SIDBI Sanctions 1,000 Crore To Start Up Funds
MUMBAI: The Small Industries Development Bank of India has sanctioned Rs 1,000 crore to 30 venture funds through the government-financed India Aspiration Fund, which seeks to support startups in their early stages.
The amount was sanctioned by the SIDBI executive committee from the Rs 1,416 crore approved by its independent advisory venture capital investment committee, Chairman Kshatrapati Shivaji said.
Earlier this month, SIDBI signed a memorandum of understanding with Life Insurance Corporation of India under which the government-owned company would contribute 10% of the fund as a co-investor.
"We got many proposals from funds, out of which 35 proposals were recommended by the VCIC to our executive committee. We have already approved 30 of the proposals worth Rs 1,000 crore," Shivaji said.
The proposals are from venture funds such as IvyCap Ventures, Blume Ventures and Exfinity Venture Partners. SIDBI will provide these funds about 15% to 20% of their total investment in startups. The remaining amount will be mobilised by venture funds from private capital and other investors, Shivaji said. "These funds will be invested to startup units. Primarily, our aim is to nudge them to make investments in the seed stage because that is when they need the maximum support," he said.
The government launched the India Aspiration Fund in August 2015 with the intention of providing equity investments to startups and micro and small enterprises and boosting employment.
In January, Prime Minister Narendra Modi announced an additional Rs 10,000 crore to support startups, which will be funded on an annual basis with Rs 2,500 crore. He also announced a tax holiday, simplification of procedures and faster closures for startups.
"The new fund announced in January means that funding of startups will not be an issue. If we need more money, the government is willing to support. This initiative is very critical for India because more than 1 million jobs have to be created every month. We cannot generate employment only through government. We have to facilitate the private sector and provide a conducive environment for their growth," Shivaji said.
It will take 12 to 18 months for the money to flow to the startups. "Due diligence takes time. This is a long-term operation of 10 to 12 years. Venture funds have to start scouting for best companies and then it will take some more time before there is financial closure," Shivaji said.
Earlier this month, SIDBI signed an agreement to provide advisory and consultancy to small enterprises and entrepreneurs in South Asia through the SAARC Development Fund.