Karnataka approves startup policy, plans fund of funds

Karnataka has set up a startup policy to encourage entrepreneurs to bulid companies not just in Bengaluru, the tech hub, but also in smaller cities such as Mysuru, Mangaluru and Hubbali.

The Karnataka cabinet approved the policy on Thursday that also envisages a fund of funds for early stage funding of technology startups. Officials said the startup policy would be applicable for the next five years and budgetary allocations will vary based on need.

"The foremost strategy is to understand and focus on the fact that for innovation to thrive we need to build an ecosystem that nurtures it," said V Manjula, Principal Secretary to Government Department of IT, BT and S&T. We are working with professional and postgraduate institutions so that students are actually encouraged to try out their ideas and make products."

Karnataka's move comes ahead of the Centre's plan for a startup policy in December. Several states such as Rajasthan and Kerala have unveiled their own startup policies as they look to attract entrepreneurs to setup within their own states.

R&D will be another major focus of the Karnataka startup policy. The state government hopes to promote collaboration between R&D institutes and the industry to enable products to get past the proof-of-concept stage. Bengaluru houses over 50% of the country's 850 odd R&D institutions.

"Our state was the first state to announce the IT policy, our state was the first state to announce the ESDN policy and only yesterday our cabinet cleared the startup policy. Here also karnataka stands first," said S R Patil, IT, BT and S&T Minister of the state of Karnataka.

Karnataka employs four million people in the technology sector with three out of four people providing ancillary services to the sector.

Manjula said that the strategy is to understand and focus on the fact that for innovation to thrive we need to build an ecosystem that nurtures it.

"Therefore we're talking about working with professional and post graduate institutions and setting up incubators within these institutions so that students are actually encouraged to try out their ideas and make products. Also improving the ease of business by setting up a startup cell in KBITS to handhold startups and setup a startup portal from where they can access information," she said..

According to industry body NASSCOM, India had 3,100 startups at the end of 2014 and that number will cross 4,200 by the end of 2015. The country is currently the third largest startup hub in the world after the US and Israel, but is on track to take the second position soon. By 2020, India is expected to have an 11,500 startups.