Jayant Sinha: we need a strong venture capital industry

Our Bureau Bengaluru | Updated on January 20, 2018

Minister of State for Finance Jayant Sinha speaks at an event hosted by iSPIRT in Bengaluru on Friday GRN SOMASHEKAR

‘Our own institutions and high net-worth individuals must invest and build this industry’

For India to be an innovation-driven economy with a flourishing start-up ecosystem, the country needs to build a strong domestic venture capital industry with a significant institutional limited partner community, said Jayant Sinha, Minister of State for Finance.

Addressing an audience of entrepreneurs in a fireside chat on future of fintech in India, hosted by software product think-tank iSPIRT in the city, the Minister pointed out that 95 per cent of venture capital in India comes from offshore sources such as the Norwegian Sovereign Wealth Fund, the Teacher Retirement System of Texas and Singapore’s Wealth Funds.

“I was speaking to entrepreneurs who are funded by Sequoia and Matrix; where do you think Sequoia and Matrix’s money comes from. It doesn’t come from Indian sources. While we must welcome and encourage it, in order to truly be an innovation-driven economy, we need to build our own venture capital industry, make our own institutions, encourage our own HNIs to invest and build this up.” Stating that we have to create a community of limited partners in India, he said the country has no institutional LPs, pension funds or insurance funds. “We have transformed the taxation and regulations for domestic venture capital, but that’s not enough. We have to make sure there is capital and so what we have done through the India Aspiration Fund is to say that the Government is prepared to be anchor investor on a matching basis. We will put in 10-25 per cent capital for your fund, and now its for you to go find other investors in India, as has been done in Israel, Australia and the US.”

The absence of a domestic venture capital industry in India is a market failure, partly because of the terrible decisions made in the past, particularly by the UPA Government, he said. “I’ve been a VC myself and I have also worked on a report we presented to the UPA Government in 2012 representing how to fix the entrepreneurial ecosystem to the then Finance Minister. The Minister said, well, Walburg Pincus is in India what’s the problem with venture capital. The report sat on the shelf; luckily you gave me a chance to represent you and be in a position to do some policy reform work.”

Bengaluru’s role

He added, “Just like the US is the entrepreneurial engine for the top 1 billion people on the planet, India must be the entrepreneurial engine for the next 6 billion people, innovating not just for Indians, but for the world. If we can innovate on scale addressing problems such as providing loans at very low rates of interest for Indians, that is the kind of innovation that will work in Indonesia, Nigeria, Bolivia, in Egypt and all the other parts of the developing world. Now, that’s the responsibility that you people have. Its here in Bengaluru that the future is going to get created. It’s a very special responsibility that you people have.”

He said there are two innovation poles globally — Silicon Valley in the US and Bengaluru in India — both innovating with the same spirit and ideas of changing the world. “But, its two different worlds. Silicon Valley is the world of Union Square, San Francisco where you drink your Pinot Noir, drive your Tesla, and think of innovating for people making $100,000 to $200,000 per annum. But you can innovate for my very own Jhanda Chowk in Hazari Bagh and innovate for people who make ₹5,000-8,000 a month. That’s what Bengaluru has to drive for India.”

Published on May 27, 2016

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