The Indian government’s $1.47 Bn (INR10,000 Cr ) Fund-of-Funds for Start-ups (FFS) , a part of the Start-up India Action Plan aimed at helping startups gather funds, isn’t seeing much action and it isn’t because of lack of trying, The Indian Express reported.
Small Industries Development Bank of India (SIDBI), which manages FFS program, has so far committed $189.3 Mn( INR 1,285 Cr) to 27 local venture capital funds under the FFS scheme, of which $20.8 Mn (INR 141 Cr) —only about 11% — has been disbursed to these funds till April 2018.
Unveiled in 2016, the Fund-of-Funds for Startups aimed to spend a staggering fund of $1.47 Bn, and to support and catalyse 10,000 startups in course of next 12 years. This aimed to create 18 lakh jobs in the country.
How the FSS scheme works is that the Department of Industrial Policy and Promotion ( DIPP) disburses the funds to SIDBI which in turn gives them to venture capital funds (also called Alternate Investment Funds ) who create a corpus fund which has participation from other investors and the money raised is then used to invest in startups.
So what has happened now is that DIPP is not impressed by the low disbursement of funds and has undertaken before a Parliamentary panel that it will not make any releases to fund manager SIDBI during FY18 and FY19.
Of the $20.8 Mn (INR 141 Cr) disbursed to early-stage ventures till end-April, some 124 startups have been reported as beneficiaries through 27 AIFs. But SIDBI believes this amount is higher when looked at the total money of each fund that has been invested in startups and the decision of investment falls down to investment managers of these funds on whom they have no control. The bank said that a total of $86.6 Mn (INR 588 Cr) has been invested in these startups by the AIFs.
SIDBI said that alongside the $88.4 Mn(INR 600 Cr) that it has received from DIPP so far, it has also got an assurance letter authorising it “to make further commitments of Rs $235.7 Mn (INR 1,600 Cr) to AIFs”.
The 27 AIFs who have received funds under the scheme include Mumbai-based early-stage investor Kae Capital and Saha Fund, a venture capital fund focused on women entrepreneurs.
Kae Capital has investments in startups like Truebil, virtual marketplace for trading used cars, Paix Technology; peer-to-peer business loan marketplace startup Loanzen; used products marketplace ListUp promoted and shopping portal Fynd.
Saha Fund’s investment targets include including fitness application Fitternity, online food platform InnerChef and women’s garment venture Kaaryah. Some of the other AIFs are Mumbai-based Orios Venture Partners, early-stage investor Unicorn India Ventures, Ideaspring Capital, Pi Ventures and Stellaris Venture Partners.
In March, Inc42 reported that DIPP had already disbursed $79.7 Mn (INR 517.92 Cr) under its Fund of Funds for Startups (FFS) initiative to more than 100 startups of India and as of end-April, around 124 startups have been reported as beneficiaries..
At the start of the year , DIPP Secretary Ramesh Abhishek said in a tweet that SIDBI would commit an additional $252 Mn (INR 1600 Cr) to AIFs from $1.5 Bn (INR 10000 Cr) FFS by March 2018.
An earlier Inc42 Data Labs analysis report showed that in terms of sector, ecommerce grabbed the majority 18.57% funding from SIDBI led Fund of Funds for startups. Enterprise application and fintech startups closely followed with 15.71% and 12.86% funding respectively. Also, the majority of startups selected for funding under Fund of Funds are just three years old, having been launched in 2015.