Budget 2016: 5-fold hike for funding start-ups

For the next fiscal, government has increased the overall funding to startups from Rs 40 crore to Rs 200 crore

A five-fold hike has been made by the government in its budget for funding start-ups in the next fiscal, a move which is in line with Prime Minister Narendra Modi's ambitious 'Start-Up India' initiative.

According to Ashutosh Sharma, Secretary, Department of Science and Technology (DST), in the 2016-17 financial year, it will provide seed capital to 50-80 new ventures with funding ranging from Rs 50 lakh to Rs 1 crore per company.
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For the next fiscal year, the government has increased the overall funding to startups from Rs 40 crore to Rs 200 crore, he said.

"Funding has always been a problem for start-ups. With the seed money, the start-ups can approach venture capitalists or other funding agencies," Sharma said.

DST is a major funding agency for new ventures related to science and technology.

"Earlier, we would provide Rs 10 lakh per start-up but, this year, we have increased the funding substantially," he said.

Referring to an internal study done by a consultancy firm on behalf of DST, Sharma said that over the last nine years, it has invested Rs 200 crore in start-ups and its value had risen to Rs 4,000 crore with 10,000 jobs, too, being created.

The government will also open 25 new technology-business incubators to provide relevant training. Incubators are a major source of funding to these new ventures.

The government has also earmarked Rs 10 crore for creating "world class" incubators.

Sharma said one of the reasons for hiking the funding for start-ups was that new ventures other than IT have limited scope of raising money.

"Sixty per cent of the funding would go to companies that are into hardware and manufacturing business," Sharma said.

Asked whether it was a risky preposition to fund start-ups and allocate more money to them, Sharma said many who start a new venture are PhD holders or qualified persons with knowledge in their field.

"So, they know what they are doing. More importantly, the proposal will be thoroughly scanned before giving money to the start-ups," Sharma said.