VCs Line up for Startup Fund of Funds
Number of fund managers approaching Sidbi doubles this year
New Delhi: The government’s .₹ 10,000-crore fund of funds for Startups has led to sharp rise in the number of venture funds approaching Small Industries Development Bank of India, or Sidbi, the nodal body for implementation of the fund announced last year. “The number of fund managers approaching us has more than doubled this year,” Ajay K Kapur, chief general manager at Sidbi, told ET.
Sidbi’s venture capital investment committee has screened 68 proposals under both Fund of Funds and India Aspiration Fund, another fund of funds with a corpus of .₹ 2,000 crore, taken together so far in the current financial year. Out of these 39 have been sanctioned and nine are under due diligence.
According to Kapur, the bank would commit more than .₹ 933.5 crore to various funds this fiscal. Last fiscal, its investment committee had screened 39 proposals while committing allocations worth .₹ 606.75 crore to 19 funds and in 2014-15, it disbursed .₹ 315 crore to 11 funds. The bank has now urged the government to relax investing criteria by venture funds since they are finding it tough to meet criteria such as investing in companies not older than five years and with turnover not exceeding .₹ 25 crore. “Once that flexibility is provided by the government, a larger number of funds can benefit from the fund of fund for startups,” Kapur said. This year, Sidbi received .₹ 500 crore from the government towards the Fund of Funds, out of which commitments have been made to four funds. Once the relaxations are approved, Sidbi expects to close this year with allocations far exceeding .₹ 500 crore.
The bank is in discussions with the government for more funds. “The government has assured us that funds will not be a constraint,” said Kapur. “The constraint here is how many fund managers come forward to avail of this benefit.”
Largely, four categories of funds are approaching Sidbi — institutional fund managers such as Gujarat Venture Fund, ICICI Venture or Rajasthan Ventures for their new funds; fund managers running domestic teams; new fund managers who have broken away from older venture funds; and, established fund managers who mostly manage overseas funds while also running their India-focussed affiliates.