India Inc putting CSR money in startup incubators

India Inc putting CSR money in startup incubators

Start-ups

Companies like SAP, Tata Motors and Bajaj Electricals are investing in startups through government-affiliated incubators as a part of their mandatory corporate social responsibility (CSR) spending.

Nearly a dozen companies have shown interest in spending CSR money in incubators at the IITs and IIMs to nurture student startups that can disrupt traditional business models or have a social impact.

In 2014, India became the first country to mandate a CSR spending of 2 per cent of average profits of the past three years for corporations above a net worth of Rs 500 crore or revenue of Rs 1,000 crore or net profit of Rs 5 crore.

The Society for Innovation and Entrepreneurship, the incubator at IIT Bombay, saw SAP and Tata Motors coming on board to incubate startups earlier this year.  IIM Ahmedabad has seen Mahindra Finance, Bajaj Electricals and Castrol partnering its incubator, the Centre for Innovation, Incubation and Entrepreneurship (CIIE).

“We want to create investable, scalable, growth-oriented social enterprises that can impact the masses. It is a great way to create a vibrant economic environment in India,” said Gunjan Patel, head of CSR at SAP India.

SAP, which devotes 40 per cent of its CSR budget to startup incubators, is also running accelerator programmes at IIM Ahmedabad and the Indian School of Business, Hyderabad, which, being a non-profit organisation, has permission from the government to run CSR programmes for enterprises.

“We expect our spending on this go up this year,” said Patel. SAP plans to support 50 startups this financial year, up from eight last year.

Tata Motors is keen to support entrepreneurs from socially and economically backward backgrounds at SINE. It is working with solar energy consulting firm Kwatt at SINE to help train tribal youth in building solar solutions and running their own businesses.

“We are engaged with institutes like IIT Bombay, IIT Gandhinagar, IIM Bangalore and IISc for educational programmes at present, but we want to support entrepreneurial activities in these institutes in the long run,” said Vinod Kulkarni, head of CSR at Tata Motors. “We want to support youth from slightly different social and economic backgrounds, because we believe they will not only support themselves but others from the similar backgrounds.”

SIDBI and SICOM have also come forward for CSR at SINE and will contribute infrastructure, seed money, acceleration and capacity-building activities. “The CSR model is working now. We are seeing many companies which would like to give money for incubation activities for startups and they have specific interest areas,” said Milind Atrey, professor in charge of SINE.

For some companies, it makes a perfect business sense to nurture startups.

“We work in all the parts of the ecosystem, and working with incubators and accelerators is a good way to engage,” said Ajay Hattangdi, CEO for India at venture lending firm InnoVen Capital. “This way we get to know startups early on and see what innovation is happening there. Supporting the startup ecosystem is intrinsic to our business,” he added.

The company is funding one material sciences startup in SINE and running programmes at the incubator at IIM-A.

IIM-A’s CIIE has also received contributions from Take Solutions, India Infoline and the Bosch group.  While Take Solutions and Bajaj Electricals made contributions worth Rs 25 lakh each, Mahindra Finance provided two CSR grants of Rs 25 lakh and Rs 50 lakh in agri-tech seed investment.

Since 2014, the incubation centre has raised Rs 4 crore through the CSR route. “We have been communicating to corporates that there is a role we as an incubation centre can play through entrepreneurship as a tool in social development,” said Salim Vali, vice-president, impact investment, CIIE.

“On our part, we are building capacities to see to it that justice is done to the contributions that are coming in as CSR spending,” Vali added. Talks are on with many corporates even as the CIIE expects to close the financial year with Rs 5-6 crore in CSR spending.

Even the recently established incubators such as the one at IIT Patna are receiving enquiries from companies. “A couple of corporates have reached out to us,” said Aditya Nataraja, manager of the incubation centre at IIT Patna, which was set up in February this year. “Though there is no defined focus areas for most of them, corporates broadly want to invest in startups that can disrupt their domain.”

According to Ganesh Natarajan, Chairman of Nasscom Foundation, with the government’s focus sharpening on startups, more companies are partnering government-run incubators.

According to Ganesh Natarajan, Chairman of Nasscom Foundation, with the government’s focus sharpening on startups, more companies are partnering government-run incubatorsincubators

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