On 15th August 2015, during the Independence Day speech, the Prime Minister painted a picture of a new India that taps on its people’s entrepreneurial potential. To expedite this vision, the Start-up India initiative was launched to create a robust ecosystem for fostering innovation and start-ups in the nation that would fuel sustainable economic growth and generate significantemployment opportunities.Additionally, on 16th January of the following year, the Prime Minister released an Action Plan for Start-up India covering 19 action items such as‘Simplification and handholding,’ ‘Funding support and incentives,’ and ‘Industry-academia partnership and incubation.’Six years down the line, the action plan has propelled India as the 3rd largest start-up ecosystem. The Start-up India program, primarily setup to provide an enabling environment for start-ups, has evolved into the launchpad for them. From providing funding to tax incentives, from support on intellectual property rights to eased public procurement, from enabling regulatory reforms to access to international fests and events, the Start-up India program has become synonymous with sustainable economic growth.
India recently reached a landmark milestone: there are now 75000 recognised start-ups in the country,with more than 80 start-ups getting recognized per day-the highest rate in the world. Of all the recognised start-ups, about 12% are in the IT sector, 9% are in the healthcare and life sciences, 7% are in the educational sector, 5% are in the professional and commercial sector, and 5% are in the agricultural sector. The Indian start-up ecosystem has so far generated an incredible 7.46 lakh jobs, which represents a rise of 110% annually over the previous six years. The enormous potential of our nation’s young is confirmed by the fact that roughly 49% of our start-ups originate from Tier II and Tier III cities.
The Department of Science and Technology (DST) has been a pioneer in fostering the national ecosystem for innovation and entrepreneurship. The DST introduced the Seed Support System in 2008 to address the major gap in the supply of initial capital for technology-based start-ups.National Initiative for Developing and Harnessing Innovations (NIDHI) is an umbrella programme conceived and developed by the National Science & Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science & Technology (DST), Government of India (GOI), to nurture ideas and innovations (knowledge-based and technology-driven) into successful start-ups through series of interventions and initiatives. The programme would work in line with the Start-up India and Stand-up India initiative and focus on building an innovation-driven entrepreneurial ecosystem with an objective of national development through promoting problem-solving innovative solutions with the market potential to make India Atmanirbhar. This umbrella programme NIDHI, launched in 2016, aims to nurture start-ups through scouting, supporting, and scaling innovations. The key stakeholders of NIDHI are the various departments and ministries of the central government, state governments, academic and R&D institutions, financial institutions, angel investors, venture capitalists, mentors, and the private sector. The Seed Support Scheme was later revamped as NIDHI-Seed Support Program (NIDHI-SSP), and the scale at which support was provided to Technology Business Incubators (TBIs) was also increased five times.
Technology Business Incubators (TBIs) and other Incubators are institutionally linked facilities promoted by the Department of Science and Technology to foster innovative and technologically led new ventures during the initial and crucial phase, the start-up phase. An incubator helps start-ups get off the ground and enables new businesses to endure and thrive in the marketplace by offering various specialised business support services.The NSTEDB has promoted more than 150 TBIs, most of which are hosted at publicly and privately sponsored higher education institutions nationwide.
Need of NIDHI-SSP
While the Incubators fulfill the ‘Space, Services, and Knowledge’ requirements of the start-ups, a wide financial gap exists, which is not being appropriately addressed. The fundamental idea of seed funding is to offer financial assistance to potential start-ups with promising ideas, innovations, and technologies.This would make it possible for some of these incubatee firms with cutting-edge concepts or technology to advance to the point where they can seek loans from financial institutions or attract funding from angel investors or venture capitalists.Thus, the suggested seed funding provided by an incubator to an incubatee is positioned to operate as a conduit between the creation and hassle-free commercialization of novel technologies, goods, and services.NIDHI- SSP aims at providing financial assistance to start-ups for proof of concept, prototype development, product trials, market-entry, commercialization, etc.
Objective and Operational Model of NIDHI-SSP
The main goal of the NIDHI-SSP is to guarantee prompt availability of seed funding to qualified incubateestart-ups within an incubator, allowing them to advance their business and increase the likelihood of commercial success.The scheme also allows incubators to increase the number of businesses in their pipeline and to share in the success of those start-ups, both of which will contribute to their long-term operational viability.
- Eligibility conditions and Grant-in-aid for TBI
A fully operational TBI active for at least two years on the date of the application, having incubated at least ten start-ups requiring seed support, is eligible for NIDHI-SSP. Incubators should demonstrate a strong track record in incubation management and progress towards self-financing. The funding can be provided to Incubators registered as not-for-profit entities approved or funded by the DST or any other central or state government (who have not previously benefited from NIDHI-SSS) and Incubators funded by DST/other central or state government but hosted by Private Institutions.
The maximum financial support provided to an incubator would be INR 1000 lakhs to be released in a few phases in accordance with the Incubator’s need, capacity, and capabilities. The grant would be released in about 2-5 rounds with a maximum of INR 500 lakhs per round,and the funds should be utilized in about 2-3 years.
- Eligibility conditions and Grant-in-aid forIncubatee Start-ups
The applicant start-up should be a registered company in India with a minimum of three months of association with the TBI. It should have developed clarity on Unique Selling Preposition (USP) through customer validation and value proposition for its targeted customers. This support is not meant for Indian Subsidiaries of MNCs/foreign companies. Persons holding Overseas Citizens of India (OCI) and Persons of Indian Origin (PIO) would be considered Indian citizens for the purpose of this scheme. The shareholding by Indian promoters in the incubate start-up should be at least 51%.
The Seed Support size for the start-ups shall be capped at Rs 100 lakhs per start-up (Rs. 100 Lakhs considered only in exceptional cases). The fund would be disbursed to the incubatee(physical or virtual) based on the recommendation of the Seed Support Management Committee constituted by the Incubator. The Seed Support Management Committee (SSMC) would decide the quantum of investment based on multiple considerations, including market and industry sector, stage of technology and business development, co-investment offers, etc., as appropriate. A start-up supported once through NIDHI-SSP will not be eligible for a subsequent round of applications.
The seed fund should be utilized mainly for technology development and de-risking activities, scale-up, market entry, product development, mentoring, seeking consultancy, IPR issues, and all suchstart-up activities. The Incubators must put their best efforts into helping raise matching seed funds/external investment through non-government sources for the start-ups and should track the following parameters as indicators of successful implementationof beneficiary start-ups: progress on Business Milestones, Minimum Viable Product (MVP), Product-Trials, and Validation, and Pilot Launch; Enhancement in paid Customer Base/Market Traction; External funding from loan, angel or VC funding raised; Awards and Recognitions; Any other growth parameters.
Current Status of NIDHI-SSP
Over the last six years, the Seed Support Programme has supported approximately 70 TBIs with INR 165 crores. The Seed Support Programme supported the following number of TBIs over the last five years: 09 (2016-17), 13 (2017-18), 12 (2018-19), 20 (2019-20), and 19 (2020-21); and the funds disbursed to TBIs were INR 1300 lakhs (2016-17), INR 2825 lakhs (2017-18), INR 2710 lakhs (2018-19), INR 3461 lakhs (2019-20), and INR 4021 lakhs (2020-21). The programme has supported more than 460 start-ups with an average funding of INR 25-30 lakhs per start-up and helped them raise investment of more than five times the seed fund from external investors.
Dr Sirat Sandil