Introduction

Centre for Entrepreneurship Development and Incubation

Recognizing the importance of Technology Incubation, many institutions of higher learning have already taken initiatives to nurture this activity. These include policy measures, infrastructure support, entrepreneurial training, IPR facilitation, and create a framework to nurture technology incubation.

Centre for Entrepreneurship Development and Incubation (CEDI), a Section 25 company, is set up under the aegis of Ministry of Communication & Information Technology, Govt. of India to promote innovation and entrepreneurship by converting and translating technology ideas and innovation in various disciplines of science and engineering into products, processes and services for commercial exploitation and the benefit of society. To accomplish its goal, CEDI runs and manages a Business Incubator (BI) at National Institute of Technology, Tiruchirappalli (NITT) to facilitate incubation of new enterprises with innovative technologies. The centre will identify innovative entrepreneurs for funding through the TIDE scheme promoted by Department of Electronics and Information Technology, Govt. of India. All the necessary mentoring and support for mobilizing funds, creating access to markets, augmenting managerial skills etc., will be provided by the CEDI centre. CEDI will facilitate the incubatee companies to access NITT’s common Infrastructure facilities, departmental laboratories and other resources of NITT for their products development purposes

The centre also network with Angel Investors and Venture Capitalists who provide mentoring and financial support to the start up companies and enable the tenant companies to mature over a period of 2-3 years and graduate to a commercial place to do the actual business. The involvement of the faculty of the institute in the technology start-up activity reinforces teaching and research, strengthens linkages between education and industry, and also better aligns education to meet market requirements.

About the Project – TIDE:

At Present, CEDI is implementing a project Technological Incubation and Development of Entrepreneurs (TIDE) funded by Department of Electronics and Information Technology, Ministry of Communications & Information Technology, Govt. of India aims to assist Institutions of Higher learning to strengthen their Technology Incubation Centres and thus enable young entrepreneurs to initiate technology start up companies for commercial exploitation of technologies developed by them in the areas of ICT and Electronics. The objectives of the proposed scheme are:

  • Promote product oriented research and development
  • Encourage and accelerate development of indigenous products and packages
  • Bridge the gap between R&D and commercialisation.

Each company selected for incubation would get financial support, in the form of soft loan, of up-to Rs. 25 lakhs over two (or three) years period. The amount of loan would be up to a maximum of 80% of the project cost of the incubating company. The loan can be used for equipment and consumables , manpower and other contingencies. At the end of two (or three) years, the company will have to return half of the financial support given to the company as per institute’s policy and the remaining 50% can be given as equity to the CEDI, which can be en-cashed at the time of valuation. So far 2 Companies have been incubated with a Total Financial support of Rs.50 Lakhs

Eligibility

Admission to BI is open to:

  • Engineering Graduates in the area of ICT (IT, CSE are equivalent) or Electronics
  • Faculty members (current and the past)
  • Students and alumni
  • NITT's R&D partners (sponsors of R&D and consultancy projects)
  • NITT's partner universities (having R&D collaborations in place) and
  • Government agencies associated with NITT's research

The proposals for business incubation must meet with one or more of the following parameters:

  • Proposals with Intellectual Properties (IP) generated within NITT and transferred to the company for a consideration
  • Proposals with IP belonging to faculty, student or alumni (created outside NITT)
  • Proposals with potentials for strong identifiable involvement or interaction with NITT faculty with/without usage of NITT facilities.

Proposals which will have social and strategic impacts in India and has potential for large resource generation, impact value and visibility to NITT and CEDI and incubation activities are considered under the scheme.

Applications for admission to BI will be made in the name of registered unlisted companies within the meaning of the Companies Act, 1956. If a company has not been registered, an application may be made in the names of all promoters/ founders; however, the promoters/ founders must ensure that the company is registered within a period of three months from the date of approval of the application for admission in BI.

Admission Process

At the opening level, applicants for admission in BI will be required to submit a Pre-Admission Response Sheet (PARS), which can be availed from the CEDI office. The PARS will be scrutinized internally by the CEDI team. While submitting PARS, applicants will also disclose information on executive involvement of the promoters/ founders in other companies or commercial entities.

Based on the initial scrutiny of PARS and affirmative assessment, applicants will be asked to submit a formal application for admission in BI along with a detailed proposal. The Business Plan will be screened by the CEDI team for assessing the suitability of the proposal for further evaluation by expert members regarding its potential for incubation.

Application Form

Seed Funding

CEDI may provide seed funding up to Rs.25 lakhs, subject to the availability of funds/ grants/ schemes meant for this purpose. Seed funding will be sanctioned only to the registered companies and shall be based on merits of each company. Promoters/ founders whose companies are not registered at the time of application shall not be eligible to apply for seed loan until their companies are incorporated. Further, admission to BI shall not automatically entitle the companies to seed funding. Though seed funding may be sanctioned, disbursement shall be linked to the milestones.

Infrastructure & Services

BI Infrastructure:

Upon admission to BI, all or some of the following infrastructural facilities will be offered to the incubatee companies on an individual basis, apart from a set of shared/ common infrastructure mentioned hereinafter:

  • Office space-company specific
  • Personal Computers and office furniture
  • Internet connection through NITT (recurring cost to be borne by the Incubatee)
  • Communication facility within NITT campus lines through internal exchange

Common infrastructure

Apart from company specific infrastructure as stated above, CEDI will provide certain facilities to be shared by all incubatee companies which would include:

  • PCs
  • Fax machine
  • Laser Printer
  • Photocopier
  • Scanner
  • Shredder
  • Teleconferencing facilities (NITT facility)
  • Meeting/Conference room with projection equipment
  • Library facilities
  • Pantry facilities
  • Common secretarial pool/staff

NITT Infrastructure

CEDI will facilitate the incubatee companies to access departmental laboratories and other resources of NITT for their products development purposes. Access to departmental resources is possible through office of Dean -Research and Consultancy (DRC) of NITT and usage of such resources should be with permission of the concerned department to avoid conflict with departmental activities and objectives. Further usage of such resources shall be on commercial basis and in conformity with the policies of DRC at NITT for consultancy/sponsored projects prevailing from time to time.

Mentoring & Other Services

Apart from physical infrastructure as stated above, BI intends to create certain other supports and services which would include: Pool of mentors, experts in technology, legal, financial and related matters, etc.

Rental for operating space:

In lieu of support and services to be provided by CEDI, the incubatee companies will be required to pay a rental of Rs. 2500/- per month for an Incubation Cell (Rs. 750/- in the case single-seater facility). Incubatees will have to pay the electricity and other charges.

Funding Mechanism

CEDI Follows two funding Mechanism

  • Soft Loan
    The entire seed fund is provided as a soft loan and the incubatee are expected to repay the amount at 6% per annum simple interest rate. The incubatee would need to provide a personal guarantee to the extent of seed loan and interest thereof.
    The repayment of the loan and the interest amount will start after one year and 100% repayment with interest over next 2 years i.e. 3 years in all.
  • 50% Loan and 50% Equity
    The Incubatee companies admitted at CEDI under TIDE project will be valuated at 2 crores uniformly, and the funding shall be in the ratio of 50:50 of loan versus equity subject to a maximum total funding of Rs. 25 lakhs per incubatee with release of funding being linked to milestones fulfillment. The equity percentage shall be 50% of total funding divided by Rs 2 Crores.

e.g. In case of providing maximum funding support of Rs.25 lakhs, of which Rs.12.5 Lakhs shall be in the form of loan at 6% p.a. simple interest for a period of 3 years and balance Rs.12.5 Lakhs investment in the form of equity, thus CEDI would hold an equity of 6.25% (12.5/200) on account of the investment.

The Equity of CEDI in the incubatee company will be proportional to the amount invested in the business. The repayment of the 50% loan and the interest amount will start after one year and 100% repayment with interest over next 2 years i.e. 3 years in all.

The incubatee company shall get the consent of the CEDI before bringing any additional investments.

Nominee Director(s): CEDI shall nominate one or two Directors from CEDI or its representatives for the Board of Directors of the Incubatee Company to monitor the progress of the company.

Exit Policy: Since CEDI is investing in the Incubatee Company and holds certain percentage of shares, CEDI has the right to sell the shares of the incubatee company to anybody at any time after 5 Years

Tenure

Companies will be permitted to stay in Business Incubation Cells, to begin with, for a period of 24 months. A nominal monthly charge will be levied to a company for the period of first 24 months. CEDI/ BI may, at its own discretion, permit companies to extend their stay for a maximum period of another 12 months. Companies will have to pay the charge at the prevailing market rate for the extended period, which will be fixed by CEDI.