Past Reports

India Venture Capital and Private Equity Report 2014
an attractive career choice as an alternative to the more traditional ‘safe employment’ options in established
companies. Academic incubators are attractive as they provide access to latest technological developments
and also an intellectual environment that promotes innovation and excellence, along with a network of
contacts in the industry and scientific establishments. In addition to infrastructure and space, they are also
able to provide business support services and also crucially, access to individually targeted mentoring and
training schemes. Moreover, such incubators are also geared towards addressing the needs of diverse startups
spanning various maturity stages, operational cycles and industry or market segments. For fresh or
returning entrepreneurs, this provides an ideal platform to create, grow and transform their ventures to
successful businesses.
Figure 4.2: Funding sources for start-ups in India
It is important to appreciate the differences in start-up ventures and thus the need for different kind of
funding support for them: a convenient classification places them in the ‘rapid-exit’, ‘social’, ‘scalable’ and ‘lifestyle’
categories. Start-ups in all categories require some form of seed funding support without many
conditions attached, in order to create and grow their businesses. In the Indian context, funds in the range of
₹500,000 to 1 million are valuable enough to kickstart venture creation and operations. Such ‘Seed Funds’ are
best routed through academic incubators, as they are able to disburse and closely monitor the utilization of
the grant value. Many incubators already have and are currently operating Seed Fund schemes funded by
government bodies or private sources.
The first round of capital infusion for expansion beyond this stage would qualify as angel funds, and depending
upon the type of venture, there can be several rounds and cycles of further funding before the company
attains full operational maturity and sustanability. Most convetional VC funds in the Indian context are
comfortable operating in the funding range of over ₹100 million per company, and thus are mainly interested
in the later rounds of funding. Rapid-exit ventures, aiming to create a brand and product out of innovative
solutions play an important role in early-stage technology transfer in the academic setting, are geared towards
making an exit even after the first round of angel funding. Social and scalable ventures on the other hand, may
sometimes take several rounds of funding to reach a stage where conventional VC’s get interested in investing
in them. Availability of early angel funds (₹2.5 to 10 million per company) and early stage venture funds (₹50
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