Govt offers funding assistance to early stage startups

Bengaluru: The central government will provide Rs135 crore under the Startup India Seed Fund Scheme to 34 incubators as part of its assistance to startups for scaling their operations up. In a written reply in the Parliament, the skills development ministry said this funding assistance will be provided under the Startup India Seed Fund Scheme (SISFS), which has been implemented from April 1, 2021.

The Indian government plans to spend Rs 945 crore over the next four years for providing seed funding to eligible startups through eligible incubators across India. Through such assistance, an estimated 3,600 entrepreneurs through 300 incubators will be supported in the next four years.

The government has established a Fund of Funds for Startups Scheme (FFS) to meet the funding needs of startups across the country. The total corpus of Rs 10,000 crores is envisaged to be provided over the 14th and 15th Finance Commission cycles based on progress of the scheme and availability of funds.

The ministry also informed that Small Industries Development Bank of India (SIDBI) has committed Rs 5,894 crores to 75 alternative investment funds (AIFs) out of which Rs 7,381 crores have been invested in 517 startups across India.

Currently, most of the risk capital invested in startups are coming from foreign fund houses due to scarce availability of capital domestically.

In the first eleven months of this year, Indian startups have set another record by raising $30 billion. Privately held startups have raised $31.2 billion, nearly three times of $11.2 billion raised in 2020. The number of deals, however, has gone up marginally to 930 so far in 2021 from 877 deals in 2019.

However, most of the fund infusion is happening in the follow-up rounds wherein established startups with business momentum are able to attract funding from marquee investors.

While the government is trying to boost funding to early stage startups, domestic investors with many successful founders are turning into this space as angel investors.