CSR Funds: Fuelling Venture Prototypes

Abstract

Over the last few years, the phenomena of trying out new concepts while coping the entry barriers in the market has generated the need of easy access to smaller bits of funding. While trending options of financing like crowd funding, start-up capital, strategic partnerships and angel investments do solve this problem of access to an extent but the need of smaller proportions of funds stay untapped. Moreover, there is an opinion that seed funds in small amounts may work out as alternate option easing out complex processes of attracting investment at the very initial stage of concept proofing and prototype creation. Another emerging option for divesting in start-ups under academic incubators is through funds under corporate social responsibility. For this, corporate social responsibility (CSR) and academic incubators bring important opportunity to develop prototype for an innovative idea. Subsequently, both have a potential to create fund for new start-ups and ventures. Corporate social responsibility funds divestment in the lieu of Companies Act (2013) under section 135 has been defined by Ministry of Corporate Affairs (GOI). Companies which are eligible for CSR funding would be restricted to set aside 2% of average net profit that would generate during the last three financial years from. The regulatory influence of the aforesaid restriction would be impactful on various activities which can fall along the policy.1 Apart from activities related to social cause as per the focus areas notified, CSR funds can also be channelized to technology incubators located within academic institutions to further extend support to start-ups based on experimental allocation. In this regards, the earlier studies could not provide sophisticated and concrete overview on role of seed fund in start-ups in Indian context. Therefore, the prime aim of the present study is to highlight alternative like seed fund to channelize available funds while judging credibility of the start-ups based on review of literature. It also emphasizes on importance of such alternative may be taken as initiative to boost start-ups growth. It provides the overview of conducted an event (as training) on prototype stage start-ups and micro seed funds at Entrepreneurship Development Institute of India. It identified 16 prototype state start-ups which have received micro seed funds under Gujarat CSR Authority. Finally, it also suggested a viable model to create new ventures and start-ups through prototype activity in India.