Kerala Technology Startup Policy

The talented youth of Kerala have been in pursuit of better career options outside their own State and have gone ahead to become successful entrepreneurs far from home. This loss is irreparable in a state like Kerala where people, thoughts and ideas are considered far more essential than land or capital. The Kerala Technology Startup Policy is an initiative launched by the Kerala Government to reverse brain drain in the State. The Policy is formulated to create a world-class scientific and technology ecosystem which would empower and enable the youth of Kerala to chase their dreams and reach their maximum potential within their own State.

Vision of the Policy

The following is the vision of the Kerala Technology Startup Policy.

For Kerala to emerge as the first destination for startups in India and to be amongst the top five startup ecosystems in the world.

Objectives of the Policy

The Kerala Technology Startup Policy aims to achieve the following.

To attract at least INR 5,000 Crores in terms of investments into the Incubation and Startup Ecosystems in Kerala.
To provide INR 2,500 Crores for the activities related to Youth Entrepreneurship.
To create more Indian-owned Global Technology Companies that are based out of Kerala.
To establish a minimum of 10 Technology Business Incubators or Accelerators in every sector in the State.
To encourage, facilitate and incubate a minimum of 10,000 technology product startups.
To develop 1 Million Sq. Ft. of Incubation space in the State.
To facilitate Venture Capital funding of at least INR 2,000 Crores.
To set up the platform for creating a minimum of one home-grown billion dollar technology company from all the startups.

Startup Funding

The Government of Kerala encourages the Banks and financial institutions to improve and extend their existing schemes concerning lending to startups on favourable terms. Institutions like Kerala Financial Corporations are encouraged to promote schemes such as Credit Guarantee Fund Trust for Micro, and Small Enterprises of the Government of India and sufficient guaranteed would be provided to these financial institutions to meet the losses by NPA with a limit of 10% of the total loan disbursed and outstanding. Private funds would be encouraged to set up operations across the State for the sole purpose of funding startups.

The Government may participate in a SEBI-approved Venture Capital Fund with upto 25% as a Limited Partner. The Venture Capital Fund so formed would invest in startups located in Kerala based on its own criteria.
Recognised Incubators that manage the Seed Fund Scheme of the Indian Government would be given matching seed funds to increase the amounts available for startups further by a rate of 200%. The State would provide Seed Funds on similar criteria as the Central Government scheme for other Incubators.

State Support

The support offered by the State Government through the Policy has been listed below.

General Incentives

The Non-Fiscal and Fiscal Incentives that apply to all the categories of the Industry would apply to the accelerators, startups and incubators in other respective sectors as well. The existing schemes of the MSME sector would be made applicable to startups in every industry according to the current classification.

The benefit of General Permission would be offered for three shift operations with women working in startups with necessary precautions taken to ensure the safety and security of the employees.
Challenge Grants for Innovation: The Kerala Government would encourage innovation among entrepreneurs and students through Challenge Grants. These grants would focus on the innovative products that address the problems in society and would be awarded every year. The Kerala State Innovation Council would execute the programme.

Financial Support to Startups and Incubators

The incentives offered in the State IT Policy of 2012 would be directly applicable through this Policy to Startups, Host Institute of Accelerators and Incubators as well. Financial Assistance as Matching Grants: The Kerala Government would match the funding raised by Incubators from the Government of India on a 1:1 basis as matching grants. Performance Linked Assistance: The Government would assist the Host Institutes of the recognised incubators with an Operating Grant that would be calculated based on the number of startups incubated every year. A transparent scheme would be formulated and published. Support to Human Capital Development Programmes: To create a boost in the innovation pipeline and support entrepreneurial talent, Human Capital Development is envisaged under this Technology Policy. These programmes would be executed through recognised incubators, and 10% of the approved programme expense would be paid as a Programme Implementation and Monitoring Fee. Corporate Social Responsibility of Public Sector Undertakings: To strengthen the startup ecosystem in Kerala, Corporate Social Responsibility Funds of State Public Sector Undertakings would be utilised to create corpus funds at incubators in compliance with the New Companies Act of 2013. Reimbursement of Registration Fee and Stamp Duty: Incubators and Host Institutes would be eligible for complete reimbursement of Transfer Duty, Stamp Duty and Registration Fee paid on the lease or sale deeds on the initial transaction and 50% for the second transaction. Patent Filing Cost: The expenses for filing and prosecution of patent applications would be reimbursed to the incubated startup company with a limit of INR 2 Lakhs per domestic patent awarded. For awarded international patents on a single subject matter, an amount upto INR 10 Lakhs would be reimbursed. The reimbursement would be executed in three stages that are during filing, prosecution and award.

Additional Incentives for Private/ PPP Model Incubators

Incubator Projects that have a capacity of creating a minimum of 1000 startups would be considered as Nodal Incubators and would be eligible for the following additional benefits. Any subsidies or monetary support offered by different government departments of both State and the Central Governments, under the existing schemes for new startup units would be in addition to the financial aid given below.

In the case of Government-owned buildings leased to technology incubators, no lease rent or O&M charges would be levied for five years or until the incubator is self-sustainable, whichever is earlier. In the case of private premises are taken on lease or rent basis, a rental reimbursement at INR 5 per Sq. Ft. per month or 25% of the actual rent paid shall be reimbursed for three years, whichever is earlier. This benefit is limited to the incubation space only.
An Investment subsidy of 20% of the Capital Expenditure, excluding land and building, would be offered to incubator Projects that enter into a Memorandum of Understanding with the State within two years of notification of the Policy. This subsidy is limited to a maximum of INR 5 Crores.
Training Assistance: For all the employees recruited by a startup within three years of incubation, an amount of INR 25,000 per employee per annum would be provided for training.
Performance-linked grant for startups: Startups that achieve a 15% year-on-year growth rate, according to the audited accounts, would be eligible to obtain a grant of 5% on the Turnover with a limit of INR 10 Lakhs within three years from the date of incubation.

Administration of Financial Incentives & Implementation of Programmes

All the monetary support offered for startups and incubators as mentioned in the Kerala Technology Startup Policy would be administered by the Technopark Technology Business Incubator (T-TBI). The support would be provided in a time-bound and transparent manner. For the administration of various schemes and programmes, the Technopark Technology Business Incubator would be assisted by a committee of external experts that include representatives from multiple industries, academia, incubators and industry associations.