Below is a 2013 presentation that explores the possibility of using the ‘mandatory’ Corporate Social Responsibility (CSR) expenditure to support early-stage, tech startups. As a tool of entrepreneurship development, this initiative can spur corporate participation in new ventures, resulting in a win-win situation.Entrepreneurship-Development-CSR-Fund-for-Startups
With little support available for deep-tech Indian startups, except the government, there is an opportunity to set up a seed-stage, deep-tech venture capital fund in Pune. This fund would leverage the CSR budgets of large Pune-based companies. It can also leverage the local pool of scientists, R&D institutes, and science entrepreneurs.
The figure above illustrates one possible structure of a not-for-profit fund that routes CSR money into relevant startups. An investment advisor would manage this entity and be compensated for assessing startups and managing the portfolio. Moreover, the corporates involved in the CSR fund would provide oversight and strategic value to investees. Thus, a win-win partnership gets created for the entrepreneurial ecosystem – spurred in part by government regulation.
Non-profit | Not-for-proftit | For-profit
Will this appeal to CSR decision-makers? Would they rather invest in purely social, non-profit projects instead? The investment advisor must seek to answer such questions and persuade corporate stakeholders to invest in deserving startups. Making entrepreneurship development a part of CSR agendas across India is the first step. Next comes the difficult task of selecting startups that have a strong social component – even if they are for-profit entities. Clearly, sectors such as healthcare and education are better suited for the proposed CSR fund. Social enterprises, clean-tech startups, and rural ventures may also meet the investment criteria. Of course, the eventual success of the CSR fund will depend on the ability of its investees to return capital and profits. These can then be reinvested into more startups, creating a virtuous cycle of entrepreneurship. The bottom line is that early-stage startups need ‘soft’ sources of capital i.e. those that are more forgiving of technical and commercial missteps.