UNIT:III

Government
Funding and
Startup schemes :
What is a Startup?

A startup is a new business started by entrepreneurs to develop

a unique product or service. It focuses on innovation, fast
growth, and solving problems. Startups often use technology and
need funding to expand.
 Example of a Startup
Example: Online Doctor Consultation – "MediHelp“

Problem: Many people struggle to visit doctors due to busy schedules or living in
remote areas.

Startup Idea: MediHelp is an online platform where patients can consult doctors
through video calls, chat, or phone calls.
 How It Works:
1.Users book an appointment on the app or website.

2.Doctors provide consultation online.

3.Prescriptions are sent digitally.

4.Medicine delivery can be added as a service.

 Why It’s a Startup?

New & Innovative Idea – Solves the problem of long waiting times at clinics.

Technology-Driven – Uses an app and website for consultations.

Scalability – Can expand to more cities and countries.

Needs Funding – To hire doctors, improve the platform, and advertise.

Real-Life Example: Practo, Tata 1mg, or DocPrime started as small health-tech startups and
became big businesses!
 Key Features of a Startup
1. Innovation & Problem-Solving
Startups introduce new ideas, products, or services to the market. They solve existing
problems in a better, faster, or cheaper way.

Examples:

•Uber changed how people book taxis.

•Zomato & Swiggy made food delivery easier.

•Paytm & Google Pay transformed digital payments.

 2. High Growth & Scalability
Unlike small businesses, startups aim to grow fast and expand across cities, countries, or even
globally.

Example:

•Facebook started as a small platform for Harvard students but quickly became a global social
media giant.
 3. Technology-Driven
Many startups use technology to create efficient business models. Tech helps
them automate work, reach more customers, and reduce costs.

Example:

•Amazon uses AI and data to improve shopping recommendations and logistics.

 4. Funding & Investment-Based
Startups often need external funding from investors, banks, or government schemes to grow.
They raise money in different stages:
•Seed Funding – Small investment to test the idea.
•Series A, B, C Funding – Larger investments as the business grows.
•IPO (Initial Public Offering) – When a startup sells shares to the public (e.g., Zomato, Paytm
IPOs).
 Think of an IPO (Initial Public Offering) like this:
•Imagine you start a small business, like a burger shop.
•At first, you use your own money to run it.
•As it grows, you need more money to open more outlets.
•You take money from friends or investors in exchange for a small share in your business.
•One day, your business becomes big, and you need even more money to expand across
the country.
•Instead of borrowing from banks, you decide to sell shares of your company to the
public (anyone who wants to invest).
•This process of selling shares to the public for the first time is called an IPO (Initial Public
Offering).
 5. Risk & Uncertainty

Startups come with high risk because they are trying something new. Many startups fail
due to competition, lack of funding, or wrong business strategies.
Types of Startups
1.Tech Startups

2.E-commerce Startups

3.Fintech Startups

4.Healthcare Startups

5.Social Startups
 1. Tech Startups
These startups build software, mobile apps, AI, or blockchain technology.

They create new digital solutions to make life easier.

Examples:

• Google (Search Engine, Android)

• Microsoft (Windows, Office software)
• Ola (App-based taxi service like Uber)
 2. E-commerce Startups
These startups sell products online instead of physical stores.

•Customers order from websites/apps, and items are delivered to their homes.

•Examples:

• Amazon, Flipkart (Online shopping platforms)

• Nykaa (Beauty & cosmetics e-commerce)

 3. Fintech Startups
•These startups deal with digital banking, online payments, and financial services.

•They make money transactions faster and easier.

•Examples:

• Paytm (Online payments & wallets)

• PhonePe (UPI payments)

• Razorpay (Business payment solutions)

 4. Healthcare Startups
•These startups focus on health and medical services using technology.

•They offer online doctor consultations, medicine delivery, and health monitoring.

•Examples:

• Practo (Book doctor appointments online)

• 1mg (Buy medicines online & consult doctors)

 5. Social Startups
•These startups work to solve social problems like education, environment, or poverty.

•They focus on helping people rather than just making profits.

•Examples:

• NGOs (Non-Government Organizations)

• Byju’s (Online learning & education platform)

 How Startups Get Support?
Governments and private investors support startups through:
 1. Government Schemes
•Startup India (India) – Tax benefits, easy business registration, funding help.

•SEZ & STP (Export Support) – Special zones for tech and software startups.

•MUDRA Loan – Government bank loan for small businesses.

2. Private Funding

•Angel Investors – Rich individuals investing in startups.

•Venture Capitalists – Big firms investing large amounts in startups.

 Government Support for Startups in India:

1.Startup India (India)

•A government initiative that provides tax benefits, simplified business registration, and
funding support to startups.

•Example: If you start an online clothing store, you can register under Startup India to get
tax exemptions for the first few years and access government-backed funding.
 2.SEZ & STP (Export Support)
•Special Economic Zones (SEZs) and Software Technology Parks (STPs) help IT and software
startups by providing tax benefits, better infrastructure, and easier export policies.

•Example: A tech startup developing AI-based software can set up its office in an STP zone to get
tax exemptions and cheaper office space.
 3.MUDRA Loan
•A government loan scheme for small businesses and startups that need funds to grow.

•Example: If you start a small bakery and need ₹5 lakh for equipment, you can apply for a MUDRA
loan from a government bank with low-interest rates.
 Private Funding Options:
4.Angel Investors
Wealthy individuals who invest their own money in startups in exchange for a share in the
company.

Example: If you start an app for pet owners and need ₹50 lakh, an angel investor who believes
in your idea may give you the funds in exchange for 10% ownership of your company.
 5.Venture Capitalists (VCs)
•Large firms that invest big amounts in startups with high growth potential. They usually support
startups that have already shown some success.

•Example: If your food delivery app already has 1 lakh users and needs ₹10 crore to expand, a VC
firm may invest in exchange for 20% ownership.
 Startup India Benefits

The Startup India initiative provides several benefits to help new businesses grow in India:

11️⃣ Tax Benefits

•No income tax for the first 3 years if registered as a startup.
•Exemption from capital gains tax and angel tax for eligible startups.

2️⃣ Easy Business Registration

•Simple online registration process through the Startup India portal.
•Fast-track patent applications with up to 80% reduction in fees.
3️⃣ Funding Support
•₹10,000 crore Fund of Funds to invest in startups via venture capital firms.
•Venture Capital (VC) firms are companies that invest money in startups in exchange for ownership (equity) in
the company
•Easier access to government tenders without prior experience requirements.

4️⃣ Legal & Compliance Help

Usually, businesses have to regularly report and prove that they follow labor and environmental laws. With
Startup India, eligible startups can self-certify, which means they only declare that they follow these laws
instead of going through long verification processes.
•Self-certification for labor & environmental laws, reducing legal burdens.
•No inspection for the first 3 years in certain cases.

5️⃣ Networking & Mentorship

When you start a business, you need guidance from experienced people and connections with others in the
industry. The Startup India initiative helps startups by providing
•Access to mentors, investors, and industry experts through Startup India Hub.
•Participation in government-sponsored startup fests & events.
 Bank Loan for Startup Business
Starting a new business requires money, and not every entrepreneur has enough savings
to fund their startup. That’s where bank loans for startups come in. Banks and financial
institutions provide loans to startups to help them set up and grow their businesses.
 Types of Bank Loans for Startups
A)Term Loans:

A term loan is when a bank gives a fixed amount of money, and the borrower has
to repay it over time with interest. It is used for expanding business, buying
equipment, or hiring employees.
Key Features:
Fixed Loan Amount – The borrower receives the full amount at once.
Repayment Period:
Short-term loans (1-3 years) – Used for quick business needs.
Long-term loans (5+ years) – Used for big investments like real estate or machinery.
Interest Rates:
Fixed Rate: The rate stays the same throughout the loan.
Floating Rate: The rate changes based on market conditions.
Example: A bakery startup takes a ₹10 lakh term loan for 5 years at a fixed 9% interest
rate to buy new ovens.
 B) Working Capital Loans
A working capital loan is used for day-to-day business expenses like:
Paying salaries
Buying raw materials
Paying rent & electricity bills
Key Features:
Short-term loan – Usually for 1 year or less.
EXAMPLE:
Imagine you own a clothing store, and the festive season (Diwali) is coming up. You know
that customers will buy more clothes, and you need extra stock. But right now, you don’t
have enough cash to buy more inventory. You apply for a working capital loan of ₹5 lakh
from a bank. The bank approves your loan for 12 months (1 year) with an interest rate of
10% per year.
 c) MSME Loans (Micro, Small & Medium Enterprises Loans)

The Indian government and banks offer special loans for small businesses under the MSME
(Micro, Small, and Medium Enterprises) category.
Key Features:
Lower interest rates than regular business loans.
No or low collateral required for small loans.
Available for both new and existing businesses.
Example: A mobile repair shop applies for an MSME loan of ₹3 lakh to expand its store and
buy new tools.
 d) Startup India Scheme Loans

Under the Startup India Initiative, the government helps new startups by
providing:
Collateral-free loans (No security required).
Easier loan approval process for registered startups.
Interest subsidies (Discount on interest rates).
Example: A tech startup gets a ₹20 lakh Startup India loan to develop new
software and hire employees.
e) Mudra Loan (Micro Units Development and Refinance Agency Loan)

This is a government-backed loan for small businesses and new startups. It has
three categories:
1. Shishu Loan (Up to ₹50,000) – For new and small businesses starting from
scratch.

2. Kishor Loan (₹50,000 to ₹5 Lakh) – For growing businesses that need more
investment.

3. Tarun Loan (₹5 Lakh to ₹10 Lakh) – For well-established businesses looking to
expand.

Example: A tea shop owner applies for a Shishu Loan of ₹30,000 to buy furniture
and stock.
f) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Loan

A CGTMSE loan is a government-backed loan that helps startups get loans without
giving any security (no collateral).
Key Features:
Loan amount up to ₹2 Crore.
No need for security/collateral.
Helps small businesses who don’t own property or assets.
Example: A homemade food startup gets a CGTMSE loan of ₹15 lakh to buy kitchen
equipment and delivery bikes.
 Eligibility Criteria for Startup Loans

To apply for a startup loan, businesses must meet certain conditions:

The business should be registered as a startup

A solid business plan

A good credit score

Example: A new electronics store applies for a loan. The bank checks its business
plan, bank statements, and credit score before approving.
 Popular Banks Offering Startup Loans in India

Here are some banks that provide startup loans:

State Bank of India (SBI) – SME Loans, Mudra Loans

HDFC Bank – Business Growth Loans

ICICI Bank – Startup Loans & Overdrafts

Punjab National Bank (PNB) – MSME & Mudra Loans

Bank of Baroda – MSME & Working Capital Loans

 Key Benefits of Startup Loans
Helps in starting or expanding a business.

Some loans require no collateral/security.

Government-backed loans have lower interest rates.

Flexible repayment options are available.

Example: A fashion designer gets a Startup India loan to open a boutique, benefiting
from low-interest rates and easy approval
 10000 Startups - A NASSCOM Initiative

10000 Startups" is a startup support program launched by NASSCOM in 2013 to help

10,000 technology-based startups in India by providing mentorship, funding access,
co-working spaces, investor connections, training, and global market exposure.

The initiative aims to accelerate the growth of early-stage startups by connecting them
with industry experts, large enterprises, and government support programs.
Now, if you're a person with a great tech business idea (like a new app, website, or
software service), but you don’t know how to start, where to get money, or how to
make it big, this program can guide you, support you, and connect you with investors
who might fund your idea.
 How Does This Program Help?

1. Gives You a Place to Work:

If you don’t have an office, 10000 Startups provides shared office spaces (called
Startup Ware) in cities like Bangalore, Delhi, Pune, Hyderabad, etc.

2. Connects You with Mentors & Experts:

If you don’t know how to grow your startup, experienced business leaders will
guide you.
They teach you things like how to get customers, how to run a company, and
how to avoid mistakes.
Helps You Get Money (Funding):
•If you need money to grow your startup, the program connects you with
investors and banks who might fund your idea.
•They also work with government schemes to help you get business loans or
grants.
Brings You More Customers:
•They introduce startups to big companies that might be interested
in their products.
•For example, if you create a great app, this program can connect
you with Google, Microsoft, or Facebook to help you grow faster.
Provides Learning & Training:

•If you don’t have technical knowledge about AI, cloud computing, or
blockchain, they offer training programs and workshops to teach you.
Expands Your Business Globally:

•If your business does well in India, they can help you expand into
countries like the USA, UK, and Israel.
How Successful Is It?

More than 7,000 startups have already received support.

Over 500 startups have successfully raised money and grown.

Many small businesses have become big tech companies.

This program is one of the best ways for new businesses in India to
succeed, especially if you are working on a technology-based idea.
 Export Promotion Schemes?

These government programs help businesses sell their products and services to other
countries (exports).

🔹 The government gives tax benefits, financial support, and special facilities to
encourage Indian businesses to export more.

🔹 This helps Indian companies earn money from foreign customers, which improves
India’s economy.
 Two major export promotion schemes are:
1 Software Technology Parks (STPs) – for IT/software companies
1️⃣

2️⃣Special Economic Zones (SEZs) – for manufacturing and IT companies

 1. Software Technology Parks (STPs) Scheme

STPs are special zones where IT and software companies get tax benefits and other
support to export their services to foreign countries.

Main Idea:
If a company develops software in India and sells it to clients in the USA, UK, or
other countries, they get special benefits like tax exemptions, cheaper office
spaces, and high-speed internet.
Benefits of STP Scheme

🔹 No taxes on software exports (Companies save a lot of money)

🔹 High-speed internet and better infrastructure

🔹 Easier government approvals for setting up an office

🔹 Duty-free import of hardware (like computers, servers, and networking equipment)

Example

🔹 Infosys, TCS, and Wipro started in STPs and exported software services
worldwide.

🔹 Many startups use Software Technology Parks to export their IT services to the
USA and Europe.
 2. Special Economic Zones (SEZ) Scheme

A Special Economic Zone (SEZ) is a dedicated area where businesses get tax
benefits, better infrastructure, and easy export facilities.

Why SEZs Are Important?

🔹 SEZs help Indian companies produce and export more products.

🔹 They attract foreign investments, meaning big international companies set up

factories and offices in India.

🔹 SEZs create more jobs for people.

✅ Benefits of SEZ Scheme

🔹 No taxes for the first 5 years (Companies save money)

🔹 Cheaper land and office spaces

🔹 Fast government approvals (No long waiting time)

🔹 Better transport and infrastructure for exporting goods

🔹 No import duties on machinery or raw materials used for exports

✅ Who Can Benefit?

🔹 Manufacturing companies that make products for export
🔹 IT companies that export software services
🔹 E-commerce companies selling products abroad
✅ Example

🔹 Many big companies like TCS, Infosys, and Wipro have offices in SEZs in cities like
Bangalore, Chennai, Hyderabad, and Pune.

🔹 Companies manufacturing electronic goods, textiles, and automobiles also

benefit from SEZs.
✅ Key Laws for Startups in India
🔹 Startup India Initiative – Provides tax benefits, funding, and faster registration for startups.

🔹 Companies Act, 2013 – Makes it easy to register a private limited company with fewer
formalities.

🔹 Startup Intellectual Property Protection (SIPP) – Helps startups patent their ideas and
inventions quickly and at a lower cost.

🔹 Insolvency & Bankruptcy Code (IBC, 2016) – If a startup fails, it can shut down within 90 days
without legal problems.

🔹 GST Benefits – Many startups get reduced GST rates to help them grow faster.
Example: If you start a company that builds AI software for farmers, you can register under
Startup India, get tax benefits, and apply for government funding.
 SBIR (Small Business Innovation Research) Program

SBIR is a US government funding program that gives money to startups working on new
technology, science, and innovation.

✅ Benefits of SBIR Grants

🔹 Startups get $150,000 to $1 million in funding.
🔹 No need to repay the money (It’s a grant, not a loan).
🔹 Helps startups develop new products in healthcare, AI, space tech, and cybersecurity.

Example: If you invent a robot that helps elderly people walk, you can apply for SBIR funding to
develop and test your product.
 STTR (Small Business Technology Transfer) Program

STTR is similar to SBIR but requires startups to partner with a research institution (like a
university or a government lab).

✅ Benefits of STTR Grants

🔹 Provides funding for tech-based startups.
🔹 Startups must collaborate with universities or research labs.
🔹 Helps in fields like biotechnology, medical devices, and space research.

Example: If you create a new type of cancer treatment, you can partner with a medical research
university and apply for STTR funding.
 NSF Grants (National Science Foundation Grants)

The NSF (National Science Foundation) is a US government agency that funds startups
working on scientific research and technology innovation.

✅ Benefits of NSF Grants

🔹 Provides $250,000 to $1 million for startups.
🔹 Focuses on engineering, AI, space tech, and energy.
🔹 Helps startups turn research ideas into real-world products.

Example: If you develop a solar panel that generates 50% more energy, you can apply for
an NSF grant to build and test it.