Startup Karnataka

The State of Karnataka, especially its multicultural and multilingual capital, is the Nations’ leading startup hub and the world’s second fastest growing start-up ecosystem. Statistics suggest that Bangalore is now home for around 3,100 to 4,900 active tech startups. It ranks fifteen among the best 21st-century start-up ecosystems across the Globe. Given these facts, it is no wonder that the State was the first to come up with a dedicated Startup Cell. The Startup Karnataka initiative was founded by the Karnataka Government with the object of boosting the scope of startups in the State through strategic investment and policy interventions by leveraging the robust innovation climate in Bangalore. This article is a detailed account of the Nation's first-ever comprehensive startup policy.

Objective

Through the Startup Karnataka initiative, the State Government seeks to ensure that Bengaluru continues to be the most important startup hub in the country, while other cities of the state are developed as startup destinations on par with thirty international startup hubs. Apart from this, it seeks to:

Stimulate the growth of 20,000 technology-based startups including 6,000 product startups by the year 2020.
Generate six lakhs of direct and twelve lakhs of indirect employment opportunities in the sector.
Mobilize a sum of Rs. 2,000 crores of funding for investment in startups solely through Government intervention, by leveraging the Fund of Funds proposed to be constituted by the State Government.
Facilitate the generation of at least 25 Innovative Technology solutions which could impact sectors like Health Care, Food Security, Clean environment and Education for all, etc.
Connect entrepreneurs to Government Departments to help them in implementing their Pilots.
Provide a One-Stop-Shop platform for information on the regulatory environment, incentives, events and the likes of it.
Partner with industry bodies, TBIs, Academic Institutions, Incubators, etc from the Startup Ecosystem.
Provide startups with the opportunity of widening its network by enabling participation in International Conferences organized by the program.

Vision

The program, as already stated, is envisioned to create a state-of-the-art startup ecosystem in the State through investment and policy interventions leveraging the robust innovation climate in Bangalore.

New Age Incubation Network

It is always never too late, indeed! But on the same note, it cannot be contested that the age of youth is the most appropriate time to instill the desired qualities. This is precisely the objective of the New Age Incubation Network (NAIN). The Network, which is already being implemented in engineering colleges will now be expanded to all professional and post-graduate institutions in two-tier cities in a phased manner. The academic institution selected for this purpose would be assisted in establishing an incubator in the given discipline, as well as in the promotion of student projects. These institutions would be graded as per Key Performance Indicators (KPI) and would be financially aided for a three-year period. Institutions that perform well would be rendered assistance for another two years.

Placing of Technology Business Incubators

The State Government seeks to play a helping hand in the placing of TBIs in institutions of higher learning with well-developed Research and development facilities. This move has been propagated with the idea of fostering a strong link between R&D institutions and the industry. The mechanism would be implemented in the below-mentioned thrust areas:

Information and Communication Technology (ICT)/Internet of Things (IoT)/Software Products
Manufacturing of all kinds
Healthcare and Biopharma
Agriculture and allied fields
Clean-Tech
Energy
Water and its recycling
Education
Nanotechnology and Composites

The general norms mandate the host institutions to provide land and built-up space for TBI. Also, these institutes are obligated to share available facilities and expertise for the setting up of TBI. The funding for these institutions would be determined on a case-to-case basis. For the awareness of the readers, TBI in this context is an incubating facility in an institution of higher learning, which renders services pertaining to business advice, financial counseling, assistance with business management and accounting, legal and regulatory guidance, access to mentors, etc., in addition to physical infrastructure appropriate for the thrust area of the incubator.

Early Stage/idea2POC (PROOF OF CONCEPT) Funding

The Karnataka Government have facilitated an Ignition fund on the lines of BIG fund of BIRAC, Government of India. The fund is meant for encouraging innovators who may require early-stage funding to stimulate commercialization of research discoveries and to cover costs like certification, manufacturing pilot devices, etc. Funds for this purpose would be in the form of Grant-in-aid limited to a one time grant of not more than Rs. 50 lakhs. Such funds would be released in tranches based on the life cycle of the business plan.

Private Sector Participation

The State Government would avail the services of the private sector including globally and nationally renowned accelerators and incubators to establish world-class incubation centres and accelerators. Assistance in these lines would also be sought for expanding the existing facility or operations.

Networking and Aggregation of Common Infrastructure Facilities

The Karnataka Government, in collaboration with the Central Government, have over the years established labs and Common Instrumentation Facilities (CIF) like IMTI and others across the state. These facilities would be made available for public use and would be set up in identified areas like electronics, mobile animation and gaming, IOT, analytics, design engineering, etc. This falls among the list of projects which would be executed on a public-private partnership basis.

Fund of Funds

A fund of funds would be allocated for venture fund investments that make its investments in startups. This would be in addition to any existing sector-specific venture funds. A portion of the fund of funds could at times be utilized for Angel state funding. These funds would be administered by a professional fund manager, the likes of whom would be selected through an open bidding process.

Identification and Solving of Challenges

As a part of Karnataka’s Social Innovation Challenge Competition, the State Government seeks to use the model of Grand challenges so as to emphasize efforts and attention on specific issues.

The Council

The initiative would entail the setting up of a startup council, which would be headed by the chairmanship of the Chief Minister. The rest of the team would comprise of the relevant ministers and senior government officers, along with ten industry experts to review the implementation of the startup policy. Measures would be adopted for equal representation of various domains. In addition to this, a Startup Policy Monitoring and Review Committee would be set up. The policy would be reviewed on an annual basis. This would involve the commissioning of a status report by the State Government to critically appraise the usefulness of the policy, the ease of implementation and the outcomes achieved. This report would be furnished to the Startup Council.

Qualifying Criteria

For an entity to be classified as a startup under this policy, it must fulfill the following criteria:

It must be technology based.
Its date of incorporation shouldn’t be more than four years. The period shall be seven years for BT companies.
It must have been registered in Karnataka under the Karnataka Shops and Commercial Establishments Act, 1961.
At least 50% of its total workforce must belong to Karnataka (excluding contract employees).

Also, on the same note, a company shouldn’t have been:

Formed by the demerger or reconstitution of an existing business.
A subsidiary of a firm in Karnataka, other than its own.
A merged entity (subject to conditions).
A franchisee of an existing business in Karnataka.
Promoted, sponsored by or related to an industrial group in the State whose turnover exceeds Rs. 300 crores.
A holding company.
Derive more than 50% of its income from investment and loans.

Incentives and Concessions

Incentives and concessions would be rendered as per the existing policies, which would include the ones provided under various state and central government policies. Furthermore, startups are eligible for additional tax benefits, as well as:

Matching Grants, whereby the Government would match the funds raised by the Incubator on a 1:1 basis.
Thirty per cent of reimbursement of actual marketing costs, including travel expenses incurred on internal marketing through trade show participation. Such incentives would be subject to a cap of Rs. five lakhs per year for a company.
Reimbursement of the cost of filing and prosecution of the patent application, subject to a limit of Rs. 2 lakhs per Indian patent awarded. Foreign patents with a single subject matter would be granted reimbursements of up to Rs. 10 lakhs. The reimbursement process entails two stages, according to which 75% of funds would be provided for filing the patent, while the remaining would be disbursed after the grant of patent.

Most of the above-mentioned benefits would be administered through identified incubators. Incubators are not entitled to insist on physical incubation of mentee incubates. Registration, be it for Startups, Incubators, Mentors or for Funding could be made from the Startup Karnataka Portal. For more details, the reader may contact: Principal Secretary to Government Dept.of Information Technology, Biotechnology and Science & Technology. Government of Karnataka. VI Floor, 5th Stage M.S.Building, Ambedkar Veedhi Bangalore - 560 001 Email ID: itbtsec@gmail.com Managing Director Karnataka Biotechnology & Information Technology Services BMTC- Central Offices Building TTMC 'B' Block, 4th Floor, Shanthinagar, KH Road, Bangalore 560 027 Email : mdkbits@gmail.com