Indian minister asks startups not to sell out cheap, launches fund

startup fund minister
Image by AS Photo Project | Bigstockphoto

India has formally allocated $127 million to the startup seed fund, called Startup India Seed Fund Scheme (SISFS), which aims to financially support early-stage startups, especially in non-metro or tier-2 and 3 cities of the country.

The country’s commerce and industry minister Piyush Goyal, while launching the scheme, said that the fund would support domestic entrepreneurs and urged startups not to get sold at throwaway prices to international venture capitalists or investors.

“Don’t get sold very cheap, particularly to foreign investors who are able to identify a good idea and are able to buy out at an early stage when funding is required,” he said, adding that business ideas of Indian entrepreneurs often don’t take off due to the absence of early-stage capital, which is critical.

Goyal said that the idea behind the scheme is to ensure adequate availability of funds, particularly to startups with good ideas in different fields. “I do hope that this scheme will support our domestic entrepreneurs and their business ideas that often cannot take off due to the absence of critical capital at an early stage,” he said.

The Indian government said that it would support early-stage startups across 300 incubation centres. The fund allocation happened almost three months after Prime Minister Narendra Modi announced the plan in January this year.

Goyal said that startups in non-metro cities are often deprived of adequate funding, which the scheme aims to change by building a robust startup ecosystem for

“…I would like to encourage innovators from rural areas to come forward and benefit from this scheme,” he added.

The fund aims to provide financial assistance to startups for proof of concept, prototype development, product trials and market entry, the commerce ministry said in a statement.

The minister said that the scheme would secure seed funding, inspire innovation, support transformative ideas, facilitate implementation and start a startup revolution.

Under the scheme, the government will provide up to Rs 5 crore  ($0.68 million) to eligible incubators selected by an expert committee called the Experts Advisory Committee (EAC). These incubators would provide grants of up to Rs 20 lakh ($26,553) for validation of Proof of Concept, or prototype development, or product trials to startups.

Additionally, investments of up to Rs 50 lakh ($66,382) shall be provided to startups for market entry, commercialization or scaling up through convertible debentures or debt-linked instruments.

“…times are tough, but our resolve is strong, and never before has it become more important for us to empower our startups,” Goyal said.

According to reports, over 7,500 new startups are incorporated every year in India. Currently, there are over 41,000 startups in India, with 44% officially recognized already. 5,700 startups are in information technology (IT), around 3,600 in healthcare and over 1,700 in agriculture, as per the Indian government.

Related article: India launches new fund to drive a local startup ecosystem

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