Govt Invested Rs 623.5 Crores in 17 VC Firms Resulting 62 Startups Getting Funded Last Year

From the government of India's ambitious 10,000 crore Fund-of-Funds announced in 2014, almost 17 venture capital funds were sanctioned Rs 623.50 crore in FY 2016-17.

However, it must be noted that only up to 30 percent of a VC’s corpus can be raised from the fund-of-funds and can be drawn from the Sidbi only when an investment opportunity arises. So, until March end, the 17 VCs had drawn only Rs 33.63 crore of the Rs 623.50 crore committed.

The data released by the Department of Industrial Policy and Promotion (DIPP) and Small Industries Development Bank of India (Sidbi), portrays that the first full year analysis of the fund-of-fund reveals that the VCs that managed to grab a share of the fund, eventually invested in nearly 62 start-ups during the year

Since its launch in January 2016, the fund-of-funds mostly due to the slow and fairly complicated procedure of raising and deploying funds by VCs, saw limited takers.

According a report prepared by ‘Dalal Street Investment Journal', the 62 start-ups managed to garner roughly Rs 186.84 crore in FY17, with Sidbi acting as a limited partner to the VCs. Unicorn India Ventures, Kae Capital, Orios Venture Partners, Pi Ventures, Stellaris Venture Partners and Ideaspring Capital, are among others that have invested in these 62 start-ups.

The fund-of-funds saw limited takers since its launch in January 2016, mostly due to the slow and fairly complicated procedure of raising and deploying funds by VCs.

After More Than 2 Yrs of Announcement Centre Finally Okays Rs 10K Cr Fund for Startups

In the 2014 Union Budget of India, finance minister Arun Jaitley announced Rs 10,000 crore startup fund for new businesses and startups in India however since then whole of the startup industry was puzzled that where exactly does this money go and how can Indian entrepreneurs benefit from it?, and after more than two years of the announcement nobody even know where and how this fund has been utilized so far.

Surprisingly, Modi government on Wednesday filled the Indian startup industry with cheer as it sanctioned the much awaited Rs 10,000 crore 'Fund of Funds for Startups'. The fund is one of the steps taken by the Central government towards boosting self-employment in the country — a move that is part of a larger initiative, Prime Minister Narendra Modi’s pet project ‘Startup India Action Plan’, which he unveiled himself in the month of January this year.

Still a riddle, question arise as how come a fund announced in 2014 took more than two years of time to get sanctioned and now as a next step how much time would it take to get implemented on grass root level as its sanctioning itself took more than a couple of years.

According to an official statement issued by the government, the fund sanctioned is expected to generate employment opportunities for 18 lakh Indians and that too on full deployment. Further, the government is quite hopeful that this dedicated corpus of Rs 10,000 crore could potentially be the nucleus for catalysing Rs 60,000 crore of equity investment and twice as much debt investment.

The fund was given a green flag after a decision was made for the same in a recent Union Cabinet meeting which was chaired by Prime Minister Narendra Modi himself.

"The Cabinet has approved the establishment of 'Fund of Funds for Startups' (FFS) at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with SEBI which would extend funding support to startups," said the official statement.

The statement issued also mentioned that the Fund has been built up over the 14th and 15th cycles of the Finance Commission. This has been done in order to provide startup enterprises with a funding source that is much for stable, reliable and predictable.

According to information available with us, the Modi government is committed to its this mission and has already approved and sanctioned a sum of Rs 500 crore for the project in the financial year 2015-16 and earmarked Rs 600 crore for the current financial year i.e. 2016-17.

In order to keep a check on the project's progress, the government is also making provisions to grant assistance through gross budgetary Support by Department of Industrial Policy and Promotion (DIPP), which will then review and monitor the project's performance in alignment with the central government's 'Start up India Action Plan'.

According to initial reactions of industry experts, this move by the central government can be of much help to Indian startups which have to face several hardships such as limitations of the conventional bank finance, information asymmetry, lack of hand holding support from agencies that are credible and limited availability of domestic risk capital.

Indian Startups At Risk As Investments Falls Down, Modi Fund Falls Short

All isn't well for the Indian startup industry. While the Modi government thinks that startups is the future of the nation and is hence trying its level best to take the industry to a different level altogether. Global investors and venture capitalists are doing the exact opposite. After showing immense interest in the Indian startups for the last 6-7 years, these investors are now tightening their purse strings.

A new report released by CB Insights and KPMG reveals some startling facts about the Indian startup investments. According to the report, the fourth quarter of the year 2015 saw the venture capital investments dip to nearly a half from $1.5 billion in July-September the same year.

According to industry experts, there could be two main reasons for such startling trends. Firstly, it could be the effects of China's economic slowdown lap around the world. Or, secondly, it could be because of the investors realisation over a period of time that huge online sales are still clouded by soaring valuations (over-valuation) and profits that were still nowhere to be seen.

Such discouraging statistics from the Indian startup industry can hugely impact its overall reputation and potential in the global market.

Industry insiders reveal that all isn't as hunky dory in the Indian startup scene as it seems from outside. According to them, a majority of Indian tech startups have been for long making losses, not profits. This is mostly because their focus is generating more revenue from the customers that buy goods and services by following a business model which is discount-driven. They then use this growth in 'gross merchandise value' on their platforms as a fancy endorsement in order to attract funding from investors.

Flipkart and Snapdeal, two of the most epic Indian startup success stories have a strong backing of big names like Singapore state investor Temasek Holdings, Japan's SoftBank Group Corp and Accel Partners. These big names invested in these aforementioned startups by getting attracted by a huge growth potential in a country where only 252 million of the total 1.3 billion people currently have Internet access.

According to banking and industry sources, both these industry biggies have had huge losses in their race to compete for increasing sales and more market share through deep discount models.

Some startups have already detected the warning signs well in advance and have also started preparing for it. For example, food delivery companies like TinyOwl and Foodpanda have either shrunk their services or cut down on jobs.

What does the future hold for the Indian startup industry, is something which only time will tell but we would surely advice them to slow down, evaluate, introspect and then progress.

Indian Startups At Risk As Investments Falls Down, Modi Fund Falls Short

All isn't well for the Indian startup industry. While the Modi government thinks that startups is the future of the nation and is hence trying its level best to take the industry to a different level altogether. Global investors and venture capitalists are doing the exact opposite. After showing immense interest in the Indian startups for the last 6-7 years, these investors are now tightening their purse strings.

A new report released by CB Insights and KPMG reveals some startling facts about the Indian startup investments. According to the report, the fourth quarter of the year 2015 saw the venture capital investments dip to nearly a half from $1.5 billion in July-September the same year.

According to industry experts, there could be two main reasons for such startling trends. Firstly, it could be the effects of China's economic slowdown lap around the world. Or, secondly, it could be because of the investors realisation over a period of time that huge online sales are still clouded by soaring valuations (over-valuation) and profits that were still nowhere to be seen.

Such discouraging statistics from the Indian startup industry can hugely impact its overall reputation and potential in the global market.

Industry insiders reveal that all isn't as hunky dory in the Indian startup scene as it seems from outside. According to them, a majority of Indian tech startups have been for long making losses, not profits. This is mostly because their focus is generating more revenue from the customers that buy goods and services by following a business model which is discount-driven. They then use this growth in 'gross merchandise value' on their platforms as a fancy endorsement in order to attract funding from investors.

Flipkart and Snapdeal, two of the most epic Indian startup success stories have a strong backing of big names like Singapore state investor Temasek Holdings, Japan's SoftBank Group Corp and Accel Partners. These big names invested in these aforementioned startups by getting attracted by a huge growth potential in a country where only 252 million of the total 1.3 billion people currently have Internet access.

According to banking and industry sources, both these industry biggies have had huge losses in their race to compete for increasing sales and more market share through deep discount models.

Some startups have already detected the warning signs well in advance and have also started preparing for it. For example, food delivery companies like TinyOwl and Foodpanda have either shrunk their services or cut down on jobs.

What does the future hold for the Indian startup industry, is something which only time will tell but we would surely advice them to slow down, evaluate, introspect and then progress.

Startup India: Govt Action Plan In 10 Points

'Startup India, Standup India' has been all over the news in print, electronic and social media since Saturday when India's esteemed Prime Minister, Narendra Modi, finally took the stage in Delhi to announce his government's action plan for the initiative he announced in his Independence Day address last year. For those who are still trying to comprehend what the buzz is all about, we at IndianWeb2.com have decided to come at your rescue by listing out the ten most important announcements made by PM Modi during the action plan launch.

1) Setting up of a Startup India hub -

In order to make the going easier for the new members of the business fraternity, the government plans to have a single point of contact for interactions with the government. This will help them in cutting down on their time and effort to get different document clearness from different departments and help them concentrate more on their product/ service.

2) Faster Exit/Shut-down

The action plan also includes 90 days for a startup to close down its business so as to provide them with the convenience of faster exits.

3) Tax Exemption For First 3 Years -

In what could be called as a real good news for the startup industry, the Narendra Modi government has decided to provide three years of tax exemptions and concessions on capital gains tax for the new members. This move will help the startups maintain a high growth trajectory and also retaining some capital for further usage.

4)Rs. 10,000 Crore Startup Fund, Again!

In an effort to encore more and more entrepreneurs to take the startup plunge, the action plan announcement also saw the PM announcing a fund of Rs 10,000 crore to back startups. Initially, the corpus will be Rs 2,500 crore. In addition to this, there is also a credit guarantee fund for the startups.

5) Mobile App For Startup Registration -

Making it a much easier process to register a startup than it is now, the Modi government has promised to launch a mobile app on April 1 which make registering a startup a one day process.

6) Relaxed norms of public-procurement -

According to the action plan, the Central and the State Government and the PSUs will exempt the manufacturing sector startups from its "prior experience/ turnover" criteria as long as they have their own manufacturing facility in the country. Further, they should have the requisite capabilities and should be able to fulfil all the requirements of the project.

7)No Mandatory Inspections For First 3 Years -

To reduce the regulatory burden on startups, the government will introduce a compliance regime based on self-certification. Under this, there will be no regulatory inspection for the three initial years.

8)Atal Innovation Mission

The action plan also mentions Atal Innovation Mission (AIM) whose main aim is to promote research and development which includes 500 tinkering labs, 35 public-private sector incubators, 31 innovation centres at national institutes, 7 new research parks and 5 new bio-clusters.

9)Including Schools in Startup Program

In order to sow the entrepreneur seed from school itself, the action plan also mentions the government's plan to involve 5 lakh schools and 10 lakh school students in core innovation programmes. Further, to provide visibility to the young, talented brains, national and international startup festivals will also be organised.

Startup India: Govt Action Plan In 10 Points

'Startup India, Standup India' has been all over the news in print, electronic and social media since Saturday when India's esteemed Prime Minister, Narendra Modi, finally took the stage in Delhi to announce his government's action plan for the initiative he announced in his Independence Day address last year. For those who are still trying to comprehend what the buzz is all about, we at www.indianweb2.com have decided to come at your rescue by listing out the ten most important announcements made by PM Modi during the action plan launch.

1) Setting up of a Startup India hub -

In order to make the going easier for the new members of the business fraternity, the government plans to have a single point of contact for interactions with the government. This will help them in cutting down on their time and effort to get different document clearness from different departments and help them concentrate more on their product/ service.

2) Faster Exit/Shut-down

The action plan also includes 90 days for a startup to close down its business so as to provide them with the convenience of faster exits.

3) Tax Exemption For First 3 Years -

In what could be called as a real good news for the startup industry, the Narendra Modi government has decided to provide three years of tax exemptions and concessions on capital gains tax for the new members. This move will help the startups maintain a high growth trajectory and also retaining some capital for further usage.

4)Rs. 10,000 Crore Startup Fund, Again!

In an effort to encore more and more entrepreneurs to take the startup plunge, the action plan announcement also saw the PM announcing a fund of Rs 10,000 crore to back startups. Initially, the corpus will be Rs 2,500 crore. In addition to this, there is also a credit guarantee fund for the startups.

5) Mobile App For Startup Registration -

Making it a much easier process to register a startup than it is now, the Modi government has promised to launch a mobile app on April 1 which make registering a startup a one day process.

6) Relaxed norms of public-procurement -

According to the action plan, the Central and the State Government and the PSUs will exempt the manufacturing sector startups from its "prior experience/ turnover" criteria as long as they have their own manufacturing facility in the country. Further, they should have the requisite capabilities and should be able to fulfil all the requirements of the project.

7)No Mandatory Inspections For First 3 Years -

To reduce the regulatory burden on startups, the government will introduce a compliance regime based on self-certification. Under this, there will be no regulatory inspection for the three initial years.

8)Atal Innovation Mission

The action plan also mentions Atal Innovation Mission (AIM) whose main aim is to promote research and development which includes 500 tinkering labs, 35 public-private sector incubators, 31 innovation centres at national institutes, 7 new research parks and 5 new bio-clusters.

9)Including Schools in Startup Program

In order to sow the entrepreneur seed from school itself, the action plan also mentions the government's plan to involve 5 lakh schools and 10 lakh school students in core innovation programmes. Further, to provide visibility to the young, talented brains, national and international startup festivals will also be organised.

Rs 10,000 Crore Startup Fund Announced In 2014 Is Still Unused & Stuck Due To Bureaucracy

Indian governments for long have had the reputation of announcing things (schemes, funds etc.) that seldom see the day of light. And, as it turns out, the Narendra Modi government is no different.

The much ambitious Rs 10,000 crore startup fund announced by the Modi government in financial budget of year 2014 is still lying unused as no one is clear which government department is responsible for managing the scheme.

Allocated to the Small Industries Development Bank of India (SIDBI) by the Reserve Bank of India, the capital has to be invested in Indian startups through a way of providing them soft loans, equity and other risk capital.

According to inside sources in the government, though the announcement was made way back in mid-2014, the RBI released the money only in May 2015. And till date, no startup has gained any benefits from the money.

Further, different officials in the Finance Ministry seemed to be on different pages when it comes to the initiation of the fund. While according to one, the Ministry will soon announce the first batch of investments from the fund, another officer confesses that he has no idea whatsoever about the allocation of the Rs 10,000 crore fund and passes on the responsibility to another department.

While the official in charge of the disbursement of the fund is Ministry of Micro, Small and Medium Enterprises (MSME) but the officials there are also not able to give any clarity on the future of the fund.

According to some industry experts, the implementation of the scheme would have been much easier if the government would have formed a board to select the startups eligible for the fund, as currently, no one has any clarity where he/she needs to apply if they want funds for their startup.

The government's interest in the industry is not all of a sudden. With a growth prospect of 40 per cent and a capacity to generate 80,000-85,000 jobs in a period of just two years, startups have obviously caught urban India by storm, and have thus also triggered the interest of the government.

Similar to the Rs 10,000 crore fund, was the Rs 5,000 crore one announced for small enterprises in the Budget 2012 by the then finance minister Pranab Mukherjee. The 5,000 crore still remains a non-starter with more than 90 per cent of it remaining untouched.

While the announcements of such schemes and funds are good for the industries and economy, the government needs to make special effort to foresee successful implementation of these policies. And, as far as the Modi government and the Rs. 10, 000 Crore fund is concerned, they need to understand one thing very clearly, while they might have announced the fund to woo the startup industry and young entrepreneurs, non-initiation of such schemes can draw major wrath and have a negative impact on the government's popularity and hence, its votes.

Rs 10,000 Crore Startup Fund Announced In 2014 Is Still Unused & Stuck Due To Bureaucracy

Indian governments for long have had the reputation of announcing things (schemes, funds etc.) that seldom see the day of light. And, as it turns out, the Narendra Modi government is no different.

The much ambitious Rs 10,000 crore startup fund announced by the Modi government in financial budget of year 2014 is still lying unused as no one is clear which government department is responsible for managing the scheme.

Allocated to the Small Industries Development Bank of India (SIDBI) by the Reserve Bank of India, the capital has to be invested in Indian startups through a way of providing them soft loans, equity and other risk capital.

According to inside sources in the government, though the announcement was made way back in mid-2014, the RBI released the money only in May 2015. And till date, no startup has gained any benefits from the money.

Further, different officials in the Finance Ministry seemed to be on different pages when it comes to the initiation of the fund. While according to one, the Ministry will soon announce the first batch of investments from the fund, another officer confesses that he has no idea whatsoever about the allocation of the Rs 10,000 crore fund and passes on the responsibility to another department.

While the official in charge of the disbursement of the fund is Ministry of Micro, Small and Medium Enterprises (MSME) but the officials there are also not able to give any clarity on the future of the fund.

According to some industry experts, the implementation of the scheme would have been much easier if the government would have formed a board to select the startups eligible for the fund, as currently, no one has any clarity where he/she needs to apply if they want funds for their startup.

The government's interest in the industry is not all of a sudden. With a growth prospect of 40 per cent and a capacity to generate 80,000-85,000 jobs in a period of just two years, startups have obviously caught urban India by storm, and have thus also triggered the interest of the government.

Similar to the Rs 10,000 crore fund, was the Rs 5,000 crore one announced for small enterprises in the Budget 2012 by the then finance minister Pranab Mukherjee. The 5,000 crore still remains a non-starter with more than 90 per cent of it remaining untouched.

While the announcements of such schemes and funds are good for the industries and economy, the government needs to make special effort to foresee successful implementation of these policies. And, as far as the Modi government and the Rs. 10, 000 Crore fund is concerned, they need to understand one thing very clearly, while they might have announced the fund to woo the startup industry and young entrepreneurs, non-initiation of such schemes can draw major wrath and have a negative impact on the government's popularity and hence, its votes.

Budget 2015: All Talks, No Work For Tech-Startups, Reacts Tech Industry

Yesterday, Finance Minister Arun Jaitley presented the Union Budget 2015 at Lok Sabha, however not much space has been given to startup ecosystem of India in this year's budget except for just one scheme called SETU (Self- Employment and Talent Utilisation), which is essentially a mechanism of techno financial and incubation platform for tech-based startups. The government will be spending Rs 1,000 crore to help incubate these new companies.

Not to forget, in last year Union Budget of 2014, government announced $1.6 billion or Rs.10,000 Startup Fund to attract private capital by providing equity, quasi equity, soft loans and other risk capital for startups. Now, a next union budget has been announced but nothing has been done on ground level for previous announced startup fund, nothing has been released about how the fund will be used by the government and not even some kind of initiation process has been kicked off so far for the same.

Additionally, this year government again announced Rs.1000 crore startup fund with the scheme named as SETU. Questions are being asked about last year promised startup fund (Refer - What happened to Rs.10000 crore startup fund, YourStory, FirstPost).

Before this year's Union Budget are about to announced the highest expectations of startups from 2015 Budget was a favorable tax reform, as an Indian tech startup has to pay service tax, which is at the rate of 12.36 per cent - a rate similar to what large corporates pay and in this this year's budget service tax has been increased to 14%, biggest disappointment for startups. This is in addition to startups having to pay excise and income tax.

Additionally, startups in India wanted to make starting-up business in India a lot more easier as current procedure for starting a business requires the entrepreneur to run from corner to corner, office to office in order to get all the approvals, clearances and licenses for his new venture. The sector has been long demanding the setting up of one single window for all these approvals, so that the entrepreneurs can concentrate more on his business and less in running around.

"Modi has said a lot of wonderful things, but so far nothing has happened, other than a lot of public relations," legendary investor Jim Rogers, who co-founded the Quantum Fund with George Soros in the 1960s, said in a recent interview.

NASSCOM's Vice Chairman BVR Mohan Reddy reacted in on budget 2015 and said - "Increase in service tax rate is disappointing. Angel tax continues - fair market valuation applicable to angel investments and capital receipts taxed in start-ups. This problem is un-addressed in spite of the focus on entrepreneurship and start-ups. Duality in service tax and sales tax applicability to product companies not addressed."

RBI Announced Rs.2000 Crore 'Startup Fund' For 2016

After much long gap of new central government's proposed Rs.10,000-Crore startup fund in the previous Budget, in July 2014, Reserve Bank of India (RBI) has finally agreed to allot about Rs 2,000 crore in the next financial year i.e. 2016 onwards, to a startup-specific fund, reported Economics Times.

As per this new 2000-crore startup fund plan, a seven-year fund-offunds will be carved out of the Rs 10,000-crore allocation and managed by a nodal bank. The money will be deployed to investment firms that apply for it. SIDBI and ICICI Bank are the contenders to be named as the nodal bank where the RBI ‘loaned’ startup fund will be parked, the official source said.

A senior SIDBI (Small Industries Development Bank of India) official said the bank, which manages about 60 investments in VC funds, was being consulted by the government on setting up the startup fund.

New fund could restrict flight or startup abroad as it may include a clause allowing venture funds drawing from it to invest the money only in India-registered startups. Several new startups are opting to register in Singapore or the US to take advantage of easier regulations there.

The new fund will operate in a co-investing model, whereby VC funds will have to put in 70-90% of the investment and take 20-30% from the nodal bank. However, the percentage of the government's contribution is yet to be decided.

The promised 10,000-crore startup fund by Modi-government has been in the papers only for last 6 months and nothing has been done so far till RBI come up with this 2000-crore fund for startups in India and that's too for fiscal year 2016 onwards, although India's VC and Angel investor community, which invested an alltime high of $2.1 billion in Indian startups last year, welcomed the move however the startups & entrepreneurs community has now given up the patience big promises made but given peanuts so far.

Government To Pump $2 Billion Fund To Create Google, Apple Like Co.s in India

Every tech-enthusiast has one common question that 'why companies like Google, Apple, Facebook and Twitter never came out of India?', it seems like Indian government has started working on some level atleast so as to give flourishing environment to IT & tech startups to become at par with companies like Google/Apple.

Indian government, which is planning a Rs 10,000-crore electronics development fund to support ambitious startups in attaining scale.

Notably, one thing to clarify that this is a different fund from the Rs 10,000-crore venture fund announced in the Budget for startups in micro, small and medium enterprise (MSMEs).

The Centre’s electronic manufacturing policy, which has proposed a Rs 10,000-crore Electronics Development Fund to boost the domestic electronic systems design and manufacturing (ESDM) capacity, is likely to be rolled out in the next two months.

Sources from ministry of information technology said that - "10,000 Crore Electronic Development Fund is in the process of finalization and we will get an approval very soon".

The government will not make the investments directly, but will rather route the money through venture capital funds that are focused on electronics hardware and IT startups. "We will take small subscription in them. Thus, we will invest in the capital of the fellows who do the investments," the source said.

The government feels that India has missed the bus in terms of creating technology giants, both in software and electronics hardware. "For example, in software, a Google or a Facebook or a Microsoft Office has not been developed in India. Despite being such a big IT power, India has not been able to make any products. We are able to do just services," the source added. The government will create the electronic development fund to make the investments. "We are not directly funding the startups, but rather we will collaborate with some venture capital funds," the source said.

The department of Electronics and IT (DeitY) had proposed the corpus be divided for various activities. It wanted 25-49 percent of the fund for seed, early and growth stage activities in the electronics and technology acquisition. Similarly, it had proposed a corpus of 25% for infrastructure related to electronics ecosystem development and manufacturing.

Please read proposed draft of Electronic Development Fund here as PDF