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Venture Fund(s) or Fund of Funds for Startups

Gujarat Venture Finance Limited (GVFL) supported by the State Government is one of the oldest venture funds in the country. Founded in 1990 at the initiative of Government of Gujarat and World Bank, GVFL has supported ventures working on cutting edge technology as well as encouraged entrepreneurs with innovative ideas. State Government has contributed INR 75 crore to the overall fund corpus of INR 250 crore. The investment from the fund is in the range of INR 2 crore to INR 20 crore in single or multiple rounds as per Startup business needs.

Looking at the current scenario in the Startup ecosystem and leveraging on decades of full investment lifecycle experience in startup investing, GVFL has launched 'GVFL Startup Fund'. The fund focuses on highly scalable, innovative business models, across, sectors, which use technology as an enabler or differentiator and are backed by credible teams and have following characteristics:

  • Innovativeness - new or improved product, services or process
  • Technology either as differentiator or enabler
  • Proven product or service offering
  • Market validation on commercial basis
  • Initial revenue growth
  • Scalable business model
  • Large market
  • Strong team credentials

 

In order to provide sustained support to the Startups, Government of Karnataka has operationalized fund of funds for investing in venture funds that invest in Startups in various sectors. Following Venture capital funds have been launched in the State with key focus on selected sectors:

  • Karnataka Semiconductor Venture Capital Fund (KARSEMVEN Fund) with INR 100 crore
  • KITVEN 3 (Bio-tech) with INR 50 crore
  • KITVEN 4 (Animation Visual Effects Gaming and Comics) with INR 20 crore and
  • KITVEN 2

 

The funds have been established to assists Startups in the field of semiconductor, bio-tech and allies sectors and animation, video, gaming and comics. To guide the above process, an investment committee with Officers from the Government, industry and academic experts with sector-specific domain knowledge, financial and legal background etc. with no conflict of interest has been constituted.

KITVEN funds have also release guidelines for entrepreneurs applying to these funds for their funding needs. Companies seeking Venture Capital assistance may please forward their Executive Summary (not exceeding 4-5 pages) online keeping in mind investment criteria, objective and the area of operation of the respective fund under management

Bhamashah Techno Fund of INR 500 Crores for Startups has been introduced to give an open sky to the potential Start-ups of the state. The fund is used for Start-ups of the State for their growth and all-round development and to levitate the Start-up community of Rajasthan. The Fund was announced in February, 2018 to ensure the robust growth in the investment infrastructure or substructure and encouraging the Startup ecosystem. Out of the said fund, INR 100 Crore is be earmarked for Women Start-ups and INR 50 Crore for Green Startups.

Key Features of Bhamashah Techno Fund are:

  • Loans will be provided as per Q-Rate ranking for a maximum period of three years
  • No Lock-in period for start-ups to return the partial / complete loan amount
  • 5% interest rate on reducing balance
  • No securitization
  • Repayment of loan with interest after six months of the date of disbursement
  • Loan repayment in six monthly instalments
  • Installment paid before the due date will be taken entirely to principal
  • The loan will be given on properly executed bonds, in the prescribed format
  • Funds shall be provided by the Department of Information Technology & Communication, Government of Rajasthan

 

Funding as Equity

  • Equity" shall be provided for a maximum period of 7 years
  • Minimum Lock-in period will be 3 years
  • Buy-back option shall be available to the start-ups from Day 1

 

Funding as Seed Funding

  • Up to 2 Lakhs as Loan

Another venture funding mechanism has been established in the form of Rajasthan Venture Capital Fund (RVCF) which is managed by Rajasthan Asset Management Company Pvt. Ltd. The fund invests in Early and growth stage companies with equity exposures ranging from INR 1 crore to INR 10 crore. As of June 2018, 36 Startups have been provided venture funding through above mentioned venture funds.

More details are available at iStart Portal of Rajasthan.

 

Government of Uttar Pradesh has established a UP Startup Fund with a corpus size of INR 1,000 crore. The Fund shall be in the form of fund of funds. In this model, the Fund will not be invested directly into start-ups, rather, it shall participate in SEBI approved investors.

Alternatively, the Fund shall not be invested directly into start-ups, rather it shall make investment in “Daughter Funds,” which would invest in startups promoting innovative ideas across all sectors in Uttar Pradesh.

The Government of Uttar Pradesh would take minority participation in the Daughter Fund, by being a limited partner of up to 25%. The fund would be professionally managed and a Fund Manager shall be nominated/appointed to manage the UP Startup Fund. A formal Memorandum of Understanding (MoU) would be signed with the Small Industries Development Bank of India (SIDBI) to manage the fund operations.

IT & Electronics Department, Government of Uttar Pradesh has also signed MoUs with two Venture Funds, Venture Catalysts and Orios Venture Advisors for investing in UP based Startups.

Government of Bihar has created Bihar Startup Fund Trust with a corpus of INR 500 crore for funding Startups. The fund will operate as a “Fund of Funds” and will nurture Startups supported by Government of Bihar to grow organically and scale to create the intended impact in the society. The fund shall enable creation of an ecosystem for providing risk capital to young enterprises to undertake research and development in high priority technology areas. As of September 2018, Bihar Government was in discussion with SIDBI for their role as fund manager.

Kerala Startup Mission (KSUM), the nodal agency for Startup initiative in Kerala is partnering with SEBI accredited Venture Capital Funds for the creation of corpus fund for supporting the emerging startups in the State.

KSUM has already invested in 2 Venture Funds i.e. UNICORN and SEA Fund with a condition that partners will invest equal amount invested by Government of Kerala in these Funds. The corpus amount will be invested by these Funds in Kerala based by Startups. The fund operates in a Fund of funds type investment model and has so far entered into a commitment of INR 12.5 crore with above mentioned funds. A similar amount has been invested by UNICORN and SEA resulting in a corpus of INR 25 crore for State based Startups. The Funds shall be investing in early stage startups with a ticket size of INR 25 lakhs – INR 200 lakhs.

Who can apply?

  • Startups who are registered in Kerala
  • Startups who are at early stage/who have a product & traction
  • Technology based product start up from different sectors
  • Startups from PAN India & who are ready to reregister in Kerala

 

Under the Startup India program, the Government created the ‘Fund of Funds for Startups (FFS) with a corpus of INR 10,000 crore to provide funding support for Startups, over a period of XIV and XV Finance commission cycles. The Fund was set up with the approval of Union Cabinet in June 2016. The operational guidelines were issued as per Cabinet approval.  The FFS is managed by Small Industries Bank of India (SIDBI) and contributes to the corpus of Alternate Investment funds (AIFs) for investing in equity and equity linked instruments of various Startups.

Two stage processes for selection of Venture Funds is followed:

  • Preliminary Screening by Venture Capital Investment Committee (VCIC)
  • Detailed due diligence and sanction by Executive Committee of the Board of SIDBI

Fund Status as of March 2019

INR 600 crore has been released to SIDBI. Further, a letter of comfort for INR 1600 crore has been provided to SIDBI in January, 2018 taking the overall commitment to INR 2200 crore.

SIDBI has further committed INR 2265 crore to 40 AIFs. The AIFs have started investing in the Startups and 193 Startups have received funding of INR 1150 Crore from AIFs. The current drawdown from FFS is INR 347 Crore. Details about Startups funded can be accessed at SIDBI website.

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