The Indian government set up a 1,000 crore fnd meant to nurture the startup ecosystem in 2016. Since then, we have been hearing reports of how hard it has been to get this fund to allocate money to VC firms. However, new statistics have emerged which reveal that as many as 17 VC funds were sanctioned Rs 623.50 crore from Fund-of-Funds corpus.
These VC funds have in their turn, invested in over 60 startups. The news is very satisfying in face of the fact that the conditions imposed before a VC fund could be deemed eligible to receive investment from the fund of funds, were deemed to be far too difficult for investors and VC firms to be able to obtain funds easily.
Also many naysayers were pointing towards the fact that it often takes VC firms years between collecting funds and then actually pumping that money into startups. The turnaround time so to speak, in this case has been pretty great and 62 startups have received an influx of cash from the 17 VC firms that have received money from the fund of funds.
The data comes from the Small Industries Development Bank of India (Sidbi) and Department of Industrial Policy and Promotion (DIPP) and it creates a pretty cool image of what the fund of fnds has managed to achieve in ts first year. Apparently, all of the 62 start-ups — which are backed by VC funds in scenarios where Sidbi acted as a limited partner — together raked in Rs 186.84 crore in FY17.
VC firms that participated in doling out the money to startups included Mumbai-based VC firms Kae Capital and Orios Venture Partners, Unicorn India Ventures, Ideaspring Capital, Pi Ventures and Stellaris Venture Partners. Of these, Kae Capital put in almost 50 crores into 16 startups. The beneficiaries included used-cars marketplace Truebil, shopping portal Fynd, lending platform Loanzen, second-hand products marketplace ListUp and others.
Do mar that VC funds can raise only up to 30% of their own fund corpus from the Fund-of-Funds. The decision with respect to the amount that will be sanctioned to the VC firm is made by Sidbi, and is subject to the approval of an investment committee made up of entrepreneurs. The Venture Capital fund can draw the amount when when an investment opportunity comes by.
Meanwhile, the 17 VC funds had drawn Rs33.63 crore from Fund-of-Funds till 31 March — with respect to the Rs623.50 crore that has been actually committed so far. The government has already released 600 crore to Sidbi, and has comitted to released the remaining portions of the planned Rs10,000 crore, in branches, all the up till 2025.
The government recently made some changes to the requirements and regulations associatd with tapping into the fund of funds. So we can expect more investors to exhibit an interest in the same and more startup to benefit from it.
Under the new scheme of doing things, VCs are free to invest only double the amount raised from the government. Earlier, they would have been forced to invest 100% of the corpus in start-ups, which made no sense. Also, VCs can now make follow-on investment in portfolio companies — even after the business no longer has the startup tag associated with it.