India has evolved to be the third largest tech startup ecosystem in the world. The Narendra Modi-led government has made startups a centre peace of their growth policy with the introduction of the Startup India initiative. A new state-wise progress report released by the government about the schemes under this initiative has shown that while Maharashtra and Karnataka topped the lists in terms numbers and funding, it is West Bengal which attracted the largest average funding tickets from the Centre’s 10K Cr Fund of Funds.
For the Fund of Funds for Startups, Department for Promotion of Industry and Internal Trade (DPIIT) is the monitoring agency and Small Industries Development Bank of India (SIDBI) is the operating agency. Union Minister for Commerce and Industry, Piyush Goyal told parliament that SIDBI has committed INR 3123.20 Cr to 49 SEBI registered Alternative Investment Funds (AIFs).
For the uninitiated, on January 16, 2016, the government launched Startup India initiative which had 19-point action plan. 19,351 startups have been recognised under the Startup India plan till June 24. It envisaged several incubation centres, easier patent filing, tax exemptions, ease of setting-up of business, an INR 10,000 Cr ($1.45 Bn) corpus Fund of Funds and a faster exit mechanism, among other things.
The minister’s reply to the parliament showed few key performance statistics of Startup India:
State-wise Investments Made By AIFs
DPIIT disburses the funds to SIDBI which in turn gives them to venture capital funds (also called Alternate Investment Funds or AIFs). The AIFs create a corpus fund which has participation from other investors. The money raised is then used to invest in startups.
Through this, 40 AIF funds have invested in 247 startups pouring in INR 1625.73 Cr ($235.61 Mn). The further diversification shows that 75 startups from Karnataka have raised INR 499.85 Cr under the scheme.
This was followed by 68 and 46 startups in Maharashtra and Delhi which raised INR 440.38 Cr and INR 252.94 Cr respectively. However, the winning force of the funding is West Bengal.
Only four startups from West Bengal have raised INR 48.75 Cr, making it the highest average funding raised by the startups across the states. According to Datalabs by Inc42, startups in Kolkata have raised $43.73 Mn across 37 deals from 2014-2019.
Notably, under DPIIT’s State Startup Ranking framework, West Bengal was among the aspiring leaders on the basis of its startup policy and implementation, seed funding support, awareness and outreach and more.
It is also interesting to note that, West Bengal has only 573 DPIIT-recognised startups under the Startup India action plan.
Maharashtra Dominates The Recognised Startups List
Under the Startup India programme, startup definitions have been modified over time. For instance, the startups’ age was also increased from 5 to 7 years (10 in the case of biotech). The government has taken various initiatives to boost the growing startup culture in the country such as fast-tracking of startup patent applications, income tax exemption, and self-certification.
As part of the programme, DPIIT provides recognition to the startups which can then benefit from the various schemes under the Startup India programme ranging from latest exemption from angel tax to other benefits.
Under this classification, DPIIT has now recognised 19,351 startups of which 3661, 2847, 2552 and 1566 come from Maharashtra, Karnataka, Delhi and Uttar Pradesh respectively.
In the past few years, several states have taken the onus to build their own incubators, coworking hubs, etc, to boost innovation in the state. Till date, 26 states and UTs have launched their state startup policies.