Startup India fund falls short of allocation target by over Rs 1,000 cr

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The Startup India fund fell short of its capital allocation target by around Rs 1,000-1,200 crore, despite initial euphoria.

The Startup India fund, launched in 2016, had a disbursal target of Rs 3,300-3,500 crore to venture capital (VC) firms at the end of the financial year ending March 2019, according to top officials at Small Industries Development Bank of India (Sidbi) — which manages the “fund-of-funds”. The Startup India fund has allocated Rs 2,265 crore to VC funds at the end of March 2019, according to data available with Sidbi.

In his address to Parliament last week, President Ram Nath Kovind had said the government wants to create 50,000 startups by 2024. In its election manifesto, the BJP had announced creating a Rs 20,000-crore seed-fund to boost early-stage startups. As of now, there are no fresh announcements on the new fund for seed-stage funding. According to disbursals till March, a little over 22% of the fund has been allocated to VC funds.

In the previous NDA government, startups were identified as a critical part of the economy which create new jobs. The government had launched the corpus to help startups get funding in early stages. This fund doesn’t directly invest in startups. Instead, it allocates money to VC funds, which are required to invest at least twice the amount of contribution received from the government.

“With the robust pipeline in hand, we don’t foresee any problem in deployment of the corpus under fundof-funds for startups during the current financial year in a much more accelerated way,” a Sidbi spokesperson said in an emailed response.

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She said Sidbi has now touched the commitment figure of Rs 3,000 crore without mentioning any timeline. This fund is supposed to be deployed during the 14th and 15th Finance Commission cycles, which ends in 2025. Since last year, early-stage startups in India have also criticised the Startup India campaign after entrepreneurs of hundreds of startups complained of harassment by tax authorities who sent them ‘angel tax’ notices.

Earlier in June, TOI reported the government was planning tax sops for startups with regards to the employee stock option programme (ESOP) in the budget next month.

Sidbi also had plans to cut the overall timeline for VCs to apply and finally get the capital to invest in startups. It typically takes about 4-5 months for a VC to apply and get the approval for capital.

“The platform relating to the receipt of online application from the funds without any manual intervention is under preparation and will be operationalised during next week,” Sidbi added in its response to TOI. Kae Capital, Saha Fund, India Quotient, Artha Venture Fund, Stellaris Venture Partners are some of the funds who have got capital from the Startup India fund.

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