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Government approves fund of Rs. 10, 000 crore for startups to generate 18 lakh jobs

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Startup & Entrepreneurship

Government approves fund of Rs. 10, 000 crore for startups to generate 18 lakh jobs

Aiming to generate employment of around 18 lakh persons, Narendra Modi-led government has approved an amount of Rs. 10, 000 crore ‘Fund of Funds for Startups’. The decision was taken in the Union Cabinet meeting chaired by Prime Minister Narendra Modi.

“An official statement released today said, “The fund is expected to generate employment for 18 lakh persons on full deployment…A corpus of Rs 10,000 crore could potentially be the nucleus for catalysing Rs 60,000 crore of equity investment and twice as much debt investment.”

This is in line with the government’s ‘Startup India Action Plan’ that was launched in January. An amount of Rs 500 crore has already been provided to the corpus of FFS in 2015-16 and Rs 600 crore earmarked in the 2016-17.

“The Cabinet has approved the establishment of ‘Fund of Funds for Startups’ (FFS) at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with SEBI which would extend funding support to startups,” the release further read.

It also said the expertise of SIDBI would be utilised to manage the day-to-day operations of the fund. The corpus shall be built up over the 14th and 15th Finance Commission cycles, subject to the progress of the scheme and availability of funds.

“This would provide a stable and predictable source of funding for startup enterprises and thereby facilitate large-scale job creation,” it added.

The monitoring and review of performance would be linked to the implementation of the action plan to enable execution as per timelines and milestones.

This fund comes at a time when startups face several challenges such as limited availability of domestic risk capital, constraints of conventional bank finance, information asymmetry and lack of hand holding support from credible agencies. This would encompass support at the seed stage, early stage and growth stage.

Many successful startups have been funded by foreign venture funds and many of them located outside the country to receive such funding.

The statement said, “A dedicated fund for carrying out ‘Fund of Funds’ operations would address these issues and enable the flow of assistance to innovative startups through their journey to becoming full-fledged business entities.”

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