Rs 100-cr Fund:A Lifeline to Startups in Hyd

Hyderabad :

The government of Telangana’s proposed Rs 100 crore fund, a first-of-its-kind initiative, is likely to give fillip to startups in the city, say industry experts. There are 1,000 to 1,500 startups in the city, over 200 of them in the IT sector, followed by those in other sectors like pharma, retail and agriculture.

While there are several angel investors offering financial support and technical guidance for entrepreneurs, they come in only after the startup venture reaches a certain stage. “The need of the hour is seed funding. Startups need capital and mentoring in the first 12 months of their venture after which angel investors take over,” said Ramesh Loganathan, president of Hysea and MD of Progress Software.

Typically, seed funding involves providing capital assistance ranging between Rs 5 and 50 lakh, where angel investments are between Rs 75 lakh and Rs 3 crore.

“The proposed Rs 100-crore fund can either emulate the Central Government’s Department of Science & Technology (DST) model, which offers soft loans and grants to potential ventures or the government can tie up with a few venture capitalists and co-invest in startups,” said Bipin Chandra Pendyala, secretary of Hysea and director of iKeva. According to Ramesh, currently, there’s absolutely no support, either financial or technical, for startups in the seed stage. “Every firm needs mentoring and capital in the first few months after starting the venture. That’s lacking and we have suggested to the government to consider bridging this gap,” he said.

While incubators like the T-Hub, also provided by the state government, give startups access to infrastructure like systems and servers, they will still need capital to hire a team and grow.

“Compared to mature markets like the Silicon Valley, seed capital for startups in India is in a nascent stage. This is a first state-level initiative and once operationalised, will help several upcoming ventures,” explained Bipin. The government, according to sources, is evaluating the business model and it is expected that the proposed investment framework will be operational in the next three or four months.

The government of Andhra Pradesh too has announced a similar Rs 100-crore fund for startups but there too the framework is yet to get operationalised. Hyderabad is home to over 1,400 IT and ITeS companies, and the state government has fixed an ambitious target of software exports to the tune of Rs 70,000 crore in FY15, up from Rs 57,000 crore in FY13. Meanwhile, the first phase of T-Hub will be ready in the next two months and will house 700 to 800 startups and will be scaled up to 1,500 or more later.

source: http://www.newindianexpress.com / The New Indian Express / Home> States> Telangana / by Sunitha Natti / April 02nd, 2015

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