“One of the things that this government has done, which is tremendously good, is setting up the Fund of Funds…The Sidbi-sponsored Fund of Funds has now invested in 140 domestic funds. They started with Rs 10,000 crore; they now have Rs 15,000 crore because the value of investments of the funds that they’ve invested in have grown that much in that period,” said Bahl at the CII Annual Business Summit.
Through the Fund of Funds for Startups (FFS) scheme, the government sponsors alternative investment funds (AIFs) or venture firms such as Chiratae Ventures, Blume Ventures, Stellaris Venture Partners, Fireside Ventures and India Quotient.
“Rs 10,000 crores, which is $1.2 billion over a period of 10 years, is too small for a nation of our ambition, size and future. What we really need is maybe Rs 5,000 or Rs 10,000 crores a year that should be put in…Hopefully when the new government comes in…they need to loosen the purse strings a bit more and provide the necessary fuel for our ecosystem,” said Bahl.
Conversations over boosting supply of capital to homegrown startups have come at a time when the startup ecosystem is experiencing a major slowdown. According to Infosys cofounder S Kris Gopalakrishnan, there is significant wealth in the country and family offices or fund managers should allocate at least 15% of their investments to the startup ecosystem as a thumb rule.
“When you look at these startups beyond Series C, we see that 80-90% of the ownership is actually with overseas funds. This is where my concern comes; when all the risks are gone and the startup is on track to go for an initial public offering, the ownership is now foreign,” said Gopalakrishnan.
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ET reported on April 16 that the government is preparing a framework to lessen investment risks for local pension funds and insurers in the startup sector. The Centre is also considering expanding Sidbi-sponsored FFS and Startup India seed funding schemes.
