IIT Madras- MSME incubation initiative


IITM Logo copyc-tides logo whiteAs any budding entrepreneur soon realizes, the difficulty in raising funds is one of the biggest worries for a start-up. But don’t let that dampen your spirits or constrict the horizon of your dreams – the Dept of Management Studies (DOMS), IIT Madras and the Cell for Technology Innovation, Development and Entrepreneurship Support (C-TIDES) have launched the IIT Madras- MSME incubation initiative – and the USP of this venture fund is the fact that it was set up with the exclusive objective of encouraging start-ups.

This initiative has been set up with the assistance of the Ministry of Micro, Small and Medium Enterprises, Government of India. Dr.Thillai Rajan, Assistant Professor, Department of Management Studies, is the Coordinator of the Incubation initiative. The Fifth Estate interviewed Dr. Rajan on the various aspects of this ambitious initiative.

T5E: How did the venture fund originate? And what were the driving forces behind its inception?t
Prof. Rajan: We noticed that there are a lot of entrepreneurial activites and avenues in IIT Madras. There were also adequate facilities for guiding entrepreneurs and for mentoring start-ups till they could stand on their own feet. But unfortunately, none of these are of any use without provisions for funding start-ups. And even though there are a lot of financial avenues outside the institution, there are hardly any that provide financing to an idea at its seed-stage. So considering the vast and untapped potential for companies to originate from IITM and the exigent need for actual capital, we decided to set up the fund.

T5E: Who are the principal targets of the venture fund? Does it specifically look forward to aiding firms that will be actively involved in innovation?
Prof. Rajan: The primary target of the fund, right from its origination, has been the student body of IIT Madras. Despite that we are of the opinion that an ideal team would comprise both students and faculty so that the students can draw from the experience and expertise of the faculty. A very important aspect of this fund is that it has the potential to serve as a connecting link between the students and the institution. Nowadays, most students graduate from the institution and move on. But we are looking forward to nurturing a longlasting relationship between the institution and its students.
Innovation is a very important aspect of entrepreneurship. When a proposal reaches us, we give a lot of importance to the imagination and thought that has gone into its origination. If a start-up is innovative in any sense (in its technology or process or business model), it immediately gets priority over other proposals. We believe that the zest for innovation is ever-present in the students of IITM. They are also original thinkers who will not need or want to replicate ideas that already exist.
We also look forward to working with CFI that is one of the hotspots of interest in innovation in the institute. If they approach us with a marketable innovation, we would advise and aid them in commercializing the idea.

T5E: Where has the capital for the fund been generated from?
Prof. Rajan: The government of India has always displayed a very active interest in the promotion of new ventures. It has several schemes to promote business innovation among students. Therefore, it expressed its willingness to fund the initiative through the Ministry of Micro, Small and Medium Entrerprises. But ultimately, this funding only serves as a catalyst. We hope to draw from private sources – including the alumni of IITM – to sustain the fund as time progresses. In fact, we are even considering the plausibility of an alumni venture fund.

T5E: What is the approximate amount of funding that a firm can expect?
Prof. Rajan: A firm can receive assistance of upto about 8 lakhs. Even though this might not be sufficient to cover the total cost of setting up an ambitious start-up, we believe that this amount will suffice to give a start-up some sort of footing to stand on. Essentially, the capital provided by us will enable the firm to build a track record, which in turn, will help them to attract more investment. Also, we are willing to provide infrastructure and mentoring to the start-ups and this will ensure that the 8 lakhs received go a long way. In fact, we believe that 8 lakhs can sustain a start-up for the first six months of its operation.

T5E: How is this different from a normal venture fund?
Prof. Rajan: A normal venture fund works on a principle of give and take. But we provide funds to the deserving in good faith and hence, it is in many ways like a grant. Moreover, neither the government nor IITM asks for any stakes in the firm. But firms cannot treat this as firm money – we expect discipline from the firms we incubate. They should have the potential to succeed, to create jobs and to contribute something worthwhile to the brand that is IIT Madras. Another important aspect is that we are willing to provide as much mentoring as is required for a firm’s success. In fact, we will be giving priority to firms that can work within IITM under the guidance of our experts. So, in many ways, this is managed like a commercial venture but at heart, we have interests that go far beyond the commercial.

T5E: What stage do you want a proposal to be in?
Prof. Rajan: The proposals received have to be well thought through. They should contain the complete business plan. If someone is unsure about how to go about doing this, we even extend assistance in this regard. In fact, we are even thinking about conducting workshops where students can learn how to generate business plans and also about how to add values to a business plan.

T5E: How many applicants have you received so far?
Prof. Rajan: We have had a very good response, especially considering the fact that we have not marketed this fund aggressively as we deliberately aimed for a soft launch. We have received proposals from students, alumni and even from two firms outside the institute. We have also had numerous queries and expressions of interest.

T5E: Could you elaborate on the process of selection of a firm and tell us about the criteria used for selection?
Prof. Rajan: The foremost criterion is definitely the potential for commercialization that we see in the proposal. We look at the market the product could have, its ability to grow and expand over a predetermined period of time, its sustainability and the ability of the idea to generate profits. But more than all this, we also look at the passion of the team that has brought up the proposal, how feasible the idea itself is and how strong the team that plans to work on the project is going to be.
The first level of reviewing and shortlisting entries will be done by the team that runs the venture. All the proposals are then presented before a review committee. The review committee is also informed about the proposals that we have shortlisted and which we think should be given preference. The committee can approve these proposals or ask for a re-examination of our decision. After the committee has approved the final list of start-ups, the proposals are sent to the government.

T5E: What advice would you give to prospective fund seekers?
Prof Rajan: The principal quality we look for is definitely tenacity. Entrepreneurship is no easy task. It is like a marathon and only the persevering can truly succeed. Another suggestions is that when you formulate a team – include people from different areas of expertise. The institute itself now has students of Management and the Social Sciences – these members could not only provide different perspectives to the same issues, but could also be of enormous help in sorting out legalities and with paperwork. Also, this is not like a job in a corporation. You need to have a sustained and long-term interest in the goal that you are working for. Besides, you just cannot afford to fear failure. Considering all these factors, I would say that if you have the entrepreneurial spirit in you, you should take a risk at the early stages of your career. Experiment with starting up something as early as possible.

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