Centre To Allocate Corpus To SIDBI To Run Secondary Deal Fund: Report

Centre To Allocate Corpus To SIDBI To Run Secondary Deal Fund: Report

SUMMARY

The fund will enable SIDBI to sponsor venture capital investors engaged in secondary deals

The government believes that the fund will facilitate timely exits for investors, preventing them from making hasty decisions due to liquidity constraints

The Indian government has been introducing initiatives aimed at a conducive environment for innovation and entrepreneurship in India

The Centre is reportedly planning to allocate a corpus to the Small Industries Development Bank of India (SIDBI) to oversee a fund of funds for secondary transactions.

As per ET, the fund will enable SIDBI to sponsor venture capital investors engaged in secondary deals.

The government believes that the fund will facilitate timely exits for investors, preventing them from making hasty decisions due to liquidity constraints. 

“The evolution of funds focused on secondaries in places like the US and China has shown that it leads to timely exits for early investors… and this prevents them from taking short-term decisions,” the report cited a senior government official as saying. 

Venture capitalists are rewarded for supporting the startup ecosystem for years via IPOs and secondary trades. 

As per a report, VC funds earning for 2024 was estimated to be over $4 Bn through IPOs and public market sales, double of what they earned in 2023 and 2.5 times that of 2022.

Some of them minted returns of over 30X from startups like Swiggy and BlackBuck. Prominent investors who turned their early startup bets into remarkable successes on Dalal Street in 2024 included Peak XV Partners, Accel, Matrix Partners, Tiger Global, SoftBank, Temasek, Elevation Capital, Prosus, Alpha Wave, among others. 

It is pertinent to note that at least two India-focused funds in secondary transactions have been launched in recent times. 

Last year, Silicon Valley-based VC firm Tribe Capital partnered with homegrown investment firm Oister Global to launch its first alternative investment fund dedicated to secondary transactions in the Indian startup ecosystem. 

In the same year, Peak XV Partners’ ex-managing director Piyush Gupta launched a secondaries-focussed venture capital (VC) firm, Kenro Capital.

The Indian government has been introducing initiatives aimed at a conducive environment for innovation and entrepreneurship in India. The Startup India initiative, launched by the Indian government in 2016 is one such. 

Among other initiatives, SIDBI manages a Fund of Funds that has allocated over INR 11,000 Cr to various venture capital and venture debt firms. 

The government has also formed the Startup India Seed Fund Scheme (SISFS) with an outlay of INR 945 Cr to provide financial assistance for startups at critical stages such as proof of concept, prototype development and product trials.

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