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Commerce Ministry to Seek More Funds to Boost Startup Ecosystem

2024/06/10 18:20 pm

The commerce and industry ministry may seek more funds for startups in the forthcoming Budget, to be announced by the new government to promote innovation in the country, an official has said.

The new government may announce the Budget for 2024-25 in July.

The seed fund scheme, announced in April 2021 with a corpus of INR 945 crore, will end in 2025, and the ministry may consider proposing a new scheme on similar lines.

The seed fund scheme was aimed at providing financial assistance to startups for proof of concept, prototype development, product trials, market entry, and commercialisation.

The fund was divided into four years for providing seed funding to eligible startups through incubators across India.

Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise, and the capital required at this stage often presents a make-or-break situation for startups with good business ideas, another official said.

There are over 1.17 lakh government-registered startups in the country. They are eligible for income tax and other benefits. These recognised startups have been reported to have created over 12.42 lakh direct jobs.

The ministry is also expected to propose a dedicated policy for deep tech startups.

Deep technology refers to innovations founded on advanced scientific and technological breakthroughs. Due to their disruptive nature, they have the potential to solve India's most pressing societal issues.

Focus on promoting startups was crucial in the previous government, which unveiled the Startup India initiative on January 16, 2016, along with an action plan for startups consisting of schemes and incentives to create a vibrant startup ecosystem in the country.

The action plan comprises 19 action items spanning various areas, such as simplification and handholding, funding support and incentive, and industry-academia partnership and incubation.

Startups have raised nearly USD 105 million in venture debt financing till May this year, compared with USD 151 million raised in the entire 2023, data from Tracxn showed. The figures include only publicly announced venture debt deals.

Venture debt is a type of loan offered to Series A-and-above startups with institutional backing, and includes equity warrants in addition to the debt component, with a repayment period of two-three years. These equity kickers are typically about 10% of the debt quantum and usually translate to less than 1% ownership in the firm on a fully diluted basis. Venture debt is typically only available to firms with institutional backing, so much of the uptick in venture debt deals hinges on the recovery in venture capital investments.


Article Source – PTI

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