Got an Idea but No Money? Government Schemes for Startups Can Help

Got an Idea but No Money? Government Schemes for Startups Can Help

Picture yourself at your desk with a notebook, a laptop and a business idea that you have a passion for.

You've considered the product. You have a problem you would like to solve. Perhaps you've even had a few prospective customers speaking with you.

However, the next big one arises:

What can I do to raise the capital for get started?

One of the major hurdles of the many budding businessmen in India is this.

To start a business with money you need to build a product, purchase equipment, hire employees, market your product and reach customers. If you are a first-time starter, you may find it daunting to get this money in order.

However, many start up founders are unaware of this: Government schemes for startups can offer various types of support to businesses that qualify for them.

This assistance isn't necessarily free money. This may cover Seed Funding, credit assistance, incubation, mentorship, IP support and opportunities for government organisations to purchase.

If you have an idea but you don't have a lot of money, then don't throw in the towel just yet.

Let's take a closer look on how the Government can support an idea to become a flourishing business.

Why Money Is a Big Challenge for New Startups

All start-ups have a beginning.

At first, a founder might only have an idea and the faith that they can help to fix a problem.

However, it's not enough to have an idea and start a business; it takes cash as well.

A technology entrepreneur might require some money to:

Describe and construct the first prototype.

• Hire a developer
• Test the product
• Design a site or app.Develop a website/a web app.
• Conduct market research
• Register intellectual property
• Connect with the initial customers
• Cover all the necessities of business.

Businesses may require capital for machines, raw materials, packaging or employees for their small businesses.

The issue is that banks are generally not going to lend to a business with no experience and investors typically do not invest in a business without some evidence that the concept is going to make it a business.

This makes it tough for start-up founders to put down roots.

It's this where startup support programs can be helpful.

What are Government Schemes for Startups?

Government schemes for startups are those schemes that are designed to support various stages of a startup and entrepreneur businesses.

Details of what kind of support is provided, will vary according to the scheme.

There are programs that are geared towards startups in the early stages. The others may provide assistance in obtaining credit, investors, support for intellectual property or government markets.

The Startup India portal gives details of all the initiatives and schemes related to startups.

The key to take in this regard is that there is no single scheme that is perfect for all of the startups.

A founder may require different kinds of support if he has just an idea as compared to a startup who has customers and is looking to grow.

Startup India Seed Fund Scheme: Help at the Early Stage

Let's go back to our 'founder' Priya.

Priya has an idea on the design of a Technology Product. She is convinced that customers will use it and she needs the funds to develop a viable prototype.

This is where support at the onset can be valuable.

The Startup India Seed Fund Scheme (SISFS) was conceived to support startups that are eligible for various activities like proof of concept, prototype development, product trials, market entry and commercialisation.

Put simply, the concept is to take an “I have an idea” idea to a “I have something people can use.”

However, it is always advisable for the founder to get the latest official information before applying as the conditions and application dates of the schemes can change.

The CGCS is a credit guarantee scheme for startups.

Now think of another start-up company.

It's already released their product, and has customers. The founder: Not necessarily to raise funds by giving up a share of the company.

Rather, the start-up desires a business loan.

Young start-ups, however, can sometimes be hard to loan due to not having the financial history or standard security.

Credit Guarantee Scheme for Startups (CGSS) is a scheme to help startups avail debt facilities with credit guarantee support from lenders which will help eligible startups.

Under the current scheme eligible debt facilities will be covered by the guarantee with terms and conditions of the scheme.

It is crucial as the funding for startups isn't always an investment.

In some cases, the appropriate financing is credit that can enable the business to expand whilst the founders keep control of the business.

Fund of Funds for Startups: Understanding Investor Support

There's another aspect that can be confusing to new entrepreneurs.

The Fund of Funds for Startups (FFS) is not just a government fund from which you can just apply, and get money from the fund directly.

Instead, the government has been extending support to the Alternative Investment Funds (AIFs) regulated by the Securities and Exchange Board of India (SEBI) that can then invest in startups.

Why is it important?

Funders who seek to invest in a startup should keep in mind that there are multiple layers in the startup ecosystem.

Government support can help enhance the investment ecosystem without directly being an investor of a startup.

This can lead to additional opportunities for the startup to communicate with sources and investors who have experience with startups.

Safeguarding Your Startup Idea through IP Support

There will be more to a founder than money.

Think of your months of hard work and effort to create a new technology, design a unique product or build a strong brand.

Then it comes to the realisation that somebody else decides to take your innovation or uses a similar name.

That's where the issues of intellectual property come into play.

The government offers various schemes like Startup Intellectual Property Protection (SIPP) for eligible start-ups for assisting them with processes involving intellectual property.

Startups may be supported with intellectual property (IP) related assistance, depending on their eligibility and type of IP.

It's indispensable for a startup to safeguard its intellectual property in order to create long-term value.

Government Markets can be Startup Customers

But what if your start-up isn't just a business venture that requires investment?

What about if it requires customers?

One of the toughest challenges for a new business is obtaining the first few customers. If there aren't customers, it would be hard to establish the effectiveness of the product.

Another opportunity for startups that are eligible is government procurement.

Through platforms and initiatives connected with government procurement, startups can get opportunities to offer innovative products and services to government buyers.

This can be a benefit for a founder as the government contract can give the founder revenue, credibility and experience.

In other words, government support isn't only about helping a startup raise money.

It can also help a startup find a market.

Government Startup Support Is More Than Free Funding

The first thing people think of when it comes to government initiatives for start-ups is grants.

Startup support can be a lot more extensive, however.

When you're starting a business, it's just like this:

In the absence of a plan, the entire process of bringing your business idea to life is inefficient. Without a plan, your entire business-to-business process is inefficient.

A Founder may require different kinds of support at various stages.

At the idea stage

You may need:

• Mentorship
• Incubation
• Market research
• Business guidance

When the prototype is in the initial development phase

You may need:

• Seed support
• Product testing
• Technical assistance
• Incubation

At the growth stage

You may need:

• Business loans
• Credit support
• Investors
• Market access

During the "scaling stage"

You may need:

• Larger investments
• New customers
• Government contracts
• Intellectual property protection
• Expansion support

That's why, it would be better for founders to not just look for “startup funding” and apply anywhere.

They need to have a clear picture of their business needs first.

So who can profit from the government schemes for startups?

Government Start-Up Programs have its own eligibility criteria.

Some may be targeted to well known startups, others may have specific criteria concerning age, innovation, business structure, sector and type of activity.

Founders must do their due diligence prior to applying:

• Whether any of their businesses are eligible.
• The question is whether DPIIT recognition is necessary or not.
• The ages and structure requirements
• The terms of funding/loans
• Required documents
• Application deadlines

If there is a plan in place, whether new applications are currently being accepted.If there is a scheme, and if such a scheme is currently accepting applications.

Don't presume that any government scheme is automatically available to you because you are a start-up.

When applying, what should Founders do first?

It can be easier if you are well-prepared.

Important business information should be readily available to a founder, including:

Clearly define your business concept.

Describe the problem your start-up is solving and how it resolves the problem in a way that is unique.

Business Plan

Demonstrate the ways in which the business will generate revenue and who the customers will be.

Product or Prototype

Provide an explanation to your teacher if you have a working product, and what stage it has reached.

Market Information

Be familiar with your target audiences, competitors and market opportunities.

Financial Plan

Understand your financial requirements and how you are going to spend the funds.

Company Documents

Ensure relevant registration and business documentation to the requirements of the scheme.

Pitch Deck

A pitch deck will enable you to quickly and easily tell your startup story to incubators, investors, or other parties.

Don't Make This Common Startup Mistake

A frequently made error is looking for a government scheme once the business is in trouble.

Rather, founders need to be aware of the support available at an early stage.

Assume that you require ₹5 lakhs to create the prototype.

Don't immediately take an expensive loan.

First ask:

But, where am I in my startup?

So why does John need money?

Do there exist government programs, incubators or other support that are similar to my case?

This straightforward thinking assists you to make a better financial decision.

One idea can be the start of your Startup Journey

Let's get back to Priya.

Initially, she had a business idea and not much funds.

She was not able to immediately find an investor who was willing to buy a big stake. She didn't have a large office and a large team either.

Rather, she began by knowing about the support on offer to startups, inspected her eligibility, enhanced her business plan and searched for the right opportunities.

She didn't set out to make her company a ₹100-crore entity.

The initial production of her product was easy to create.

That's where at least a lot of startups start.

Not for millions of rupees.

Not with a large office.

With one problem, one idea and the desire to take the first step.

Final Takeaway

When you don't have any funds, you may think that starting a business is impossible.

However, it is not always a requirement that your idea must stop at the beginning.

The Government of India has a number of initiatives for startups, which can provide entrepreneurs support at various stages of their journey.

It is important to remember that each scheme will have its own objective, criteria for eligibility and application procedure.

Don't give up on your idea, soak up your options before giving up.

There might be instances when you don't have the funds you require now. However, with proper support, planning and execution, you can make your first step to becoming a real business.