The Indian government has reportedly invested just 19% of its fund dedicated to boosting startups

• The Indian government is planning to infuse more money towards Venture Capital (VC) fundings from its startup India fund that was initiated three years ago, to foster startup fundings at early stage.
  
• As of now, of the ₹100 billion fund, only 19% has reportedly been invested towards venture capital fundings for startups — and the Indian government is planning to increase it to 33% by the end of this fiscal.
  
• It takes four-five months for a VC to apply and get funds approved from government — the government claims to trim it to two-three months with the introduction of automation.

Prime Minister Narendra Modi’s startup India fund, which was introduced three years ago to foster startups at early stages, has reportedly allocated only 19% of its total capital so far.

The total corpus under the ‘fund-of-funds’ initiative is ₹100 billion — and the Indian government is planning to increase it to 33% by the end of this fiscal, TOI reported. The funds are allocated to venture capital funds, which have to, in turn, invest at least double the amount that the government pumps in for startups.

Around ₹19 billion fund has been engaged into VC firms up to December 2018, said Mohammad Mustafa, chairman and managing director of the Small Industries Development Bank of India. He further added that they aim to conclude this financial year allocating ₹33 billion to fund-of-funds.

In fact, to ease the process of VCs raising capital from such initiatives by government, the Startup India Fund is also planning to launch ‘automation’ by next financial year.

However, the initiative has faced criticism because of the ‘angel tax’, which applies to startups that were formed before 2016. Recently, India’s Income Tax Department issued notices to nearly 150 fresh startups. In response to the aggressive complaints, the government claims that they will not threaten startups to pay the tax.

In all, it takes four-five months for a VC to apply and get funds approved from government — the government claims to trim it to two-three months with the introduction of automation.

Meanwhile, the Indian government is said to be making it easier for the country’s startups to tap the Initial Public Offerings (IPO) market as an alternative capital source.

Overall in 2018, Indian startups raised more money through fundings and financing via the venture capital route, beating other Indian companies that raised money via IPOs this year, according to data from research firm, VCCEdge.

Under the venture capital funding, India’s recent unicorns raised ₹70 billion in its latest round of fundings from international investors such as Naspers and SoftBank among others.

In fact, Swiggy entered the ‘unicorn club’ last year, accompanied by the homegrown food major, Zomato, which raised ₹13.99 billion from Alibaba Group’s subsidiary — Ant Financial Services.

See also:
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The Indian government may roll back a tax on angel investments that is said to be hurting the country’s startup ecosystem

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