More domestic capital flowing into start-up ecosystem compared to Covid period: STPI DG Arvind Kumar

Time of India

5 days ago

The Software Technology Parks of India (STPI), an autonomous society under the Ministry of Electronics and Information Technology (MeitY), Government of India, was formed in 1991 with the aim to promote the IT/ITeS industry, foster innovation, support research and development (R&D), and encourage start-ups across the country.
STPI
has been actively working on strengthening India's start-up ecosystem by providing support and resources through its Next Generation Incubation Scheme (NGIS) and domain-specific Centres of Entrepreneurship (CoE).
Arvind Kumar
, Director General of STPI, talks to ET Digital about the organisation's initiatives that are shaping the future of India's technology and start-up ecosystem.
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Economic Times (ET): Tell us about STPI's initiatives in the tier II and III cities.
Arvind Kumar (AK)
: We have 67 STPI centres in India, with 59 located in tier II and III cities. We also have 24 CoEs (Centres of Entrepreneurship) across the country. Most of these are in tier III cities. So, these 24 centres of entrepreneurship are domain specific. These are different from other incubators because other incubators are generally for all kinds of start-ups. But we have domain-specific or technology-specific centres. For example, we have CoE in Bengaluru for artificial intelligence (AI), medtech in Lucknow, and blockchain in Gurugram. We have created 8 COEs in the Northeast, including Kohima, Shillong, Itanagar, Agartala, Gangtok, and Guwahati.
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Our scheme NGIS (Next Generation Incubation Scheme) is particularly for tier II and tier III cities. Under this scheme, we are supporting around 700 start-ups. Here, we provide Rs 25 lakh and incubation space at 12 locations to those who are selected. Along with this, we also provide mentorship and global connections to them. In the past three years, we have taken 25 to 30 start-ups to Silicon Valley along with this TiE Silicon Valley program.
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ET: What are some of the key challenges these entrepreneurs typically face?
AK:
When I meet investors and other stakeholders in the industry, they say that even though the start-up has a very good solution, they don't know how to pitch. This realisation came to us three years back and since then, we have been working with these start-ups, teaching them how to pitch right.
We first did 90 days of intensive mentorship with them, where they got to understand how to talk to investors as well as those outside the country.
An important factor here is also to be ESG (Environmental, Social, Governance)-compliant. So, in this mentorship programme, we have a number of mentors who are experts in climate change or in ESG, and they guide them on how to go and how to show your pitch to outside investors, assuring them that you are indeed ESG compliant.
ET: Recently in an event, you mentioned that STPI was unable to meet its start-up target. What have you been able to analyse here?
AK:
So, we have the NGIS scheme, which was for three years. We need to fund around 200 start-ups in these three years. That was our target, but we were able to fund only 135 start-ups. Then we analysed the problem. This fund needs to be dispersed through the fund manager, and sometimes these start-ups are not even an official company yet; they don't have chartered accountants. It takes time. Sometimes they don't know what the shareholders agreement (SHA) is, so we have to make the SHA for them. And even then, they are sometimes not aware of the implications of some small conditions of SHA. When we select to disperse the Rs 25 lakh fund, we have to sign this agreement. Then sometimes they get this advice from somewhere that this will be bad for them, and they should remove themselves from the SHA.
While we had selected more than 300 start-ups, we were able to onboard only 135 due to lack of awareness and compliance issues. Because it takes a lot of time.
ET: The MeitY Secretary S. Krishnan had also recently said that a lot of innovations coming from start-ups are adopted by big tech companies and taken forward. And sometimes they are not able to find new start-ups to populate incubation centres. So, what has been your experience?
AK:
Not lack of ideas, but lack of awareness, like I said. So, they have ideas, but they don't know which incubator they should have. Sometimes one start-up may get incubated at 10 places. They may also get funded from 10 places. Sometimes, they are unable to present their ideas to any incubator or any fund investor. The problem is they aren't able to pitch the ideas before the right incubator based on what exactly they are looking at. Every incubator is offering something different. Every fund investor is offering something different. Some could be incubation equity and some could be investment equity. As a start-up, you are busier in building technical things but may not be able to identify incubators.
ET: What kind of start-up sentiment are you seeing today, in terms of funding, ideas, and products, compared to a few years back when there was a funding winter?
AK:
The best of the time was actually the Covid-19 period, about four years back. So, 2021 was the best period when a start-up was getting a lot of funding. Once this period was over, there was a funding winter. Back then, most of the fund investors were from outside. India's capital was not moving towards the start-up ecosystem. Indian investors were looking at the stock market, real estate, and gold as investment options. While the Indian innovators were creating start-ups, HNIs (high net-worth individuals) in their fifties with a lot of money did not have start-ups in their investment portfolio.
So, the big change that I can see today is now domestic capital is moving towards the start-up ecosystem. Now, domestic people who have money want to invest. Now they have a lot of awareness about start-ups. They are looking for a good start-up to invest in. So that is why today funding is not a major issue. Funding is coming from all corners. So, there is positive sentiment towards funding as of now.