₹10,000-cr start-up fund, a good idea but with hurdles

The Government plans to create a ₹10,000-crore fund that will incentivise private parties to back-up small and medium-sized start-up companies in the country. In his Budget speech, Finance Minister Arun Jaitley said a lack of start-up capital was often a hurdle for start-up companies.  

To address this limitation, he indicated that the proposed fund will establish “a conducive eco-system for venture capital in the MSME sector… to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies.” But industry experts warn that while the proposed fund seemed like a good idea, it’s still unclear how it would meet its stated objectives.

“It’s a nice initiative, but one needs to look at what happens on the ground. It’s all directional,” says Vikram Hosangady, Head of Transactions and Restructuring and Private Equity at research and consultancy firm KPMG. “One has to understand how they’re going to operationalise and implement the proposal. What is the qualification criteria, who is the investment committee, what will they do with the companies, will they give them incentives or something else…,” he added.

Hosangady also said the announcement of a nationwide “district-level incubation and accelerator programme” for incubation of new ideas and providing necessary support for entrepreneurial initiative was welcome, but until the contours of the plan were revealed, it was difficult to assess its potential.

“This is again a directional point. This is okay for a corporate, but for a Government to do something like that everyone will have to be on the same page. It’ll be a challenge; may be they should take up a few States initially. The key is implementation,” he said. 

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