PM Modi’s ‘Start up India, Standup India’ vision received a big push with the establishment of a special ‘Fund of Funds for Startups’ (FFS). Rs 10,000 crore was allocated for this FFS, which is expected to generate 18 lakh jobs in the next 5 years. Union Cabinet approved this special fund of funds, which would be handled and managed by Small Industries Development Bank of India (SIDBI).
Out of the Rs 10,000-crore fund , Rs 500 crore has been released during FY 2016 and Rs 600 crore is scheduled for release in FY 2017. These will be fully utilized for the Fund of Funds for Startups.
SIDBI contributes a maximum of up to 25 per cent of the total amount and the venture funds would in turn raise funds from other sources, including from abroad, such as high net worth Individuals (HNIs), corporates, other institutions. The corpus, so pooled, will be invested in startups by way of equity and equity-linked instruments. SIDBI is set to review ten proposals from alternative investment funds seeking a commitment of Rs 675 crore from the Fund of Funds for Startups (FFS)
SIDBI has already committed a sum of Rs 168 crore so far to six alternative investment funds from the Rs 500 crore provided for the FFS in 2015-16.
“We are taking 10 proposals, seeking commitment from Sidbi for Rs 675 crore with a total corpus of approximately Rs 4,200 crore, for in-principle clearance from the Venture Capital Investment Committee. The process will be held on July 12 in Mumbai,” said Sidbi chairman Kshatrapati Shivaji.
After the government abolished angel tax for investors, abolished capital gains tax for startups, and increased angel funds by 5 times; this is another major step towards encouraging entrepreneurship and startups in the country.This initiative will definitely help startups in India find their footing.