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The central government must step in and create a large Fund of Funds (FoF) so as to encourage “patient capital” to flow into deep tech startups, Amitabh Kant, G20 Sherpa, said on Wednesday.
Such a FoF structure set up by the government would help in sharing of risks with the deep tech focused Venture Capital Funds who fund the young innovators of today, Kant said at the TechSurge India Summit, organised by Celesta Capital in partnership with USIBC.
“If this is done you will see a huge number of blossoming of young innovators who need patient capital from venture funds (like celesta) and risk sharing will be done by the Fund of Funds”, he said.
Supports Govt Policy
This FoF would lead to huge number of venture capital funds coming in and bringing in the biggest disruptions in the deep tech world, Kant added.
Kant also stressed the need to ensure large Indian insurance companies and pension funds put money (patient capital) into deep tech startups.
“Indian insurance and pension funds are currently not putting money into deep tech startups”, he said.
Kant’s remarks are significant as the government is in the process of firming up a Deep Tech policy for Startups, which will do over and above the existing Startups Policy.
Setting up a FoF and enabling deep tech startups will also accelerate transformation of research in India, said experts.
Semiconductor design, telecom infrastructure equipment are some areas that are being focused by deep tech startups in India.
Ecosystem boost
NASSCOM President Debjani Ghosh said that patient capital is absolutely needed in order to grow the deep tech startup ecosystem. “We have to ensure patient capital for India. One of the biggest problem today is 90 percent of the Sstartups that get funded are building for the US and globally because money is coming from there. If we do a FoF, we have to figure out how it is actually getting utilised for benefit of India”, she added.
Arun Kumar, Managing Partner, Celesta Capital, a deep tech focused global venture capital fund, later told businessline there is lot of potential to increase VC funds flow (patient capital) into deep tech.
A FoF could be a game changer as it would make available capital to deep tech focused venture funds, help entrepreneurs build products that calls for expertise.
A fund of funds is a pooled investment fund that invests in other types of funds. Put simply, its portfolio contains different underlying portfolios of other funds.
The holdings replace any investing directly in bonds, stocks, and other types of securities.
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