Reliance Industries Limited (RIL) is set to refresh its entrepreneurial spirit and engage in India’s quickly evolving startup ecosystem. To this end, it will be partnering with technology giant, Microsoft, to incubate startups by offering seed capital, mentorship andtechnology.
RIL, which already has interests in telecom, retail and petroleum, is now keen on focusing on startups in India that exhibit the potential of converting into billion-dollar businesses.
Initial Investments and Nature of Partnership
The company’s partnership with Microsoft will be operated through its 4-year old venture capital firm, Gennext Ventures. So far, this firm has announced two investments – one in Covascis Technologies Pvt. Ltd and the other in Videonetics Technology Pvt. Ltd.
The precise nature of the partnership with Microsoft is yet to be disclosed. A reliable source claims that the startups, once identified, will be funded via RIL and there will no limit on investments at the seed stage. This is taking into consideration that such companies typically require a small investment, ranging between ₹50 lakhs to ₹2 crores.
The RIL-Microsoft start-up model appears to have drawn inspiration from a US-based seed accelerator, Y Combinator. This establishment offers capital, advice and networking opportunities in exchange for 7% equity in the company. Y Combinator is known to invest in the range of $120,000 has funded 500 companies, including Dropbox, belonging to 30 different markets as on December 2013.
What Puts Startups in the Limelight?
According to Rajesh Sawhney, founder of GSF Accelerator, there are 3 main reasons why corporate houses are ready to fund startup businesses. He says, “R&D spends are going down, large companies are struggling to innovate (for instance Facebook, Whatsapp, YouTube, even Google were independent start-ups that scaled globally and were not spun out of large corporations) and finally they are struggling to get startups.” GSF Accelerator funds early-stage startups and is backed by 30 entrepreneurs. He adds, “Globally, only Silicon Valley has been able to solve this problem and companies like Cisco, Facebook, Google are the biggest acquirers of startups.”
Sawhney believes that it will be challenging for corporations to replicate the Y Combinator model, which essentially owes its success to its independence, that is, not being attached to any corporate.
Large Indian companies have been relatively slow in recognizing the potential posed by startups. The RIL-Microsoft partnership opens new doors for mentorship and funding,thus creating a fertile environment for new ventures.
The businesses taken under the wing of this partnership will be provided mentorship through an industry veteran. It is also believed that Microsoft India will offer ready access to its own business units in India and overseas to pilot the products and services developed by the incubating companies.
So far, most incubators in our country lack experience or the requisite skill sets to mentor budding entrepreneurs. Furthermore, the credible ones operate only out of one of the 6 top cities in India or are associated with specific universities or colleges. The RIL-Microsoft venture seeks to bridge this gap and encourage entrepreneurship in India.