Start-ups anchoring knowledge economy

With KSUM as pivot, the State now boasts 3,500 start-ups attracting investments to the tune of ₹3,700 crore by way of venture funds and angel funding and creating 35,000 jobs and 30,000 aspiring entrepreneurs

Published - April 02, 2022 07:14 pm IST - KOCHI

When the Kerala Startup Mission (KSUM) set up an Innovation and Entrepreneurship Development Centre (IEDC) at the MES College of Engineering at Kuttipuram in 2015, Vimal Govind and friends, then in their third year, had no plan to become entrepreneurs.

Seven years down the line, their startup, Gen Robotics Innovations, is looking at a likely turnover of ₹30 crore in the just-concluded financial year with multiple offices across Kerala and a subsidiary in the United Kingdom collectively employing 200 persons.

Apart from selling their much-lauded manhole drain cleaning robotic unit to 15 States and abroad, they have now come up with a slew of robotic products catering to the oil and gas industry, medical sector, and sanitisation of skyscrapers.

“If the IEDC had not introduced us to the product manufacturing platform during our college days, we would probably have never realised our own creative potential and like thousands of others would have settled for stable jobs. If not for the handholding and support by the KSUM, our idea of manhole drain cleaning robotic drone would not have managed investments, initially from the Kerala Water Authority and later equity investments through the KSUM’s Fund of Funds initiative,” recalls Mr. Govind, founding partner of Gen Robotics Innovations.

Set up in 2015 as the State’s nodal agency for implementing the Startup Policy, arguably the first in the country when it was announced a year before, the KSUM has been performing a critical role in creating the right ecosystem for start-ups.

It offers infrastructure across the State to help nurture an idea and scale it up to big enterprises. Start-up hubs complete with a network of incubators, accelerators, and knowledge labs for handholding start-ups through various stages of their lifecycle have been set up in Thiruvananthapuram, Kochi, Kozhikode, Palakkad, Kannur, and Kasaragod.

As per the data available with the KSUM, the State now boasts 3,500 start-ups attracting investments to the tune of ₹3,700 crore by way of venture funds and angel funding and creating 35,000 jobs and 30,000 aspiring entrepreneurs.

Adding to the start-up ecosystem are four accelerators, 63 incubators, a super fab lab, and 22 fab labs offering high-precision machining capabilities, AR VR Centre of Excellence, and innovation zones with the KWA, Kerala State Electricity Board Limited, and the Kerala Police.

Among the incubators are four specialised ones – Maker Village for hardware, BioNest Kochi for biotech, IIM Live Kozhikode for IT and ITES, and STADE for space-related ideas.

“We have a great synergy between start-ups and the IT parks in the State. In fact, many of the incubators operate from the parks and officials of IT parks and the KSUM work in close association offering advice to start-ups, including on taking up space in parks on their graduation. We also have several schemes like part rent reimbursement for a certain period for the space start-ups take in IT parks,” says John M. Thomas, CEO of Kerala IT Parks, who also holds additional charge of the KSUM.

The reason for the State’s focus on the start-up ecosystem could be traced to the formation of a technology business incubation centre at Technopark, Thiruvananthapuram, in 2002. It was recognised as a technology business incubator by the Department of Science and Technology in 2006.

Startup Village, the country’s first telecom incubator, was launched six years later making innovation the buzzword and attracting a steady stream of delegations from across the country and outside.

“When we set a goal of 1,000 entrepreneurial ideas from the State in a decade, it was considered farfetched at that time. But see where we have reached now. Considering that a start-up takes up to 10-12 years for completing its lifecycle, Kerala needs to give another four to five years for its start-ups to achieve their full potential. With land at a premium for setting up industries, knowledge economy remains the best bet for the State and it needs to keep investing in it,” says a former senior executive of Startup Village.

In keeping with the dictum catch them young, the KSUM launched initiatives such as Learn to Code and Electronics@School at the school level and IEDCs at the college level. The initiatives at the school were later integrated with the larger IT@School project while 340 IEDCs were scaled up as mini-incubators.

“We focussed on creating an ecosystem that supported innovations rather than invest in start-ups per se. Unlike Hyderabad, Bengaluru or Delhi, where the IT ecosystem was built by people from outside, we adopted a ground-up approach to building a flexible model realising that the State hardly can count on mass in-bound migration. Our focus was also more on tech-based, profitable start-ups with assured cash flow rather than being obsessed with valuation and producing billion-dollar startups. It seems to have served us reasonably well,” says Saji Gopinath, former CEO of KSUM and now Vice Chancellor of the Kerala University of Digital Sciences, Innovation and Technology.

Kerala bagged the ‘top performer’ honour for developing a strong start-up ecosystem as per the Startup Ranking Framework prepared by the Department for Promotion of Industry and Internal Trade of the Ministry of Commerce and Industry on both occasions since 2018 before the outbreak of the pandemic put paid to the ranking system.

The back-to-back honour shows that the State got it more or less right in the case of start-ups after missing the proverbial bus of the IT revolution.

Among the factors that won the State the top billing were its performance as institutional leader, regulatory change champion, procurement leader, incubation hub, seeding innovation leader, and scaling innovations leader besides its support for women-led startups, special subsidies, seed funding and a robust venture funding mechanism. 

“Unlike the city-based ecosystem elsewhere, we went about building an ecosystem for the entire State. We put in place a system of offering unique IDs for the start-ups recognised by the KSUM and Startup India. This made possible a single dashboard of all data related to start-ups facilitating better decision making,” says Ashokkumar Panjikaran, manager (business development, incubation and IT), KSUM.

So far, 400 start-ups have received innovation grants to the tune of ₹20 crore during various stages of the product development while 150 start-ups have benefitted from seed loans of up to ₹15 lakh at a reasonable interest rate of 6%. Besides, a grant of up to ₹30 lakh is available for research and development though it comes rather late in the day.

As the demand for funding by start-ups rose, the KSUM, in association with four SEBI accredited Alternative Investment Funds (AIFs), set up a Fund of Funds (FoF) towards the end of 2017 with the State government as a limited partner for bringing in investments. Since then, ₹61 crore has been mobilised by way of venture funding through FoF. Giving further impetus to funding for start-ups, the State government in the latest Budget proposed a working capital fund in association with the Kerala Finance Corporation, Kerala State Financial Enterprises Limited and Kerala Bank.

The Budget also set apart ₹90.52 crore to the KSUM, of which ₹20 crore will be for the Kochi Technology Innovation Zone and ₹70.52 crore for the Youth Entrepreneurship Development Programme. The decision to amend the store purchase manual to give preference to start-ups in government procurement was another major enabler for start-ups. This is supposed to further boost the Government as a Marketplace (GAM) initiative, under which 150 start-ups have so far received works totalling ₹10 crore from 80 different departments.

Going beyond offering grants and market access, the idea now seems to be on developing industry-based start-up clusters complete with mentorship and expertise like what the proposed Kerala Medical Technology Consortium plans to do at the Life Sciences Park, an initiative of the Kerala State Industrial Development Corporation.

“The plan is to offer common facilities to start-ups from incubation to research for building up a favourable ecosystem for a thriving medical devices industry. The objective is to help overcome the challenge of the huge cost involved in the development of medical devices,” says C. Padmakumar, Director, Life Sciences Park, Thiruvananthapuram.

Kerala State IT Infrastructure Limited (KSITL) is also planning to join hands with the KSUM in the near future once the Kerala Fibre Optic Network (KFON) is rolled out. KFON is likely to make the potential of start-ups accessible to those even in the hinterlands breaking barriers such as bandwidth issues, says Santhosh Babu, Managing Director, KSITL.

Closely associating with the Young Innovators Programme under the Kerala Development and Innovation Strategic Council through workshops and training programmes, Santhosh Kurup, CEO of ICT Academy, says that the start-up ecosystem had helped the overall development of the community beyond entrepreneurship by improving their problem-solving capabilities.

“The ecosystem that clears the pathway right from schools to entrepreneurship works beautifully and facilitates a certain level of natural acceleration leading to speedy graduation of the start-ups. However, there remains the challenge of going to the next level by creating high-end start-ups. Besides, the reason why many entrepreneurs choose to move out of the State after reaching a certain point needs to be looked into and addressed,” he says.

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