The Tamil Nadu government will set up a start-up fund with a corpus of Rs 250 crore for investments in start-up businesses, as per the new Tamil Nadu Startup and Innovation policy 2018-2023 unveiled by Chief Minister K. Palaniswami on Saturday.

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According to the policy, the first tranche of Rs 25 crore will be allotted in the financial year 2019-2020.

Called Tamil Nadu Startup Fund of Funds, it will be managed by a professional financial agency like the Small Industries Development Bank of India.

"It will be registered as an Alternative Investment Fund (AIF) under Securities and Exchange Board of India (SEBI) regulation, 2012. The fund will be invested in other SEBI registered AIFs for investment in Startups and MSMEs established in Tamil Nadu. Government of Tamil Nadu will invest Rs 75 crore in the fund," according to the policy.

In addition, a Tamil Nadu Startup Seed Grant Fund (TNSSGF) of Rs 50 crore with an allotment of Rs five crore in the first year shall be created in partnership with financial institutions and universities for supporting early stage financing requirements of the start-ups in the form of grants to fill the gap in fund requirement for research and innovations.

The TNSSGF would also provide funding for Idea-to-PoC (Proof of Concept) stages which are pre start-up activities.

According to the new policy, the state and central public sector undertakings (PSU) shall be encouraged to adopt incubators and channelise their corporate social responsibility (CSR) funds.

These incubators shall also serve as an innovation sandbox to solve problems faced by the state/central PSUs which, in turn, shall support start-ups with access to platform, test bed, data, handholding and others.

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According to the new policy, an entity will be recognised as a start-up (a)if it is registered in Tamil Nadu under the Tamil Nadu Startup and Innovation Mission (TANSIM),(b) if it is incorporated as a private limited company/partnership firm/limited liability partnership, (c) up to seven years from the date of its incorporation/ registration; however, in the case of start-ups in the biotechnology, Artificial Intelligence (AI) and Machine Learning (ML) sectors, the period shall be up to 10 years from the date of its incorporation/registration, (d) if its turnover for any of the financial years since incorporation/registration has not exceeded Rs 25 crore.

According to the policy, the following entities would not fall under the start-up category -- (a) entities formed by splitting up or reconstruction of a business already in existence, (b) a subsidiary of a firm in the State, except subsidiary of a start-up itself which also qualifies as start-up and the combined entity also satisfies the start-up criteria, (c) a franchisee of an existing business in the state, (d) entities promoted or sponsored by or related to an industrial group in the state whose group turnover exceeds Rs 300 crore.

The Tamil Nadu Startup and Innovation policy, aims to provide an enabling, innovative ecosystem in the state and hopes to support emergence of at least 5,000 technology start-ups.

The policy also hopes to extend a dedicated support to at least 10 global high growth start-ups developing innovative technology solution for high social impact in sectors like sanitation, food, clean energy, healthcare, education and others.