Startup India allocates only 19% of Rs 10k Cr fund to VCs, aims to take up to 33% by March

The government-backed Startup India initiative to help startups get funding in early stage has just allocated 19 per cent of its Rs 10k crore corpus to VC firms in the last three years.

Till September this year, the fund has allocated around 15 per cent, Rs 1500 crore, of the total fund. According to Chairman of the Small Industries Development Bank of India (Sidbi) Mohammad Mustafa, it is committed to take the figure to Rs 1900 crore VC firms till December and Rs 3300 crore by March 2019.

Sidbi major role is to manage the fund and allocate it to VCs who in turn invest in startups.

Among the firms which received the funds included Kae Capital, Orios Venture Partners, Stellaris Venture Partners, and Alteria Capital.

Now, Startup India plans to speed up the funding disbursal process by leveraging new technology, added Mustafa. It has been receiving a lot of demand form VC firms, said an ET report.

The govt will start an automated platform that will do away with the physical filing of forms or interactions with Sidbi and essentially it will cut down the process by two-three months for VCs to avail fund.

At present, the process takes over four months for a VC to apply for fund approval.

Startup India fund was announced by Prime Minister Narendra Modi in 2015. The govt-backed funds of funds have been criticised for not living up to the promises and allocating enough funds as required by the startups’ ecosystem.

This was also earlier emphasised by NITI Aayog CEO Amitabh Kant who said less than 10 per cent of our VC investments in startups come from domestic investors.

This month, several startups had complained about receiving Angel tax notices. This was backed by industry veterans the Indian startup ecosystem such as Mohandas Pai, Kunal Bahl, Abey Zachariah, and Anand Mahindra.

They are levied around 30 per cent premium on investments made by external investors.

Suresh Prabhu taking note of the issue had said to resolve and not take any coercive action on demanding taxes from startups.

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