Whether it’s India, Europe, or the US, the reality is that early-stage science startups need government support – whether as grants, loans, or even equity capital. Angel investors tend to shy away from the high risk, high uncertainty of science startups. Thus, the government ends up filling this crucial gap in entrepreneurship finance. To discuss this, I gave a talk as part of the Global Conference on Entrepreneurship and Technology Innovation at IIT Kanpur in 2010.Entrepreneurship-Finance-Govt-Funding-for-Science-Startups
The highlight was the comprehensive funding database put together by my colleagues at the NCL Venture Center, Pune. It is a one-stop shop for science entrepreneurs looking for government support.
However, getting risk capital from government agencies is easier said than done. A lot of time and effort has to be invested in the paperwork. Moreover, each government funding scheme has its unique terms and conditions that specify how such funds can be used. Thus, there is no ‘free lunch’ in entrepreneurship finance – only a ‘best fit’ for each stage of a startup.
In fact, the constraints faced by science ventures often push angels and VCs towards software startups. In recognition of this, IT professionals from large corporations have aggressively pursued new ventures. Entrepreneurship finance lends itself well to software/Internet startups which require minimal capital investment and may result in high-margin recurring revenue.
Nevertheless, government funding has played a central role in the birth of many technologies and industries – the Internet being one. Without public funds, many biotech startups would not exist. Neither would consumer technologies that originated in military use. The challenge for entrepreneurship finance, when it comes to government funding, is the ease and pace at which it is available. Clearly, startup founders cannot wait for months or deal with tons of paperwork. Thus, governments must employ agile methods to assess applications, approve projects, and release funds.