Fine print should be read to see how Rs 10,000 crore is handed - equity, debt, or grants
There has been a lot of momentum generated since the NDA government, under Prime Minister Narendra Modi, took charge. There are some positive vibes for the biotech industry. First major announcement came from the Union Finance Minister Mr Arun Jaitley in his Budget speech in July this year. He announced the setting up of a Rs 10,000 crore fund to support start-ups and Small and Medium Enterprises (SMEs). The fund is aimed to catalyze financing in the form of equity, quasi-equity and other forms of risk capital. This is to facilitate entrepreneurs to access more risk capital and equity-based fund flow. The government also announced another fund, the "Technology Development Fund" with a corpus of Rs 100 crore. The other big impetus came to the sector, when the Prime Minister launched the Make in India campaign. Biotech and lifesciences is one of the identified segments for growth and investment.
The question now is ‘what next'? And how much will the biotech industry get from the Government from its proposed Rs 10,000 crore fund? Who should bid for the fund? This is one thought that has been raging the minds of investors, technologists and entrepreneurs. And there have been several on this topic at various forums like the third annual innovators meeting organized by the Biotechnology Industry Research Assistance Council (BIRAC) in New Delhi and at biotech investors meet held by ABLE in Bangalore.
Most of the biotech majors in the country are asking BIRAC to play a lead role in seeking capital for the biotech industry. Simply because BIRAC has been playing a critical role for development of the sector and it is best suited to cater to the needs of the industry. According to Prof. Ashok Jhunjhunwala, Department of Electrical Engineering, IIT Madras, the venture capital today is available in the Second stage, the Third stage, and the Bridge/Pre-public stage of the financing process. The support is needed for the Seed and Start-up stage. Since the government is looking for agencies in the Seed to Start-up stage, the industry wants BIRAC to submit a proposal. BIRAC during the last three years has supported nearly 90 scientists and entrepreneurs, 240 companies, 360 projects, and 100 incubatees. It has provided support of nearly $225 million.
Enabler for innovation
The critical components in a research ecosystem are industry, start-ups, and academic research institutes. Dr Kiran Mazumdar-Shaw, CMD, Biocon, cited, "It starts with the academic research institutes. It is all about the symbiotic relationship between the academia and industry. Each component rely on each other to keep building that ecosystem. Unfortunately, in India, this critical component doesn't exist. Hence most researches die away within the walls of the laboratories."
The lab-to-market journey is a virtuous cycle. "Academic research is about conceptualizing new ideas and discovering new ways of doing things. This academic research is supported by public funds. For academic research to be productive, we need to get people interested in it and take the ideas to proof-of-concept (PoC) stage. This is where young start-ups have an important role to play. So this is about creating accretive value to that concept. Funding for the proof-of-concept level has to come from various funding schemes offered by BIRAC and others. It is also important to find angel investors at this stage," she explained.
Post the PoC stage, the start-ups need to become a larger organization, and take it to the industry and this would need the support of venture capitalists and capital markets. "When you create this important ecosystem, then you will find industries looking out for start-ups who are creating research with interesting concepts, and thus start-ups will be able to license their IPs. Simultaneously, the academic research will start to strengthen and the whole patenting culture will kick-in and the ecosystem will become an effective ecosystem," Ms Shaw elucidated.
Ms Shaw believes that if we can create a good ecosystem and build a strong path from lab-to-market, it will pave way for an exciting ecosystem. "If we want to get the government's attention in policy making, ABLE needs to write a white paper on building the ecosystem, about funding from the government, research institutes and incubators. We have to change the concept of how we access capital markets. We need to create interest among companies to take the PoC to the market funded through capital markets," commented Ms Shaw.
She warned that investing in old, tried-and-tested archaic models is not going to pay any dividends. "It is going to take a long time before you see profits. If people can do it in e-tailing, why not in biotech? This is all about investment in transformational change and investment in the future. We need to inculcate this thought process among the government, investors and policy makers. Creating this ecosystem will create jobs through start-ups and take advanced scientific ideas to market. Our competitive edge is in taking advanced science at lower costs," held Ms Shaw.
She defined affordable innovation as high science at lower costs in a global landscape delivered in a competitive way. "That is what India's model is about. This is what Mangalyaan was all about. And we can do that in Biotechnology (BT)," she encouraged.