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ET Soonicorns Summit: Govt needs to update policies for new tech businesses: K’taka IT minister Priyank Kharge

Priyank Kharge, Karnataka’s minister for information technology, biotechnology, rural development and panchayat raj, said the government needs to “reset” its policies to accommodate new technologies and sectors.

“I know the pain points this (startup) industry goes through,” Kharge said in his keynote address at the ET Soonicorns Summit on Saturday.

“Sometimes just because the government does not understand the technology, we panic and we ban it; we say your business is illegal,” he said, adding: “We have a lot of examples, but a classic case is Ola, Uber and Rapido … They’ve often faced bans in different cities, just because we don’t fully understand ride sharing.”

The minister referred to the 28% GST on online gaming firms as another example of a need for reset.

“We’ve not even bothered checking what is a game of skill or a game of chance; we’ve just come up with the policy just because we think certain things are bad without understanding them … Until we reset our policies, it is very difficult for new businesses to come up.”

The Soonicorns Summit saw participation from a range of startup executives and investors across sectors like software-as-a-service, spacetech, cleatech, mobility, artificial intelligence, logistics and parts manufacturing.

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The minister asked startups and industry executives to collaborate with the state government in its upskilling initiatives. The government would be open to bearing 50% of the cost involved, with industry and the candidates bearing 25% of the cost each, he added.”Whenever I meet industry captains, startups, you always say that our engineers are unemployable, the skill sets are not good enough, the syllabus is primitive … We have formed a skill-advisory committee with industry, academia and government participation to ensure we are future-ready, and I am personally chairing this committee. We want to listen to the industry’s needs,” Kharge said.

The Karnataka government is expanding its centres of excellence to upskill people in sectors like cybersecurity, internet of things, agri-innovation, data science and artificial intelligence, semiconductors, aerospace, robotics, animation, VFX and gaming, the minister said.

The government is also set to further bolster the Karnataka Innovations Authority and introduce a preferential public procurement policy. “Our intention is to one day give you a pilot, ensure your product is tested in a sandbox environment, and if it’s good enough why can’t we be your first customer,” the minister said.

Need for rethink

The event, focusing on startups that are likely to soon top $1 billion in valuation and become unicorns, hosted a number of panel discussions involving startup executives, investors, and other industry participants like bankers.

In a discussion on the recent spate of governance issues at startups, Ritesh Banglani, partner at Stellaris Venture Partners, said investors are having to strike a fine balance. “We’ve started doing more reputational and ethical due diligence before investments now, but we can’t do it every time because that would just take too long … in our experience, the majority of founders are ethical … we don’t treat founders as potential criminals,” he said.

“Over the last two years, things changed a bit … but this (increased due diligence) is not something new, in fact I’d say it’s a return to what was normal back in the day. So now we’re very strict that this is the bare minimum diligence, and the bar cannot be lower,” said Swapna Gupta, partner at Avaana Capital.

Talking in the same panel about startups going public, Abhishek Goyal, cofounder of Tracxn Technologies, said it improved the chances of long-term success. “Look at the largest firms on the planet, 90% of them are public … (after the IPO) we went from 30 shareholders to 30,000 shareholders overnight and the amount of responsibility that puts on your shoulders is great for your business … that kind of discipline can set you up for decades of growth.”

In another panel discussion, manufacturing startup Zetwerk’s chief executive Amrit Acharya talked about the difficulty of raising a seed round in the manufacturing space, as many investors didn’t understand the nature of his business. India continues to be in its golden era of manufacturing, and the company is looking to open manufacturing capacities not just in India but also the US, he said.

At another panel discussion, Vishnu Rajeev, investment principal at Speciale Invest, talked about the difficulties in finding deeptech startups to invest in. “When making investments in deeptech, three things matter a lot. First and foremost is the team; they must have the right set of scientific and engineering capabilities with the right mix of commercial capabilities … Then there is the technology that can move the needle. The third part is the market size. A deeptech investment needs to have large opportunities,” he said

Ethereal Machines founder and chief executive Kaushik Mudda said academia can play a role by telling freshers about a once-in-a-generational opportunity in the next couple of years.

“With the ‘China Plus One’ idea, the government of India is pushing hard for manufacturing with ‘Make in India’ … The fresh new batches of engineers that are coming out need to be made aware of the importance of this for us to grow as a country. That is something only academia can instil,” Mudda said.

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