Economy

Investors, entrepreneurs view start-up fund with scepticism

Priyanka Pani Mumbai | Updated on January 20, 2018 Published on June 24, 2016

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Say the amount allocated istoo less, planlacks clarity

The ₹10,000-crore start-up fund may be well intended, but investors and entrepreneurs are sceptical as there is no clarity on how the government plans to disburse it. They also feel that ₹500 crore of investment in the first year maybe too less.

The Centre has not mentioned how and when the funds will be disbursed, what kind of VCs will be eligible for the fund and whether it will be executed at the earliest given the fact that the start-up ecosystem in India is already reeling under pressure with foreign funds drying up.

Another major concern among the start-ups and investors is the amount allocated. As per the government plan, the ₹10,000-crore corpus shall be built up over the 14th and 15th Finance Commission cycles subject to progress of the scheme and availability of funds.

Meagre amount

It has earmarked ₹500 crore for 2015-16 and ₹600 crore for 2016-17, and the funds will be disbursed at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF).

Harshad Lahoti, founder of venture capital firm ‘ah! Ventures’ said: “₹500 crore allocation per year is peanuts given the fact that thousands of start-ups enter the ecosystem every year. Besides, the government has to execute it fast and ensure that there are no bureaucratic challenges for release of these funds. I guess, the government should add more into the pool. It should also provide a proper definition of what kind of start-ups are eligible for these funds.”

Sanjay Mehta, another serial investor, said: “I hope the announcement doesn’t get trapped in government bureaucracy and the money moves to the entrepreneurs’ bank accounts.”

The government fund is not meant to go to entrepreneurs directly, but first to VCs and early-stage funds, who will finally invest in the start-ups.

Developing the ecosystem

Apoorv Ranjan Sharma, founder, Venture Catalysts, said the government should pump in at least ₹10,000 crore every year so as to create a robust start-up sector in the country.

He also hoped that the government would not come out with any riders for the disbursement as it has done with policies related to FDI in e-commerce.

“The amount is too less,’ he said, adding that there are about 20-25 active VCs in the country with a corpus of ₹200 crore for at least two years.

“Besides, start-ups entering the system have increased by over 36 per cent in 2015, according to data from the Ministry of Corporate Affairs, he said.

Sharma is of the view that the government should develop the SIDBI on the lines of the Silicon Valley Bank in the US.

He said they should also introduce direct funding for entrepreneurs and help in mentoring these start-ups.

Published on June 24, 2016
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