10,000 Start-ups programme a boon for entrepreneurs

Following the Nasscom initiative, the number of start-ups funded every year has doubled

Till about two years ago, only about 100 technology start-ups were funded a year, despite the fact that the information technology (IT) services sector had a workforce of three million. But after Nasscom launched the 10,000 Start-ups programme, that number had doubled to 200 start-ups through last year, Rajan Anandan, Google's India chief, told Business Standard in a recent interview.

The buzz around start-ups in India is unmistakable. Various corporate houses, white-collar executives and governments are contributing towards building an exciting entrepreneurship environment in the country, and Nasscom's year-old initiative is a significant stakeholder in this. The programme, in which both Google and Microsoft are partners, has completed a year and has entered its third phase. This comes on the heels of the IT industry body receiving flak for being too "IT" driven, and not taking up the cause of products and start-ups enough.

This programme, however, has proved to be a sort of course correction for Nasscom.

In the first two phases, the initiative received about 7,000 applications, of which about 4,000 were received in the first phase. Now, Nasscom has decided to run the project in four batches a year. Rajat Tandon, senior director of Nasscom, says the first month will be spent collecting applications, the second in due diligence and the third in pitch sessions with partners.

Of the 7,000 applications, 529 were short-listed. Of these, 130 were impacted, pitching to angel investors, incubation partners, accelerators, mentors, etc. A further breakdown reveals 30-35 firms received funding directly through the project. Around 30 companies were selected by accelerators to groom them for the next level and qualify for funding. Another 40 secured mentorship and executive connects by the chief experience officers of companies such as Target and Walmart.

SOME COMPANIES THAT RAISED ANGEL FUNDING

• TookiTaki : A social audience discovery platform for brands. Amount raised: $425k from Blume Ventures, India Internet Fund
• Incights : A voice biometrics system for authentication. Amount raised: $160k from an on-spot-funding event
• Bookpad : Bookpad's flagship product Docpad enables document embedding, annotations and editing in enterprise applications. Amount raised: $50k from multiple angel investors
• Function Space : Social Learning Network for science enthusiasts. Undisclosed amount from Nexus Venture Partners

Tandon says in the past six months, early-stage funding of $1.5-2 million has been invested in some 20 companies by firms such as Tlabs, Venture Nursery and Kyron.

In its first year, the project might have created awareness about entrepreneurship, but the total number of companies benefiting by way of pure funding isn't very high. "We are realistic in our approach and are planning to run a marathon, not a one-year sprint." But the project has generated a lot of interest in the corporate, government and venture capital worlds, he adds.

Industry groups are reaching out to Nasscom on a daily basis, claims Ravi Gururaj, chairman of the Nasscom Product Council. "The new mantra in large corporate houses is to embrace innovation, internal or external. We are able to nurture innovative companies, aggregate them and provide resources to connect with them; else, these companies would be hard to discover."

The Karnataka government has already set up a start-up warehouse, through which 29 companies have gone through; a second is coming up in West Bengal. Four-five states have also evinced interest in setting up such centres. "It is just the tip of the iceberg," says Gururaj.

REAPING THE BENEFITS

  Adsparx, a firm short-listed in the first phase, joined Microsoft Accelerator in 2013 and recently raised funds from the Indian Angel Network. An advertising company, it helps digital content monetise itself better. The three founders put in Rs 30 lakh of personal capital and tried to raise funds after running operations for a year. Kunal Lanwankar, chief executive and co-founder, says the firm registered online for the Nasscom project and was contacted by a few accelerators, before being chosen by Microsoft Ventures. Microsoft didn’t acquire equity in the project; it gave  Adsparx infrastructure and access to its huge network of mentors, investors, lawyers, etc.

SeekSherpa, a mobile-first application, helps connect travellers with locals for personalised tours. It was short-listed in the first phase of the programme. Recently, the company raised seed-funding from Venture Nursery and was funded by a group of angel investors. Dhruv Raj Gupta, its chief executive, says the Nasscom stamp of approval goes a long way, as the company is viewed in a different light after going through the grilling programme. “Nasscom doesn’t hold you by collar…it gives you a lot of options,” he says. The company received initial funding to create proof of concept and raised $80,000-100,000 last month.
When the project was launched, companies whose business model wasn't necessarily online were also considered. But with the launch of the third phase, Tandon says the quality of companies applying is "far better". A lot more are in the prototype stage, which means these already have a decent business model. Nasscom is also receiving proposals from companies not restricted to focusing on North America, a deviation from the export mindset. Many of these are consumer driven and considering catering to the local Indian market, he says. E-commerce is still the "hot button", though a lot more companies are coming up with ideas on big data and analytics, with health and education receiving a lot of interest in the last phase.

The Internet of Things, the concept of connecting the most basic of utilities on a grid is "crucial and critical". Hopefully, more companies will come up with business ideas in this emerging area, says Tandon.

The geographic spread of start-ups is "anybody's guess"-south India dominates, with the most applications coming from Bangalore, Chennai and Cochin. "Mumbai, Pune and the Delhi National Capital Region fight for the second spot closely," adds Tandon.

Despite the good response, India still has to play catch-up. As Anandan told Business Standard, "The US has 15,000 funded start-ups. So, this is not enough."

An industry official agreed, saying about 3,000 companies had applied for funding to the Indian Angel Network in 2012. Of these, 13 secured funding. "There are several hundred companies out there and only a couple of hundred will make it," the official said, adding some chinks were appearing in the accelerator programme. "The over-promise, under-delivery disenchantment is kicking in for the investor community.

So, other ways to enhance this eco-system should also be considered."