BANGALORE: The Karnataka government will launch two new venture funds to back young companies and set up a network of incubators in smaller cities as part of an ambitious plan to boost startup activity in the state.
The venture fund will have a corpus of 100 crore, with half the investments coming from the state and central governments. Private investors will provide the balance. "A separate fund of 20 crore will be set up to provide angel investments for very early stage companies," said TV Mohandas, chairman of Karnataka Information and Communication Technology Group 2020 which is spearheading the initiative.
A network of incubation centres to support technology startups will also be set up across select districts by the first quarter of 2014 according to the state's secretary for information technology and biotechnology, Srivatsa Krishna. "We are creating a comprehensive ecosystem for startups," he said.
Karnataka's moves to bolster startup activity coincide with similar initiatives by the centre and other states, such as Kerala. Earlier this month chief minister Oommen Chandy said his government would set aside 1% of the state's budget expenditure or 500 crore to fund young entrepreneurs. In Delhi, the India Inclusive Innovation Fund, envisaged as a 5000-crore fund, has received initial commitments of 400 crore from investors.
"The government can play a significant role," said Krishna Tanuku, executive director of the Wadhwani Centre for Entrepreneurship Development at Indian School of Business. "It should create infrastructure like tools, platforms, interdisciplinary projects and proof of concept centres."
Government support for startup activity comes at a time when entrepreneurial activity is rising across the country. An estimated 600 new startups will be launched every year according to consulting firm Zinnov. This year nearly 1,750 crore has been invested in early stage ventures.
The entrepreneurial boom is also attracting interest from foreign governments keen to partner with state-supported funds. This month, the United Kingdom Trade & Investment board struck a partnership with the Karnataka Information Technology Venture Capital Fund. They will together fund UK-based startups that set up operations in the state.
"There will be a link between startups in London's Tech city and Bangalore," said Francis Maude, Britain's' cabinet office minister who announced the tie-up this month.
UKTI will also mentor entrepreneurs along with software industry body Nasscom.
Government support for startup activity is also being modelled on successful initiatives globally, including Israel's Matimop programme. Karnataka's vision document for the sector, co-authored by Pai, recommends greater backing for research and innovation-led startups, including the establishment of a 1000 crore venture fund for information and communication technology ventures. "We are committed to making Bangalore the innovation hub for the world," said Krishna.