In a bid to promote entrepreneurship, the Department of Industrial Policy and Promotion (DIPP) is planning to expand its $1.46 Bn (INR 10,000 Cr) startup funding scheme.
As per media reports, the government will allow venture capital (VC) funds that manage the corpus to invest half of it in mature startups and reduce capital risk. The fund is made to assist innovative startups on their journey to becoming full-fledged business entities.
“We are planning to give them some relaxation so that they have to invest around 50% of the funds in startups. Rest they can invest in non startups,” said a DIPP official.
The Union Cabinet cleared the Fund of Funds for Startups under the Small Industries Development Bank of India (SIDBI) in June 2016 for contribution to various VC funds registered with the Securities and Exchange Board of India as part of the Startup India Action Plan.
To avail funds from the corpus, an eligible VC fund has to make a presentation before SIDBI’s Venture Capital Investment Committee (VCIC). The committee has a panel of seven external experts like former Nasscom president Kiran Karnik, Naukri.com founder Sanjeev Bikchandani, and T.V. Mohandas Pai to review the applications.
Based on the VCIC’s recommendations, the fund makes an application to the SIDBI, which is put before its executive committee. Upon sanction, a letter of intent is issued and a contribution agreement is signed with the VC fund.
Not only this, as per the DIPP officials, the government is also considering relaxing the norm that mandates VC fund managers to invest in startup firms with an annual revenue of less than $3 Mn (INR 25 Cr). According to the DIPP, for the purposes of availing government incentives, a startup is an enterprise that has been registered not more than five years ago and has an annual revenue of no more than $3 Mn (INR 25 Cr) or less in a fiscal year.
The DIPP has been playing a key role in executing the Modi Government’s ‘Startup India, Stand Up India’ mission. In the last one year, the department has taken several initiatives to encourage the startups.
Among other things, in March 2016, the DIPP issued a uniform definition of the word startup. It also hosted a startup festival in September 2016 in Hyderabad. It has also identified about 200 fake ecommerce companies. In October 2016, DIPP proposed to set up a Credit Guarantee Fund with a corpus of $300 Mn (INR 2,000 Cr), although no deadlines were prescribed to set up the fund.
(The development was reported by LiveMint.)