Kochi

A game changer for start-ups

Collateral security-free capital loan to start-ups captures industry players’ imagination

The boost received by start-ups in the budget was the toast of Information Technology industry players though there was the odd voice of caution against giving monetary incentives to start-ups without ‘due diligence’.

The budget proposals for helping start-ups tide over capital paucity attracted near universal appreciation from all quarters.

“The proposal to facilitate working capital loan of up to ₹10 crore without collateral security is a key decision meeting one of the long-standing demands of entrepreneurs. It could be very useful to start-ups, especially in the hardware sector, as several of them have been complaining about commercial institutions not financing working capital without collateral security. It is a model initiative, which no other State has done so far,” said Saji Gopinath, CEO, Kerala Startup Mission.

He also found the assistance of up to ₹1 crore to start-ups at the time of expansion of new product prototypes very encouraging. Prasad Balakrishnan Nair, CEO of Maker Village, said the collateral security-free capital loan could prove to be the biggest game changer for hardware start-ups with the potential to turn Kerala into a national innovation hub for hardware development.

“Compared to software start-ups, which manage to generate some revenue from the very beginning, hardware start-ups involve longer product development cycle and investments and are more complex with no revenue generation till the products are developed. The new initiative could be a big breakthrough for the hardware start-up ecosystem,” he added.

Mr. Nair said nearly 10 hardware start-ups from outside the State had already been chosen under the Social innovation Programme for Products: Affordable & Relevant to Societal Health (SPARSH) of the Department of Biotechnology and the Innovations for Defence Excellence (iDEX) under the Ministry of Defence. The new scheme will further make Kerala a sought-after destination for hardware start-ups.

However, Joseph C. Mathew, a successful entrepreneur and IT adviser to former Chief Minister V.S. Achuthanandan, said while the allocation of government projects to start-ups was welcome, extending monetary assistance without verifying the credentials of start-ups betrayed a lack of due diligence.

“The tendency to register a start-up only to mop up monetary incentives and then winding it up soon thereafter seems to be widespread. Rather, the government should provide them incubation facilities, infrastructure, and handholding. From the very outset when start-up culture started in the State, incentives to entrepreneurs were in kind rather than in cash,” said Mr. Mathew, who felt that financial incentives should be distributed sparingly taking into account the longevity and job creation by start-ups.

On the absence of significant budgetary allocations for IT parks, P.M. Sasi, CEO, Kerala IT Parks, said the government was of the view that IT parks had stabilised and should be eyeing self-sustained growth. The budget merely said the total area of Technopark, Infopark, and Cyberpark would be increased to 245 lakh sft. in 2021.

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Printable version | Jun 7, 2020 12:18:38 AM | https://www.thehindu.com/news/cities/Kochi/a-game-changer-for-start-ups/article30766880.ece

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