolidated fund has to be invested in companies. TDB has a large cheque size and has done funding up to Rs 10-12 cr.
TDB usually gives funds at 5-6% interest, which is way below what a bank can give. They funds 50% of the total project cost, and usually invest above 50 lakhs. Start-ups (3-5yrs) as well as established companies can apply. Some exapmles of companies funded by TDB are Nano etc.
TDB focuses on innovative technology. The funding process is as follows:
1. The application goes through filtering to make sure all documentation is in order.
2. The application is reviewed by experts.
3. Once it is passed by experts, the application goes to the hational committee which meets twice a year, and before which the company will make a presentation. If approved, funds are received in two months. Personal guarantees and pledging of share are required.
The turn around time from applying to receiving funds is 6-7 months. 90% of TDB companies have managed to raise 5-6 times the amount from outside because of the credibility that a TDB funded company has. More information at: http://www.tdb.gov.in/
Indo- US Grants:
The governments of the United States of America (through the Department of State) and India (through the Department of Science & Technology) have established the United States–India Science & Technology Endowment Fund (USISTEF)for the promotion of joint activities that would lead to innovation and entrepreneurship through the application of science and technology.
The grants are for areas od national importance like health,education, eradication of poverty, etc. The grant size is uptoRs 2 cr. Eligibility criteria includes, among other criteria, that the enterprise have a US partner.
More details can be found at: http://www.usistef.org/
Partnering with Institutions:
The Indian Government parks a lot of money for research in govt. institutions as well as in more established private institutions, who have been using this money for theoretical research. Slowly, faculty have been warming towards entrepreneurship, and focusing on technologies that can be patented. However, institutes lack the know how to take this technology to the market. This is an opportunity for startups. They can partner with these institutes, give them valuable market inputs, and help institutes launch the technologies commercially. Base work will need to be done to identify the institutions and faculty in the area of interest.
The Dept of Science and Technology has Technology Business Incubators (TBI), which have seed funds. To apply for the seed fund, a company needs to have been physically been incubated at one of these centers. A list of incubators are at: http://www.nstedb.com/institutional/tbi-center.htm
Our second speaker for the day was Mr. Nakul Saxena, Fellow ispirit
Nakul talked about below schemes:
Quasi Govt Schemes
1. Patent Funding: Here the Govt, gives a discount of 50% of patent filing and application fees at the time of filing/applying. This is a discount, and not a refund.
2. CGTMSME: Credit Guarantee scheme of MSME. Under this scheme, a startup can avail funding of Rs 1 cr without collateral. This is a 7 yr loan. During the first three years only the interest is to be paid. iSpirit formulated a committee to review and rate startups. This rating is used by banks like SIDBI to validate and fund startups. So far, 3-4 companies have been funded. Turn around time is 3-4 months, and the loan is at 14% interest, plus 1% processing fee. This means that the startup will get upfront 1cr 14 lakhs to enable them to pay the first years interest.
Some requirements are that the startup be in existence for atleast a year, that there be atleast 4-5 customer(for B2B businesses) or 1000-10,000 customers(B2C businesses), that the turnover be atleast 15-20 lakhs, and the ability to pay the interest component of the loan. More information is at: http://www.cgtsi.org.in/
3. GEM Scheme: Growth Equity scheme for medium and small enterpirses. They fund uptoRs 10 cr.
Written by,
Tashina, SSGGN Volunteer
For more information or queries, write to gurgaon@headstart.in