VCs Line up for Startup Fund of Funds

Num­ber of fund man­agers ap­proach­ing Sidbi dou­bles this year

The Economic Times - - Disruption: Startups & Tech - Taslima.Khan @times­group.com

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.

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