“We hold startups very close to our heart.” Rajasthan CM Vasundhara Raje stated this while announcing the launch of a $77.3 Mn (INR 500 Cr) startup promotion fund during the Kota Digifest in August 2017. In line with the CM’s commitment towards startups, state officials have now come up with the final guidelines to utilise the said fund.
As stipulated, the fund corpus will include components for women-led and green solutions startups and has earmarked $15.4 Mn (INR 100 Cr) and $7.73 Mn (INR 50 Cr) for both respectively. The funds for green startups will be payable from the funds available with Rajasthan State Pollution Control Board.
Limitations Surrounding Fund Disbursal To The Startups
Only the startups registered in Rajasthan can be benefits of this fund. As per the guidelines released by the state government, a startup can avail a maximum of $38.6K (INR 25 Lakhs) of the funding, based on its Qrate ranking.
Qrate is a unique programme that assists startups to sharpen their business plans and investor pitch decks. The programme then connects them to the potential investors and customers. Startups are first assessed on various parameters of business and then they are provided with the Applyifi scorecards and assessment reports that highlight their strengths and weaknesses.
So, How Can Startups Avail This Fund?
Startups can either apply for the loan or equity from the stated corpus of $77.3 Mn.
For the selected startups, the funds will be allotted solely by the Department of lnformation Technology and Communication, Government of Rajasthan, while Principal Secretary of the lT&C department will be the sanctioning authority and will act on the basis of recommendations offered by a Committee established for the said purpose. The funds returned or bought back by startups, either as a loan or equity, will be returned to the Revenue Head of the State.
The documents required for applying for either loan or equity include:
- Copies of P&L accounts and balance sheets
- Must be able to justify the main source of income and how the loan is proposed to be repaid within the stipulated period
- Application for loan or equity must include the purpose for which the loan or equity is proposed to be utilised and economics of the scheme.
Further, a different set of guidelines has been documented to avail the facility of the loan or equity under the Rajasthan startup promotion fund.
For sanctioning a loan:
- The government loan will be provided for a maximum period of three years, with no lock-in period.
- The interest rate on such loans shall be 5%, on reducing the balance.
- The repayment of the loan along with the interest will be effected after six months of the date of disbursement. The same would continue to be repaid in six monthly instalments.
- Installment paid before the due date will be taken entirely to principal, unless of course, any interest for a preceding period is overdue.
- The loan will be given on properly executed bonds, in the prescribed format.
- The amount of the loan would be utilised for which it is granted and certificate of utilisation will be obtained from the loan in the prescribed form.
- In case of the loan, the amount recovered from the debtor will be adjusted towards the principal and interest in the ratio of 40:60 in case the interest is due along with the principal.
For sanctioning equity:
- ‘Equity’ shall be provided for a maximum period of seven years wherein the minimum lock-in period will be three years from the government Additionally, a buy-back option shall be available to the startups from Day 1.
- Startups will have to ensure ‘One Director with Golden Share’ on the Board of Directors of the Company registered as a startup in Rajasthan and opting for Government Equity, for the Department of Information Technology and Communication, Government of Rajasthan.
In case of ‘Seed Funding’:
-Up to $3088 (INR 2 Lakhs) as Loan (as per above criterion)
Rajasthan Government: Using Multiple Tactics To Foster The State’s Startup Ecosystem
From implementing the e-governance stack to framing startup policy as well as IT/ITES Policy, the Rajasthan government is leaving no stone unturned to make Rajasthan a startup hub.
In the last few years, a number of startups from Rajasthan have inked their names on the wall of fame, attracting investors along the way. As per AngelList, there are currently 750 active startups in the state.
Also, as per Inc42 DataLabs Funding Report 2017, around 30 startups based out of Rajasthan raised $148 Mn (disclosed) funding altogether between 2014-17.
With the presence of globally recognised startup ecosystem enablers including Rajasthan Angel Investor Network, Rajasthan Venture Capital Fund, Startup Oasis, as well as government initiatives like iStart and Digifest, Rajasthan is currently rooting for the top spot in DIPP’s state ranking list.
With another $77.3 Mn added to the state’s startup promotion fund, it will be interesting to see how many startups will be able to get the benefits in the near future.