Kerala Govt to create Rs 500 crore fund-of-funds for state-based startups

The Kerala government is planning to create a fund-of-funds for startups and will also roll out invitations to investors to support young companies from the state.

The target is to create a corpus of Rs 500 crore for Kerala-based startups over the next three years, according to Saji Gopinath, chief executive of the Kerala Startup Mission, or KSUM, the state government's nodal agency for promoting entrepreneurship in Kerala.

“Kerala doesn't have large angel funds or established angel networks, so we are attracting early stage funds to invest in startups in the state,“ said Gopinath.

Venture capital funds supported by KSUM will have to invest in Kerala-based startups double the proportion of the funds committed by the state government.

He added that while the government doesn't have the expertise to invest in startups, it is a good idea to invest through Alternative Investment Fund (AIF) in early-stage startups.

Under AIF, Indian and foreign investors will pool in capital for the purpose of investing under three broad categories. One of these is meant for funds that plans to invest in early-stage startups, social ventures, small and medium enterprises and infrastructure funds.

Under the government’s new plan, KSUM has already invested Rs 10 crore in Unicorn India Venture, which has a corpus of' Rs 100-crore; and signed a pact with Bengaluru-based SEA Fund to invest in Kerala based startups.

“Kerala has one of the best infrastructure with respect to startups. In the past five years, a lot of developments have happened at the ground level in terms of government support, connecting startups to private companies, and infrastructure and incubation facilities,“ said Anil Joshi, partner at Unicorn India Ventures.

In the past few months, the Kerala government has made a few announcements to catch up on other states.

Two days ago, it announced to set aside Rs 1,375 crore for the start-up sector, of which Rs 549 crore will be for IT and ITeS, Rs 10 crore for technology innovation centre, and Rs 70 crore for start-up box, start-up camp etc.

Inaugurating the 3rd edition of the Young Entrepreneur Summit (YES 3D 2017),  Chief Minister Pinarayi Vijayan assured young entrepreneurs that funding would not be a constraint for start-ups. The government has plans to create 1,500 start-ups and has made necessary provisions in the State budget.