Any company with an annual turnover of INR 10 billion and more or a net worth of INR 5 billion and more or a profit of INR 0.05 billion or more during any financial year, is to spend 2 percent of their average net profits on CSR activities. In February 2014, there was a mandate passed by the government, as part of Schedule VII of the new Companies Act and Corporate Social Responsibility Rules, where among substantial changes, several new activities, including support to technology incubators in academic institutions were included in the list of CSR activities under the Schedule. Startups suddenly found the possibility of finding CSR funds through incubators like CIIE. In a country like India that struggles with issues of disparity and access to technology, synergies between a corporate and a social startup, with the potential to have immense impact on rural and urban agriculture, energy and waste, among other things, could be a game changer.

It is in this context that we caught up with 3 startups incubated at CIIE that received CSR funding to understand how a corporate grant investor is different from a traditional equity investor and what some of the advantages are that startups could leverage and what the challenges are. Piyush Jaju of ONergy Solar says, “Corporate grants can be innovatively channelized to make equity investments into startups/ early stage enterprises through the support of incubators. The grant is given by the corporate to the incubator which in turn makes the equity investment to a startup/ incubatee. This makes the traditional grant more sustainable and has a wider impact.” ONergy Solar, a solar enterprise providing complete solar solutions. including rooftop powerplants, solar irrigation pumping, solar lighting and microgrid solutions, received the grant of Bajaj Electricals in the form of equity through CIIE. Nitin Gupta of Sickle Innovations, a farming solutions company focused on improving conventional farming practices through design intervention, has a slightly different perspective. He says, “There is not much difference from the startups perspective, raising funds is the same. The incubator, CIIE, receives the CSR funds and then invests it into the startup. CIIE is like the equity investor. If it was a pure fund or a seed fund, the fund would have its own norms. That is not the case here.”

There could be interesting synergies that open up especially if the corporate that has invested funds is a potential customer. Rashi Agarwal, of Banyan Nation, an integrated plastic recycling company that helps global brands use more recycled plastic instead of virgin plastic, says “Castrol, who is a potential customer and also investor in Banyan Nation, helped immensely with discovery. We’ve had the unique opportunity to understand their interests, challenges, and constraints as a customer better — which has helped us develop an effective strategy for their packaging needs and for the industry in general.”

Aside from just the funds, is the credibility that comes with being associated with a known, established corporate brand. Piyush Jaju says, “there is value in being backed by large corporate that has shown confidence. It certainly helps towards brand building and reaching out to other stakeholders because it adds credibility.” Nitin Gupta completely agrees, “That Mahindra has financed us has opened many doors. It somehow makes it credible. Our first corporate customer came on board only because of this credibility.” This has also bought in more investments, in the startups both equity and debt, and credibility of the corporate, has a large role to play in this.

In terms of everyday functioning, some corporates take a very hands-off approach by leaving it to the startup to best utilize the money where they see fit, while there are others have a team regularly engaging to provide more active support. Rashi, says of Castrol, “Our corporate donor has been fairly accessible and supportive of our work. We’ve had several conversations on how our work can directly benefit them and are formulating solutions that serves their needs.”

This would however not be possible without incubators like CIIE, that are not just the medium of transfer of funds but also bring to this equation their own credibility and networks through which these startups find not only more investments but also more collaborations and customers. Rashi Agarwal, says “Companies cannot directly give CSR money to for-profit ventures like ours despite the significant environmental and social impact we create through our work. Institutions like CIIE enable such patient capital to flow to the high-impact startups who need it.”