Budget 2024-25: FM Announces INR 1K Cr Venture Capital Fund To Boost Space Economy

SUMMARY

The Centre announced the venture capital fund to boost the space economy by 5X in the next 10 years

While the specifics of the disbursement are not clear, Pixxel’s founder and CEO said it could either be a direct fund that makes startup investments or a fund of funds

While the spacetech founders and VCs are positive about the announcement, they seek an even more aggressive financial push from the government in the coming days

Giving a major boost to the nation’s space economy, finance minister Nirmala Sitharaman on July 23 (Tuesday) announced the setting up of an INR 1,000 Cr venture capital (VC) fund.

During her budget speech, the FM said that the government has increased its focus on the space economy and private sector-driven research and innovation at the commercial scale.

“…we will set up a mechanism for spurring private sector driven research and innovation at commercial scale, with the financing pool of INR 1 Lakh Cr, in line with the announcement in the interim budget… With our continued emphasis on expanding the space economy by five times in the next 10 years, a venture capital fund of INR 1,000 Cr will be set up,” Sitharaman said.

It is pertinent to note that the Centre with its policies for the spacetech ecosystem has enabled the private startups’ participation in this industry in the last few years.

From establishing the Indian National Space Promotion and Authorization Centre (IN-SPACe) as the nodal agency to support emerging startups in the sector to allowing up to 100% foreign direct investment (FDI) via the automatic route for certain sub-segments in the space sector during the interim budget this year, the government has taken several steps to enable the development of the spacetech ecosystem.

However, there was an increasing demand in the ecosystem for certain financial benefits such as a Production Linked Initiative (PLI) scheme to spur the domestic spacetech industry.

Pertinent to note that despite the INR 1,000 Cr VC fund announcement, the FM did not get into the specifics of the disbursement.

However, Awais Ahmed, the founder and CEO of Pixxel anticipates the fund will be strategically allocated to support the most promising startups and projects within the spacetech industry.

“Judging by the amount, it could either be a direct fund that makes startup investments or a fund of funds… We expect that there will be a transparent and efficient route in place to ensure that the funds reach the companies and projects that have the potential to make significant contributions to India’s space capabilities,” Ahmed said.

He also noted that the fund is likely to help early-stage startups avoid the “valley of death” and enable more early-stage experimentation while providing crucial financial support to startups so that they can focus on innovation and growth.

“However, the private space sector is still nascent, and we recognise that even larger funds will be needed as the sector grows—eventually, an INR 10,000 Cr fund,” he said, adding that further revenue budgets for procurements will also be needed to help startups have operational support to execute their projects effectively.

Meanwhile, applauding the government’s move, Vishesh Rajaram, managing partner at Speciale Invest, said that the fund will catalyse India’s dominance in the global space market and lead to a multiplier effect in investments from venture capital and private markets in the space sector.

It is pertinent to note Speciale Invest’s portfolio includes some of the top spacetech startups like Agnikul Comos, Galaxeye Space, Kawa Space, Astrogate Labs, and InspeCity.

As per Inc42’s analysis, over 150 spacetech startups bagged more than $285 Mn in funding between 2014 and 2023. The Indian spacetech market is expected to cross $77 Bn by 2030, growing at a 26% CAGR.