Startup India fund: Of Rs 10,000 cr, only Rs 5.6cr invested so far

Programme launched by PM on 15 Aug 2015 off to a slow start

After a year of its launch, the National Democratic Alliance (NDA) government’s Startup India initiative has managed to disburse only Rs 5.66 crore — of the promised Rs 10,000 crore — to fledgling companies.

Prime Minister Narendra Modi announced the programme in his Independence Day speech in 2015. The plans were firmed up and the initiative launched on January 16, 2016. It promised to promote and support start-ups in the country.

One key part of the programme was to set up a Rs 10,000-crore fund of funds. This was eventually established on June 22 last year. The fund is to be built up to its full by 2025. Small Industrial Development Bank of India (SIDBI) was made the fund manager. The funds were to be invested in the Securities and Exchange Board of India-registered alternative investment funds (AIFs). These AIFs, in turn, were to invest in start-ups.

Till now, SIDBI has created a corpus of only Rs 1,315 crore for four private investment funds. Of this, it has committed only Rs 110 crore to these four. From this committed money, only Rs 5.66 crore has actually been invested in start-ups by one of the four investment funds. 

This was revealed to Business Standard in response to RTI queries. The reply to the query was sent by SIDBI on February 8.

The four AIFs for which a corpus has been earmarked include Kae Capital, Orios Venture Partners Fund-II, Saha Trust and Kitven Fund-III. 

The commitment made to Kae Capital is Rs 45 crore, out of a total corpus of Rs 300 crore earmarked to the venture fund. This is the only venture fund that has actually invested the money in a start-up so far. Kae Capital has put Rs 5.66 crore of this money in start-ups. The response to the RTI query did not reveal which start-ups received this money. Kae Capital did not respond to queries sent by Business Standard. 

The second investment fund that has got money, Kitven Fund, has previously been funded by SIDBI. It is also backed by the Karnataka state government. It invests in information technology start-ups. Kitven has been allotted a corpus of Rs 50 crore, of which Rs 5 crore has been committed by SIDBI.

The third, Orios Ventures, has got the lion’s share of the corpus: Rs 900 crore. It, too, has been previously funded by SIDBI from other sources. Out of the Rs 900 crore, SIDBI has so far committed Rs 50 crore to the company. The investment fund has not invested in any start-up as yet. 

Another beneficiary of the fund is Saha Trust. It is a woman-centric fund that claims to promote start-up initiatives of women entrepreneurs. Saha Trust has been given a corpus of Rs 65 crore, of which Rs 10 crore has been committed by SIDBI. 

According to the action plan of the government, Life Insurance Corporation (LIC) was to be a co-contributor to the fund of funds. But SIDBI told Business Standard that LIC had not contributed any money to the fund to date.

The government’s fund of funds is permitted to invest in private funds only when the latter have already raised 50 per cent of the capital. At that time, the fund of funds can invest up to the rest.

Serviced by SIDBI, the fund of funds has a board of six private professionals besides officials, that screens the proposals at the first stage. But the decision of the SIDBI board for the fund needs the concurrence of the Ministry of Commerce. Documents show SIDBI had initially decided to fund six AIFs for a corpus of Rs 1,720 crore but after concurrence of the ministry it has now committed Rs 1,315 crore to only four of the six AIFs.

Mohandas Pai is one of the people on the board. Asked about the slow pace of the Startup India fund, Pai told Business Standard, “It is typical in a fund of fund structure to start like this and go up the J curve.” He claimed the fund had actually invested Rs 200 crore and this would catalyse investments of Rs 1,000 crore.