The Reserve Bank of India will allocate Rs 2,000 crore for the government’s proposed startup fund in the next financial year, reports the Economic Times. During the budget presentation in July last year, finance minister Arun Jaitley had proposed a Rs 10,000 crore startup fund to attract private capital by providing equity, quasi equity, soft loans and other risk capital for startups.
The report also mentions that a seven-year fund-of-funds will be carved out of the Rs 10,000 crore allocation and managed by a nodal bank, which is reported to be either ICICI Bank or Small Industries Development Bank of India (SIDBI). The money will be deployed to investment firms that apply for it.
The fund is also reported to have a clause looking to restrict the flight of startups overseas, and venture funds drawing from it to invest the money only in India-registered startups. A government official told ET that the fund will work in a co-investing model whereby VC funds will have to put in 70-90% of the investment and take 20-30% from the nodal bank, but he added that the percentage of government’s contribution is still to be decided.
Other government startup funds and initiatives
–In May 2014, Kerala State Industrial Development Corporation had setup a Rs 10 crore angel fund to invest in startups this fiscal, as per The Hindu. It was also looking to partner with Kerala Financial Corporation (KFC) to help launch private venture funds which would be managed by professionals.
–In December 2013, Kerala government had stated plans of setting aside Rs 500 crore annually to improve startup ecosystem in the state and to offer angel funding to entrepreneurs. Startup Village had also received Rs 150 crore investment from the Department of Science and Technology (DST) and the Kerala government in September last year.
– Karnataka Chief Minister Siddaramaiah had proposed the creation of a Rs 15 crore angel fund to encourage new and innovative projects in the state. It also proposed a plan to setup incubation centers for Information & Communication Technology (ICT) sector in collaboration with engineering colleges in select district headquarters to encourage entrepreneurship and innovation in this sector. In April 2014, NASSCOM had stated plans of setting up a ‘Startup warehouse’ along with Karnataka government that will incubate 25-30 early-stage technology firms.
– The newly formed Telangana government is creating a technology development bank that will offer seed funding to startups in the hardware and software sectors. The government is also setting up an incubation centre in Hyderabad at GachiBowli. This incubation facility will reportedly accommodate 120 startups and is expected to come up in the International Institute of Information Technology (IIIT) – Hyderabad campus.
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