HAVING SET a target to cultivate 2,500 new start-ups in a span of five years, Gujarat government is planning to launch a Rs 250-crore start-up fund in the next couple of months. The fund will not only provide crucial financial support to first-generation entrepreneurs, it will also help the state government put a firm foot forward in implementing its plan to nurture the entrepreneurial skills of Gujaratis in an organised manner.
A year has already gone by since the Gujarat government announced its new Industrial Policy, 2015. The policy, for the first time, contained detailed schemes for cultivating, on an average, 500 start-ups every year. Little seems to have moved on the ground during the last 12 months as state government officials associated with implementing the policy try to align the state policy with the one launched by Prime Minister Narendra Modi in mid-January this year.
“Start-ups are brilliant ideas. In Gujarat, we have already come up with a policy. We might improve our policy looking at the needs of the future. We have also already identified institutions that will be responsible to help the start-ups,” said state Finance Minister Saurabh Patel, while talking about the start-up policy on the sidelines of an event recently.
The effort by the state government to create a favourable ecosystem of start-ups is evident from the preamble of Gujarat’s Industrial policy that states: “More than 60 percent of Gujarat’s population is in the age group of 15-59 years. A young population means a young workforce, which, in turn, implies a more innovative and entrepreneurial mindset. The government is focused strongly not just on the employability, but also on initiating the start-up incubators/centres for developing entrepreneurial skills in the youth… The primary mission of the Industrial Policy includes innovation, start-ups and technology transfer. As per the state government, start-ups will create opportunities for young population in the future.”
The state government, in association with its own venture-funding arm — GVFL Limited (formerly Gujarat Venture Finance Limited) — is also looking to launch a new Rs 250 crore fund that will specially address the equity requirements of start-ups in the state. “The Rs 250 crore fund, known as the GVFL Start-up Fund, will be launched in the next couple of months. The finer details are currently being worked out,” said a senior official of GVFL whose first fund for start-ups was launched way back in 1990.
Till now, GVFL has launched about two seed funds and three start-up funds and has financially supported over 80 companies, including several start-up firms, like Saraf Foods, Cadila Laboratories Limited, Gujarat Surgico Ltd, 20 Mircons Ltd, Neilsoft Ltd, eInfochips Ltd, Sahajanand Laser Technology Ltd and others.
The state government’s target of cultivating 2,500 start-ups currently looks a bit distant, considering that only a handful from Gujarat had tasted success in the recent past.
According to a NASSCOM report published in October 2015, there are over 4,200 start-ups in the country, of which “more than 65 per cent are located in Bangalore (26%), NCR (23 %) and Mumbai (17%)”. The trio is followed by Hyderabad (8%), Chennai (6%) and Pune (6%).
The report, titled Start-up India — Momentous Rise of the Indian Start-up Ecosystem, describes Ahmedabad as an “emerging city” on the start-up arena that has “incubators, mentors and a well-entrenched ecosystem for start-ups”.
Three of the 11-government recognised incubators operate in Ahmedabad. Sunil Parekh, who is part of one such incubator in the city, says, “At present, there are about 150 odd ideas that are getting incubated across Ahmedabad alone. Most of these are in the e-commerce, aggregators, health tech, Internet of Things, and consumer services.”
Parekh, who has also been a board member of Start-up State-level Implementation Committee of Government of Gujarat, however, says that despite 11 incubators in institutions in Ahmedabad-Gandhinagar, the ecosystem “has not matured as yet” and needs entrepreneurs who create long-term value with their enterprises rather than those that run with the dotcom products which typically thrive in highly competitive business environment.
The presence of “me too” ideas, which cannot be described as “innovative”, is not encouraging. “Novel ideas that can bring out new products are less than five percent. ‘Me-too’ ideas are being encouraged to drop out,” says Parekh, while talking about the prevailing situation in the state’s start-up space.
Industrialists like Piyush Shah, executive vice-chairman and MD, Hitachi Hi-Rel Power Electronics Pvt Ltd, while speaking about Gujarat start-up policy recently, have described the sustenance allowance of Rs 10,000 provided to start-up firms in the Gujarat as “peanuts”. Others have also demanded a sizable increase in the assistance of Rs 10 lakh provided in the new policy as cost of raw material components required for new product development to start-up firms in Gujarat.
In spite of the perceived shortcomings, what holds water is that an ecosystem for start-ups is definitely being created in Gujarat. The need of the hour is nurturing them, say experts.
Amit Gohil, who has been working with The Indus Entrepreneurs (TiE), a 22-year-old organisaton that has been assisting start-ups, says, “Gujarat used to lack proper ecosystem for funding start-ups and for scaling them. This is the primary reason for the state lagging behind in creating start-ups. But the scene is changing now. Earlier, the investors did not see any alternate business opportunity in it. But a complete paradigm shift is taking place in this direction.”
Giving an instance of a start-up firm PlexusMD — an aggregator for doctors that attracted a fund of Rs two crore from a local businessman, Gohil says that local start-ups, like wWhere and PlexusMD, have also begun hiring from engineering colleges, indicating these ventures are sure to succeed and make profit. wWhere has received a financial assistance of Rs 1.2 crore from a local investor as an equity shareholder.
Mitesh Shethwala, founder of Alagrand.com, a start-up firm dealing with online marketing of textiles, says the major problem for Ahmedabad to create start-ups was the “unavailability of experienced employees and funds to sustain the new ventures launched by students studying in final year of these courses”. But the situation, according to him, is changing, with investors stepping forward to finance start-ups.
Yash Shah, whose start-up Gridle.io, a platform for internal communication among companies of similar nature, have attracted 126 companies in the last two years. Winner of several awards in setting up a successful start-up, Shah says, “Ahmedabad will not stay behind in start-ups.”
Hiranmay Mahanta, who helped formulate the start-up policy in the country and is currently managing Gujarat Technological University’s innovation council and incubation centre called Student Start-up Support System, says there is a need to decentralise innovation and entrepreneurship at district and taluka levels of the state. “Take entrepreneurship beyond big centres, like Ahmedabad, and support them in their initial stages when they face financial hardship to bring industrial and business revolution,” Mahanta said.