Karnataka govt plans help for startups to beat funding winter

Karnataka is planning to create a dedicated platform providing state-born startups with direct access to venture capital and high net-worth individuals as the government looks to revive investments following a prolonged funding winter.

According to IT/BT Minister Priyank Kharge, the proposed platform will benefit hundreds of startups incubated under the government’s Elevate programme.

“The only mechanism with the government now is to provide a grant,” Priyank said, explaining the need for a platform that can make startups meet with “credible” investors. 

“One of the most important tasks is getting startups mentorship and access to venture capitalists,” the minister said. “The last 2-3 years has been a venture winter. The prime reason for that is huge taxation by the Union government, such as the angel tax. The ecosystem wasn’t as robust as it used to be,” he said. 

“Now, we’re trying to see if we can develop a platform in coordination with a couple of private firms to ensure that startups get access to credible high net-worth individuals who are willing to put their money in and mentor startups,” he said. 

In 2023-24, the government picked 244 startups for a grant-in-aid of up to Rs 50 lakh under the Elevate programme at a total cost of Rs 56.14 crore. 

“Along with the government grant, if I can facilitate access to VCs, then I don’t have to run a grant programme,” Priyank said. 

While Elevate already offers incubation support, mentoring and VC connects, Priyank said there are limitations. “What we’re doing currently takes a longer gestation period,” he said. 

The platform being planned for startups is part of a larger Karnataka Acceleration Network. “We want to push 500 startups under this,” Priyank said. 

India has the world’s third-largest startup ecosystem. Karnataka is among the “best-performing” states in terms of startup ecosystem, according to the Union government’s Department for Promotion of Industry and Internal Trade. 

In his 2024-25 budget, Chief Minister Siddaramaiah has proposed starting a Rajiv Gandhi Entrepreneurship Program, which will be an early-stage funding initiative for startups founded by students or entrepreneurs. A new initiative to support early-stage women entrepreneurs and five acres of land for agri startups are also planned “to maintain Karnataka’s top position in the startup ecosystem,” Siddaramaiah said in the budget.