Karnataka govt wants startups to think beyond Bengaluru; action plan proposes incentives in other districts

The state government wants to increase the number of startups outside Bengaluru from 2,955 now to 10,000 by 2032.

In a move to divert investments to other Karnataka districts and also to decongest Bengaluru, the state government wants startups to think beyond the capital city.

The tech clusters outside Bengaluru are proposed to be located in Mysuru, Mangaluru, Tumakuru, Hubballi, Dharwad, Shivamogga, Belagavi, Mandya, Chamrajnagar, Udupi, Manipal and Kalaburagi.

The state government wants to increase the number of startups outside Bengaluru from 2,955 now to 10,000 by 2032. This was revealed in an action plan prepared by the state department of planning, programme monitoring and statistics and the Federation of Indian Chambers of Commerce and Industry to make Karnataka a $1 trillion economy by 2032.

For early-stage startups setting up outside Bengaluru, it proposes to reimburse state Goods and Services Tax (GST), marketing and patent filing costs and quality certification fees.

The government is also likely to permit and facilitate startups to file self-certification under the Factories Act, Wages Act and so on to improve the ease of doing business.

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The action plan also recommended setting up a Rs 1,000 crore ‘Beyond Bengaluru Growth Fund’ to prompt startups to move to these emerging tech clusters.

Sanjeev Kumar Gupta, chief executive officer, Karnataka Digital Economy Mission (KDEM), told Moneycontrol: "The startup and innovation ecosystem in Karnataka is leading among all states in the country. Bengaluru has an amazing startup system so an extension to the emerging clusters is required, especially to cities like Mysuru, Mangaluru and Hubballi-Dharwad.”

He added: “The government is now working with academic institutions in those clusters, giving grants for ideas and converting them into some sort of prototypes and also to support entrepreneurs/startups by setting up innovation and incubation centres in these clusters. We are also encouraging angel investors to come forward to work with startups and also to provide mentorships".

Gupta said the government had already started a programme named 'Elevate' to provide up to Rs 50 lakh for startups to convert an idea into a prototype.

"We have also launched 'Beyond Bengaluru Blue' initiative to promote startups outside Bengaluru. The report on the $1 trillion economy by 2031 will be analysed by the respective government departments. We are also planning to relaunch the startup policy to strengthen the collaboration of the startup ecosystem with (other countries), especially the UK, South Korea and Singapore," he said.

One reason for conceiving the plan is to ease Bengaluru’s notorious road congestion. Location technology company Tom Tom has ranked the city as the second most congested city in the world, behind only London, in terms of how long it takes a commuter to drive 10 kilometres.

Government should invest money, says Pai

Former Infosys director and chairman of Aarin Capital TV Mohandas Pai told Moneycontrol: "The state government's policy to make Karnataka a $1 trillion economy by 2031 is in the right direction but the government should put money behind it. What is required is a large amount of investment in each of these places".

"The government should set up incubator centres in places like Mangaluru, Mysuru, Hubbali- Dharwad, Belagavi and Kalaburagi on the lines of 'T-Hub' in Hyderabad so young people will have a quality place to go and work and create excitement. They should also rope in workplace operators to provide office spaces for companies. Right now, there are no sufficient office spaces outside Bengaluru.”

“The government should come up with city-specific venture capital funds to encourage startups outside Bengaluru. The lack of leadership outside Bengaluru was a major problem all these years. The 'outside Bengaluru' was a thought even in the state government's first Information Technology policy in 1997, but governments didn't do much so only Infosys went to places like Mysuru and Mangaluru," said Pai.

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Pai said: "The government should create a series of events every quarter to create some excitement and bring companies outside Bengaluru. Today, many big software companies want to go to smaller towns because they are finding the attrition rate very high in bigger cities. Many people who joined these companies are working from home and they don't want to return to bigger cities. The government should also create infrastructure to improve the quality of life in those cities. We also need big technology parks in Hubballi- Dharwad, Belagavi etc. The government has to work with the private sector to do it. The government should allocate at least Rs 500-Rs 1,000 crore a year for the Beyond Bengaluru initiative but they are not investing much now".

5,000-seater technology clusters, one accelerator in each district 

Other recommendations in the action plan to promote startups outside Bengaluru are rural innovation centres, innovation labs/centers in colleges, mini-fab labs, a dedicated research centre to support circular economy-focused startups and state support in the form of incentives & concessions for Karnataka government incubated startups.

The government will also develop world-class infrastructure for at least 5,000-seater technology clusters covering an estimated area of 400,000 sq. ft. in Mysuru, Mandya, Chamrajnagar, Mangaluru, Udupi, Manipal, Hubballi, Belagavi and Dharwad.

“It has also proposed to establish the 'acceleration network' in a hub-and-spoke model, in collaboration with industry partners, where existing accelerators act as a hub to extend the benefit to startups in the form of strategic support, mentorship and networking opportunities, especially outside Bengaluru urban district,” the report said.

The state government is planning to set up one accelerator in every district. Currently, three accelerators are being set up: one each in Mysuru, Mangaluru and Hubballi - Dharwad.

Other proposals are for government centres to provide subsidised seats for startups at up to Rs 3,000 per seat per month across each district of Karnataka, a one-time capital grant (50 percent of cost or Rs 50 lakh) to support establishment of state-of-the-art private incubation centers outside Bengaluru urban district and Rs 1,000 crore to develop 10 tech clusters in Mysuru, Mandya, Chamrajnagar, Mangaluru, Udupi, Manipal, Hubballi, Belagavi and Dharwad.

The government is also expected to earmark Rs 500 crore for the advancement of skilling and training facilities across the state at a cost of Rs 100 crores each year for the next five years, which will enable the upskilling of about 25,000 people each year.

It has also proposed to allocate Rs 300 crore to set up Centres of Excellence (CoEs) to be developed across three emerging tech clusters and also Rs 200 crore to establish a skill and entrepreneurship university in Mysuru.  The Karnataka government expects the share of startups in Gross State Domestic Product to grow from 2.8 percent now to 9.1 percent in 2031.

Women-led startups 

To promote women entrepreneurship in the state, an exclusive early-stage seed fund of Rs 5 crore is also being planned. The state government has also proposed earmarking 25 percent of the Rs 100 crore Venture Capital Fund and reserving 20 percent of seats at government-supported incubators and also a direct loan of up to Rs 10 lakh through the Karnataka State Women Development Corporation for women-led startups.

Separately, financial aid of up to Rs 50 lakh will be provided to support Scheduled Caste and Scheduled Tribe entrepreneurs and dedicated programmes to support startups founded by entrepreneurs from Other Backward Classes and minority groups and for startups in the aspirational districts of Kalyana-Karnataka in the northeastern part of the state.

The government will also establish a centre of excellence for assistive technology with a grant/funding support of Rs 15 crore to develop innovative products and solutions for differently abled people and senior citizens outside Bengaluru, the report said.