In our earlier post we had talked about the government providing certification to 20 private organizations, including Nasscom and iSprit, as Incubatorsto issue recommendation letters to Startups under the Start-up India Action Plan (“Action Plan”) and benefits to startups.
Startups in India need to be recognized by the Department of Industrial Policy and Promotion (“DIPP”) to avail the benefits under the Action Plan. However, the applications for such a recognition have to be accompanied by a letter of recommendation/support/funding/endorsement from an Incubator.
An incubator must fall in one of the following categories to be authorized to provide a recommendation/ support/ endorsement letter to a Startup:
- Incubator established in a post-graduate college in India;
- Incubator funded by Government of India or any State Government as part of any specified scheme to promote innovation;
- Incubator recognized by Government of India by virtue of an application to the Department of Industrial Policy and Promotion (“DIPP”).
The DIPP is inviting applications from Incubators to get recognized by the Government of India for the purpose of providing recommendation letter to Startups. The government of India, recently issued guidelines for Incubators to get this recognition and the requirements for the same are as follows:
- Incubators need to furnish an application through the Startup India mobile app or portal. Each incubator is required to authorize a person who on behalf of the Incubator would be eligible to provide the required information for the process of recognition. Once the form is duly filled by an applicant, the application shall be scrutinized and evaluated.
- An incubator must be a registered entity as a Society under The Societies Registration Act, 1860, or a Section 8 Company under The Companies Act, 2013, or a Private Limited Company under The Companies Act, 2013), or a Public Company under The Companies Act, 2013, or a Limited Liability Partnership under The Limited Liability Partnership Act, 2008.
- The incubator needs to fulfill the following four parameters:
- The Incubator needs to be in existence for atleast the last 2 years. This benchmark of existence for atleast 2 year is not applicable for Incubators which have received a sanction letter by the Central/ State Government;
- The Incubator needs to have a minimum of 20 incubatees graduated or on rolls at present i.e. at the time of filling of application. For Incubators which have received a sanction letter by the Central/State Government a minimum of 5 incubatees should have graduated or on rolls at present i.e. at the time of filling of application;
- The Incubator needs to have a minimum of 5000 sq. feet of carpet area dedicated to the incubates;
- The Incubator should facilitate at least 3 months of in person or virtual interactions between its incubatees and mentors.
- The certificate of recognition is valid for a definite period of time which is two (2) years from the date of grant of recognition. In case, an Incubator fails to justify its roles and responsibilities or if found to be misrepresenting any information, the recognition status of the Incubator can be revoked. However, previous recommendations from the Incubator to the Startups will still remain valid.
- A recognized Incubator has to be evaluated on the following parameters after 6 months of obtaining the certificate of recognition. The certificate of recognition will also be reconsidered on the following points in case the recognized Incubator is found not fulfilling its roles or responsibilities or is found misrepresenting:
- The number of tie-ups between the Incubator and Venture Capital Fund and Alternate Investment Funds;
- The number of tie-ups between the Incubator and Corporate Organizations to provide industry exposure to the incubates;
- The number of mentors providing in person or virtual mentorship to the incubates;
- The number of outreach programmes conducted in the previous one year.
After receiving the required information, the application from an Incubator is forwarded to the Inter-Ministerial Board (“IMB”) for examination and on approval from the IMB, a certificate of recognition is given to the incubator. The certificate of recognition is a system generated online downloadable and verifiable certificate. For extension of the certificate of recognition post expiry of the period of recognition, a fresh application is required to be submitted to IMB for examination. This is required to be done atleast 3 months prior to the expiry of the period of recognition.
Once an Incubator application is found eligible, the name of the incubator is included in the appropriate list(s) by the DIPP.
An Incubator is required to validate if the entity under review is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. There is a specific format in which an Incubator is required to provide a recommendation which is published on the Startup Portal. A maximum fee of Rs. 5000 is charged by the Incubators for issuing a letter of recommendation to Startups. In cases where an Incubator is required to form a panel of external experts to assess the innovativeness of the product/service/process, a maximum fee of Rs. 10,000 is charged. An Incubator featured in any of the lists on Start-up India portal, can endorse an idea/ Startup not incubated in such Incubator. The objective of the recommendation is to validate that a Startup is involved in an eligible business. Incubators need to complete the process in 3 weeks after receiving complete application forms. A further extension of time may be added by the Incubator on a case to case basis.
We will shortly follow this up with the other program called Atal Incubation Centre promulgated by the Government.