New INR 1 Billion VC Fund Announced

The Karnataka government approved a new start-up policy on December 22 and aims to add 10,000 more start-ups in the next five years. Already, Karnataka is home to 15,000 start-ups. The state is now focused on multiplying high-growth start-up enterprises.

The state information technology and biotechnology minister CN Ashwath Narayan has said Karnataka hopes to become a ‘champion state’ the start-up sector and nurture these enterprises throughout their business cycle so that the state is a global hub for innovation.

Karnataka Start-Up Policy 2022-27: Key provisions

The new start-up policy has a provision for a INR 1 billion (US$12.05 million) venture capital (VC) fund to support emerging and disruptive technology start-ups in artificial intelligence (AI), machine learning (ML), electric vehicles (EV), medtech, robotics, drones, etc.

Start-ups aligned with the UN Sustainable Development Goals (SDG) will receive state support as also start-ups that aim to assist the differently abled.

Start-ups under the policy will get a one-time grant of up to INR 500,000 ((US$6029.81).

Twenty-five percent of the INR 1 billion fund will be reserved for start-ups led by women. Such start-ups will also qualify for a INR 1 million (US$12,059.61) direct loan through the Karnataka State Women Development Corporation.

Broad pillars to meet policy objectives

There are nine broad pillars to achieve the start-up policy objectives:

• Creating and strengthening new age innovation networks (NAIN) in higher learning technology institutions outside the Bengaluru urban district. Each NAIN student will be provided a INR 500,000 support fund per student project for a three-year period and annual assistance up to INR 1.2 million (US$14,471.53) for operational expenses.
• Fostering academy-industry partnerships
• Funding
• Mentorship, incubation, and accelerator infrastructure
• Creating an inclusive and equitable ecosystem
• Fostering social and rural entrepreneurship
• Innovation channeled for societal impact
• Enabling and facilitation
• State incentives and concessions

Beyond Bengaluru Cluster Seed Fund

The policy has a Beyond Bengaluru Cluster Seed Fund, which highlights the state’s ongoing efforts to improve the scope and scale of development and industry beyond the Bangalore city epicenter. This Fund will assist start-ups scale up in emerging tech clusters in- tier-2 and tier-3 regions like Mysore, Hubballi, and Mangalore. Start-ups from the relatively backward Kalyan Karnataka area will receive support from the state under the policy.

Other incentives 

The Karnataka Start-Up Policy seeks to establish a center of excellence (CoE) for assistive technology and will offer a INR 150 million (US$1.80 million) grant for R&D leading to innovative products and solutions for the differently abled and senior citizens.

The state government also stated that its share of the GST collected will be refunded to Beyond Bengaluru start-ups that are incubated in Karnataka’s state supported hubs and common instrumentation facilities (CIF) with a turnover of up to INR 10 million (US$120,596.10) in the first three years of incubation.

Additionally, 30 percent of marketing costs up to INR 500,000 (US$6029.81) will be reimbursed. For patent filing, the government will reimburse up to INR 200,000 (US$2411.92) per Indian patent. For foreign patents filed, the Karnataka government will reimburse up to INR 1 million (US$12,059.61).

Start-ups located outside Bangalore (Bengaluru) urban district can claim half of the quality certification costs incurred at a cap of INR 600,000 (US$7235.77) for up to three industry standard quality certifications.