New Delhi: A number of successful start-ups that have made it big, such as Flipkart and Snapdeal, have emerged out of educational institutions like the IITs. And now, the Narendra Modi government wants educational institutions to spend at least 1 per cent of their budgets to encourage the growth of more such start-ups.
According to a start-up policy formulated by the All India Council for Technical Education (AICTE), released early this month, the government wants institutions to relax the rules for faculty and non-teaching staff members to work on such projects, whether they are started by students or faculty members themselves. Faculty members will also be evaluated on the basis of their contribution to start-ups.
The Ministry of Human Resource Development hopes the policy, which all higher education institutions have to follow, will enable them to actively engage students, faculty members and staff in innovation and entrepreneurship-related activities.
In turn, the institution will be allowed to take up to 2 to 9.5 per cent equity/shares in the start-up, depending upon the extent to which it supported the project.
Students to get relaxations too
The policy states that student entrepreneurs will be able to earn credits for working on innovative prototypes or business models. Such students will also be allowed to sit for examinations even if their attendance is less than the minimum permissible.
The institutions have also been asked to allow their students to take a break — for a semester, a year or even more — to work on their start-ups.
On investing part of the institution’s budget on start-ups, the policy states: “Investment in the entrepreneurial activities should be a part of the institutional financial strategy. Minimum one per cent fund of the total annual budget of the institution should be allocated for funding and supporting innovation and start-ups related activities through creation of separate ‘innovation fund’.”
Every faculty member should be encouraged to mentor at least one start-up, it states. Participation in start-up-related activities will be considered a legitimate activity for them, in addition to teaching, research, industrial consultancy and management duties.
“Higher education institutions may allow their students/staff to work on their innovative projects and setting up start-ups or work as intern/part-time in start-ups while studying/working,” it states.
The policy states that the institution should offer access to pre-incubation and incubation facilities for a mutually acceptable time-frame. In case an institute does not have a dedicated facility of its own, it may reach out to the nearest incubation facilities in other institutions.
It also wants the institutes to provide entrepreneurial mentorship on a short-term, six-month, one-year, or even part-time basis.
The facilitation can be in a variety of areas, including technology development, ideation, creativity, design thinking, fund raising, financial management, cash-flow management, new venture planning, business development, product development, social entrepreneurship, product costing, marketing, brand-development, human resource management, as well as law and regulations impacting a business.
“Institutes may also link the start-ups to other seed-fund or venture funds, or itself may set up seed-fund once the incubation activities mature,” the policy states.
Institute can take equity
In return for the services and facilities that the institution provides to start-ups, it may pick up 2 to 9.5 per cent equity/stake. This share will be based on brand use, faculty contribution, support provided, and use of the institute’s intellectual property rights (IPR).
There will be no restrictions on shares that faculty pick up in the start-up as long as they do not spend more than 20 per cent of office time on the start-up in an advisory or consultative role and do not compromise with their existing academic and administrative work.
In case the faculty holds an executive or managerial position for more than three months in a start-up, he or she will go on sabbatical or leave without pay.
Institutes could also extend these facilities to alumni as well as outsiders.
‘More needs to be done’
According to a paper published by the Observer Research Foundation (ORF), so far 14,036 start-ups have been recognised based on the definition set by the Department of Industrial Policy and Promotion (DIPP). Of these, 660 start-ups have received business support, while 132 have been funded.
Speaking to ThePrint, start-up entrepreneurs said the policy was a step in the right direction, but more needed to be done.
“There was a need for a policy like this but just a policy will not work, the mindset needs to change,” said Akshay Singhal, the founder of Log9 Materials, a start-up incubated at IIT-Roorkee.
“Institutions think that students are trying to make a fool of them… They become too stringent with start-ups and new entrepreneurs. Thankfully, we were lucky that the person involved with our start-up gave us freedom but a lot of new entrepreneurs have to face problems,” he added.
Singhal and his team developed electric cars that can run on water and aluminium.
Binay Krishna Shivam, the co-founder of another successful start-up, TapChief, started from Birla Institute of Technology and Science (BITS), Pilani, agreed. According to him, “just a policy is not enough, the government should make sure that the start-ups are provided with end-to-end support”.
“The policy takes care of a lot of basic things, but it is also important that the institutes provide end-to-end support to students, like connecting them with clients and companies. It is very important for students when they are starting out to have such connections,” he said.
He added that this lack of support was the reason why many start-ups don’t emerge from education institutions in India.
Shivam started TapChief with BITS batchmate Shashanka Murli. Earlier this month, the company was ranked third on a list of 25 successful Indian start-ups.