Knock on the government’s door - you will be surprised by what you find

A technology entrepreneur in India is faced with several challenges (and opportunities) while he sets out to create a technology startup.

Apart from identifying the right idea and the right markets and being able to recruit the right team, the most crucial challenge an entrepreneur faces is raising money for the new venture. There are widely known sources of funding for technology startups that one can think of, such as venture capitalists, angels, banks, and friends and family. But, an often-overlooked source of funding, particularly in the early stages of a startup, when private investors hesitate to invest due to the high risk of failure associated at that stage, is government funding. Through an array of programs and initiatives, the government offers funding for technology startups, from early-stage development to full-scale commercialization, which entrepreneurs could take advantage of.

Issues with Technology Start-ups
Getting a startup off the ground is strewn with challenges and difficulties. It is more so in the case of a technology startups as there are specific set of challenges associated with them that need to be overcome. There is always a risk of the technology idea on which the start-up is based (technology risk) will fail or not deliver to the desired level. Also, technology startups will need more resources and infrastructure even at the early stage of development. For example, a software solutions company can start product testing or product development with very little investment and infrastructural support, whereas a material science technology startup will need laboratory facilities to even test their idea and for product development, and these facilities are lot more capital intensive and need a much greater upfront investment.

Since idea testing and product development is such an involved process in the case of technology startups, it also extends the time-frame in which the first product/products can reach the market. Which means, an investor, who invests at an early stage of a technology venture, has to wait for a much longer period to see the returns materialize. From a private investor’s point of view, all these factors add up to a significant and in many cases an unacceptable level of risk. And hence, funding is that much hard to come by for an early-stage technology startup. So, traditionally, entrepreneurs have turned to their own funds, or to the support of friends and family or to sheer ingenuity and resourcefulness to take their venture ahead.

But, there are government funding sources that have been set-up to specifically support and fund technology-based startups that could be exploited. These funds could be used right from idea validation stage to the full-scale commercialization stage. There are various needs at each stage of technology commercialization and new-venture development that need to be understood before one can fully understand and exploit the funding landscape and funding opportunities offered by the government. The following section gives a brief outline of the various stages involved in starting and growing a technology startup.

Stages of Technology Commercialization/New Venture Creation
Figure 1 illustrates the five stages of technology commercialization and new venture creation. The first stage is where the entrepreneur recognizes an opportunity that could be exploited by identifying a problem and a corresponding solution for that problem. The next step is the idea validation stage, where the do-ability or proof of concept of the technology is studied by experiments and tests. The third stage is the prototyping and demonstrating the technology at a lab scale. The next step is where the process is scaled up to commercial scale, and all the hurdles of setting up a plant etc. is overcome. The fifth and the last stage in the new-venture creation process is commencing commercial production and getting the product to the customer.

Comments (17)

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Implementation?
written by Reuben Dantes, July 08, 2010

Hey, it would be interesting to know about anyone whose made use of these government schemes. Do share your experience. You could even check http://tools.theindianstartup....ps-296.htm

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Funding for technology startups
written by Jim Benson, June 14, 2010

Well Roy - all I can say is that these guys are global players and are pretty close to some sovereign funds (and that's where the good conditions are these days). BTW: instead of talking to Esolve Capital, you may want to talk to their Esolvenano division directly ( http://esolvenano.com/about ). It is them that handles start-ups

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Funding for technology startups
written by Roy Sochan, June 10, 2010

--> Jim Benson

I looked at the company and I see they are in Luxembourg with a couple of offices in other countries, such as Russia. Sow how could they help us in India?

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Funding for technology startups
written by Jim benson, June 05, 2010

For all of you out there - let me tell you there are other options. My company got in touch with eSolve Capital (http://esocap.com) and these people have access to a wide range of funding offers providing excellent conditions

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My breath may come to rest...
written by Satish Pathak, April 01, 2010

I never knew that GoI, DSIR etc. has any such schemes until I was invited at CIIE, IIM-A by Prof Gupta, met Dr. A.S. Rao for the first time there! I have crossed my age 42; have 2 kids 12 and 4. The passion for innovation and entrepreneurship based on that was my dream since start of career. I encouraged my wife to be an IT professional and now she is taking of my family, my father 78. We exchanged the poles as in circus and dared innovation when my wife could not dream that there can so huge salaries of Rs. 10,000 per month! I carried out my innovative projects at cost of career and burning pocket! The purpose of carrying out tailor-made automation and related projects was to fulfil hunger for brain and stomach, besides finding issues as problems in industries to dare patent. I came across so, where the industrialist had ruined crores of rupees due to failure of a multinational company. No one was ready to touch the project due to various responsibilities in Instrumentation, valve design, electronics, PLCs, software, pneumatics, mechanical and interfacing all together to run the plant. I dared to accept the problem and solved it best ever! The need of 500 valves for 250 chemicals (2 for each) was brought down to 250 valves ( 1 for each), delivering accuracies beyond expectation and international standards! I was ready to offer all commitment less approx for Rs. 1 Crore. What the client asked – we will give you Rs. 2-3 Lakhs, give us the design of your valve, we will get all parts machined and then you assemble it all, take responsibility of entire automation, we will pay you per day charges! I declined the offer when my more than Rs. 4 Lakhs were outstanding. Forced negotiations and they agreed for deal of Rs. 1 Crore. After that other family members did not support the fellow owning that unit and everything stopped there! I decided same day, I will bring this technology and penetrate it in international market hence filed patent. I started new activity to prove my entrepreneurial skills and be independent. In April 2002, I installed first ever Advance Time Table system, fully automatic to update suburban time table. It was developed, manufactured and delivered from residential block 550 sq. Ft. I accepted challenge to repair the display after Kasab had shoot 4 bullets of AK 47 on 26/11! The system is still working at my cost – no AMC payment for 8 years! I did few more projects with railways and learnt what Tendering with Railways means, what they care for your quality, what they expect from you to be in business, how banks behave and make “Full Kaashi” of your dreams, sincerity, efforts etc. I ruined my team, every fresher that I had trained got best jobs in industry, those from rural areas of Orissa, not able to speak Hindi, English and fresher too, learnt everything under me, absconded without any notice, used to share food at my house! Fine, no issues, I have to march ahead. Now, receiving welcomes from European and North American countries to come and start venture in their country. I contacted ministry of state for commerce – Sindia’s office, XXX baboo used to cut my phone and with great mercy replied once “ humane dikhaya unako, koi interest nahi hai”. I contacted TDB saying B-strategy is made but received no further response from 2 names referred by secretary! Sent reminders to comment, no ack. Now, my breath is slowing down, may stop without notice!! Nervous, mentally upset, took medicine to regain mental fitness!! I am ready again to fight... Are koi hai jo mujhe Masjid tak pahuncha de...mere namaz ka vakt ho gaya hai... beta Ahmad... Duniya ka sabse bada boz – apna invention apne kandhepar lekar industry khadi karana... woh bhi puri imandari se... koi gila nahi, koi shikava nahi...

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TePP Fund: An eyewash from the Govt.
written by Abhinav, March 22, 2010

In continuation of my earlier post,which I had submitted in January,Its been an year since I have applied for the TePP Phase-1 fund and there is no sign of it till now.I would like to inform entrepreneurs like me not to pay heed to such kind of govt. schemes and waste much of their precious time.

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question
written by animesh kumar, February 19, 2010

i want to start a buisness at small level. from where i can get fund for that.

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We need an indeendent commission for technology evaluation
written by M A J Jeyaseelan, January 19, 2010

What are the technology start ups that need to be supported by the Government is the all important question in this context.

Every innovator has to protect his innovation while trying to get it funded. We therefore an independent commission which can arrange to evaluate technologies by pooling together relevant experts and getting technologies evaluated in camera with due non disclosure agreements in place.

Most of the time those who evaluate technologies on behalf of VCs or Govt Agencies are management or financial experts who have no idea of the commercial potential of new technologies

Also most technology evaluations are done mainly from a short term financial perspective.

A country that wishes to promote innovation must first learn to evaluate technologies from technology perspective first. This is where our promotional schemes are woefully inadequate.

While someone claiming to produce petrol out of water might get overnight publicity, there is no place where a genuine innovator can get his technology claims independently evaluated.

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The problem with the DSIR funding is, that you never get it
written by Abhinav, January 18, 2010

I applied for the TePP phase 1 funding back in April 2009 for my project and I was told that it might happen within 4-6 months. It was approved within a month or so and I was asked to submit a few more documents. After submitting those documents I was told that it would take a month or so to process my application. After a month when I followed up, I was told to get quotations for every budget item I ve put in the proposal (It was already August!!!). Then I was told that it would take another month before I get the first installment. So I followed up again in September and I was told that my file is with the finance dept. and it would take two more months now for the funds to reach me. Its now January and there is no sign of any funding. Although DSIR is an institution run by scientists but there is still no logical process through which my application has gone through. I am a young engineer without much of savings for building my prototype.
I had quit my job last year to pursue my entrepreneurial dream. Much of my savings have been spent on marketing studies for my venture and my parents are taking care of my expenses now.
I would like to ask the DARE magazine to put some more research before they actually write something about any such govt funding.

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CMD, Bati Energy
written by Bhavesh Bati, December 10, 2009

good to learn

Thank You...

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some facts are not stated properly
written by sandeep sharma, December 08, 2009

Though the article is informative on various schemes and policies, some facts and hard realities are far away from the study. I wish the authors should have spent at least one day in some of the organisations before reaching on any conclusion. How can you compare a bureaucratic institute with one who is working with true and pure spirit in supporting the innovators (i am talking about NIF). A poor person in a far flung village working on a bamboo windmill or material does not get anything from anybody. How many schemes have reached to him/her except NIF's initiative and support. Have you seen the person without having chappals in feet getting award from President of India? Have you seen anywhere in the world some individual or institute giving money to someone without any documents or collateral but just on the trust of the knowledge of the person? I can give thousands of such examples where NIF has created history and gone to the extent possible to help these poor and unsupported souls.
Second aspect is have you seen how do people work in such institutions - avoiding their sleep, working day and night, no holidays, no diwali or holi or christmas, 24X7 active, leaving their family but with utter motivation, nothing else. Though it is not to be mentioned but just to clear the clouds.
It is true that lack of fund has hampered many of the initiatives which could be pursued otherwise. But this is what it is. Only the pressure from knowledge society may sensitise Government towards knowledge holders and it will happen at any cost, if not now, maybe 5yrs, 10yrs down the line. Innovation and Inclusive development are the key towards a sustainable economy and every country needs to resort to these now or in future when more touch times are awaited.

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professor and executive vice chair
written by anil k gupta, December 07, 2009

i am really thankful to ravi for his comment. He is absolutely right that when pittance is doled out, how can a major impact be made. He should address this comment to Minister of science and technology and the rest of the government which has kept the budget of the NIF frozen for last nine years when database has crossed tens of thousands. However, how can i or any one claim be father of innovation when the tradition of invention at grassroots is as long as perhaps humanity. reg former dg csir, he continues to be the chair of NIF and we love his leadership. nothing more needs to be said.
as regards innovations by NIF, i think the fact it has scouted through Honey bee network more ideas, traditional knowledge practices ( not all unique), innovations and children creativity than any other program in post independence history of the country ( in fact the world should hold it in good standing. But criticism on account of doling out small grants is valid and absolutely correct. keep it up

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Get your peanuts - TOO LITTLE, TOO LATE
written by Vikram S Puri, December 06, 2009

The Indian government, via its various arms purportedly supports funding innovation and commercialization of technology. I agree with some of the reviews here - its peanuts.

Apart from the starting disadvantage of very low funding assistance, the process itself is mired in bureaucracy and babudom. An analysis of how many applications have been received, processed and accepted will reveal the true and correct picture.

Agencies like the Technology Development Board are best place to really jumpstart innovation in India but alas, see the implementation of their own policies as an impediment to their calm and ineffective existence.

Till the time the government can see its way to more transparency, more participation by private and ngo associations for industry and and interaction platform, these schemes will remain what they are today - peanuts for monkeys.

Its easy to criticise without offering a solution - here are some simple possibilities that can possibly be implemented without too much effort or rancor:

A clear policy, an example of previously funded projects and their track record published on the net, availability of members of the decision making committee for one-on-one meetings / video / internet conferences are some easy ways forward.

The Indian Entrepreneur has many things to contend with, many fires to fight and many hills to climb - it would help if the stepladders provided by the government were to be reliable, consistent and dependable.

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President
written by A.S.Rao, December 05, 2009

Great effort by Premnath and Vibhor to come out with this compilation. Funds do not create innovations at the same time absence of appropriate funds makes it much more difficult for innovators to take their idea to market.

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Big ideas cannot flourish in an environment of petty thinking
written by M A J Jeyaseelan, December 05, 2009

Thinking "Big" is key step towards successful innovation. However, all those who are associated with innovation promotion programmes in our country do not seem to have grown beyond petty thinking. Just look at the schemes that have been are being flaunted as major innovation promotion initiative. Look at the funding limits. Rs. 75000 or even 10 or 15 lakh is peanuts if one pursues any big ticket innovation.

What is clearly implied is that if you are an innovator, you must first think of an idea that can be commercialized within these funding limits. Are these people living in the real world. Do they know what it takes to develop, prototype, test and commercialize any innovative technology. No doubt, the schemes of the Department of Biotechnology seem more realistic. Does the country need innovative technologies only in the biotechnology sector. What about innovations in other sectors. Just because, we have already a few big companies operating in sectors like software, pharmaceuticals, etc. do we want to shut out innovations in these areas?

Look at the innovation database of the National Innovation Foundation. It is plain pathetic. I do not think anyone who looks at the database would ever be enthused to take up the innovation challenge.

As Ravi has pointed out all our innovation initiatives are a crying shame. Let me give you my own example. I have been working on a software innovation in the area of database technology for many years and finally managed to commercialize it last year. It has cost me about Rs. 2.5 Crore. I would spend about a crore more in the marketing exercise. Of course I believed in the power of my idea. So put all my Rs 35 Lakh of Provident Fund as the initial capital and then used commercial revenues earned from initial innovation to support follow up innovation activities.

I am not complaining. But the question the country must ask itself is : Should every innovator risk his life's savings to make innovations work.

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TECHNOLOGY STARTUPS
written by Maj Gen Pinak Pani Das, December 05, 2009

These startups require tremendous efforts in persuing with GoI deptts to get these small amounts sanctioned. Dont waste your time unless you have a well wisher who will move your file .Some of the national labs have funds to do such work , try them . GoI is not sure what course to follow except follow the WEST. GoI does not want to be first in any thing , MY 38 yrs service in goi tells.
contact at 01126124216 for inputs.

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Clearly the Govt of India does not know how to support entrepreneurs or innovation
written by Ravi, December 04, 2009

One of the highlighted shames of the Indian Government's thinking on innovation is what is called National Innovation Foundation. Run by someone who has projected himself as the father of innovation without having innovated one viable idea, it is as harebrained and as far fremoved from anything that can create the culture of innovation as possible. Even the former DG CSIR who started the foundation was reportedly displeased with this initiative. At least the government in India does not get it. Much of the innovation is coming from those who are teaming up globally not through those who spend more on their upkeep and dole out small pittance that can hardly create a critical mass for achieving anything, new or old. Its just mindless.

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