CM Nitish Kumar Unveils Bihar’s Startup Policy; Announces $76 Mn Fund

The Government of Bihar has rolled back its Startup Policy 2016 and has enforced a new policy in place – the Bihar Startup Policy 2017. As mentioned in an official statement, “The State has set up a Trust, with an initial corpus of $76 Mn (INR 500 Cr), which acts as the nodal agency for implementation of this policy.”

As the nodal agency for this policy, the Trust will be responsible for the overall monitoring and implementation of the policy and for identifying and developing new markets for startups in the state.

The new policy has been framed on the basis of feedback received from various stakeholders, as stated in an official document by the government. The 2017 startup policy aims to “enable Bihar (to) emerge as the most preferred destination for startups and entrepreneurs by leveraging the potential of local youth through a conducive startup ecosystem for inclusive growth in the State.”

It mainly focusses on capitalising upon the power of youth aka YUVA – YES to startups (awareness, networking and mentoring campaign), Unleash regulatory enablers for supporting startups, Vibrancy in education system to encourage and facilitate startups, and Access to financing and incubation support.

The policy framework has been build in line with objectives such as development and encouragement of entrepreneurship; facilitate financial as well as infrastructural support, and more.

Points Of Focus

The primary goal of Bihar Startup Policy 2017 is to inculcate and strengthen the roots of entrepreneurship in the state. In order to encourage the growing youth community, the following measures has been proposed under the new policy:

Launch Of “Udyami Bihar, Samridh Bihar” Campaign And A Network Platform For Startups

The policy plans to launch and promote “Udyami Bihar, Samridh Bihar Campaign, “to foster a culture that positively values entrepreneurs as a crucial factor to achieve inclusive economic growth.” As part of this initiative, local startups will be recognised for their achievements and support will be provided to organised startup awareness activities. In order to facilitate effective networking and increase startup visibility, the Government will also organise a Bihar Startup Fest.

Startup Advisory And Assistance Cells

In order to provide essential guidance to startup entrepreneurs, the state will form Entrepreneurship Development Cells in Divisional towns and Nagar Nigam(s) and  Entrepreneurship Facilitation Centers at Educational and Professional Institutes. These centres will further support startups in for preliminary mentoring including tasks such as making business plan, market research, etc.

Infusing Entrepreneurship Lessons In Institutes Curriculum

The policy further proposes to embed entrepreneurship modules in high schools, university, skill training, and vocational training institutes’ curriculums/programs. Also, business/ innovation idea competitions and social innovation challenge will be organised. While the selected ideas will be showcased at the Bihar Startup Fest, a challenge grant will be provided to 20 social innovators to support their ideas, through Entrepreneurship Development Cells.

Regulatory Measures Taken

Startup Bihar Portal

In order to establish a single platform for interaction and information sharing of various stakeholders, a Startup Bihar portal shall be launched. This portal will guide startups through registration process, state compliances, various govt schemes and more. A toll-free helpline and a mobile app for the same has also been proposed in the policy.

Zero Cost For Filing Patents – Domestic & Foreign

In order to safeguard the Intellectual Properties of startups and provide support for commercialisation, the government will bear the entire cost of registration. Also, additional financial assistance in the form of reimbursement for awarded foreign patents towards filing fees will be provided.

Single Window Clearance Committee

All statutory licenses/clearances required by startups (if not exempted otherwise under this policy) shall be facilitated on a priority basis.

Financial Management Company

The Trust shall set up a Financial Management Company to carry out the financial operations of the Trust. The Financial Management Company shall disburse incentives, loans and other financial assistance to the startups as decided by the Trust.

Startup Investment Advisory Committee (SIAC)

The SIAC shall carry out the following activities:

• Recommend the list of applicants under this policy to be certified as startups.
• Assist the Trust in creating a panel of private incubators, angel groups and Category I Alternate Investment Funds.
• Assist the Trust and the Financial Management Company to create a panel of Venture Capital Funds and aid in decision making of investments in Fund of Funds for Startups in Bihar.
• Advise the Trust on various issues related to the implementation of the Policy f) Advise the Trust and review the performance of the policy.

Infrastructure And Incubation Support

• Plans to facilitate shared infrastructure for startups such as coworking spaces, shared software and hardware like high-end printer, computers etc., common testing labs and tool rooms, shared services like legal, accounting, technology, patents, investment banking and more.
• Provision for establishing Bihar Innovation Hub to provide all services of an incubator including shared work spaces, professional business advisory/consultancy; access to funding and networking, etc.
• Financial support will be provided for the setting up of a new incubator. The government will reimburse up to INR 2 Lakhs of the cost of incubating a startup.
• Fiscal incentive will be provided to the Incubators @2% %of the investment received by its incubatee from SEBI-registered AIFs into Bihar-based startups
• Fiscal grant will be provided to State Supported Incubators @3% of the investment received by its incubatees from SEBI registered AIFs
• Fiscal grant will be provided to State Supported Incubators @5% for startups in social sectors providing solutions to public service access problems in Bihar  like health, education, nutrition etc.

Funding Support And Assistance

Validation Stage

At the validation or initial stage of the startup, a Seed grant upto $15K (INR 10 Lakhs) will be provided as 10 years interest-free loan to the startups, on achievement of milestones and targets set by the incubation centre. Also, an amount equal to 5% of the seed grant shall also be contributed by the incubatee into the startup.

Commercialisation  Stage

If the startup is at commercialisation stage, then the government will help founders get connected with Angel investors. As stated, “A success fee @2% of investment shall be provided to startups for mobilising investments from state registered angel investors towards early stage funding. A financial assistance equal to the amount invested in startup by the angel groups and 4w Category I Alternate Investment Funds shall be given as loan to the startup.”

Growth Stage

For supporting growth stage startups, “The Trust may participate in SEBI registered AIFs (Alternate Investment Funds) and Venture Capital Funds, upto 25% as Limited Partner. The Venture Capital Fund so created shall invest at least 50% (i.e. equal to twice the contribution made by trust in the VC Fund) in startups located in Bihar.”

Additional incentives to SC/ST/Women/ Differently-Abled

Those falling under this category will receive an additional grant of 15% plus , 22% (20% SC/ 2%ST) of the total corpus for funding startups will be reserved for SC/ST.

Other states which have already implemented their startup policies are West Bengal, Rajasthan, Kerala, Gujarat, Odisha, Uttar Pradesh, Karnataka, Tamil Nadu, Jharkhand, Telangana, and Andhra Pradesh.