DIPP demands Rs. 1600 crore to boost startups

DIPP demands Rs. 1600 crore to boost startups

- in Industry, Startups

Five M’s (money, material, method, machine and manpower) are pre-requisite for any Startup to be a successful commercial venture. One of key challenges faced by new entrepreneurs in India has been access to funding. The Department of Industrial Policy and Promotion (DIPP) has asked the finance ministry for additional allocation of Rs. 1600 crore in the current financial year to boost Startup funding.

In order to provide funding support to start-ups through their journey to becoming fullfledged business entity, Fund of Funds (FoF) was created by the government with total corpus of ₹10,000 crore will be released till 2025.

The funds has to be spent till 2025. The average allocation should be around Rs. 1,100 crore per year. But only Rs. 1 lakh was allocated to FoF in this year’s budget. The government had earmarked Rs. 600 crore to the FoF in financial year 2016-17. As of now, all the available funds have been commited to Alternative Investment Funds (AIFs).

According to Startup India Action Plan status report, “Rs. 623.5 crore have been committed to 17 AIFs. 62 startups have received funding from various AIFs.” Taking into account the DIPP has asked the finance ministry for an additional allocation of Rs. 1600 crore in current financial year to ensure steady fund flow for Startups.

Hundreds of application poured in, 932 applications had requisite documents and have been recognised as start-ups by DIPP until now. Rest of the applicants will be provided guidance and support by the Startup India Hub to submit relevant documents. Of the total applicants, 23 startups have been approved for availing tax benefits by IMB, as of first week of May 2017.

On June 22 last year, Cabinet has approved the establishment of ‘Fund of Funds for Startups.’ Small Industries Development Bank of India (SIDBI) has been appointed as the fund manager. FoF does not fund start-ups directly, it will contribute to various Alternative Investment Funds registered with capital market regulator Securities Exchange Board of India (SEBI) which would extend funding support to start-ups.

Recognising the potential of Startups to create new India, the fund of funds was set up to create strong ecosystem for growth of Startups, provide a parallel platform to Startups vis-a-vis the experience companies and a business friendly environment for Startups to grow multifold. On full deployment, the fund is expected to generate employment for 18 lakh persons.

The government has relaxed norms for venture capital funding, allowing them to invest a part of their corpus in firms other than Startups. The government has made it easier for Startups to close their businesses if they wish to wind up their operations. The Insolvency and Bankruptcy Code, 2016 has been published in the Gazette. Once this is notified, Startups shall be able to wind up their operations within a period of 90 days from making an application. DIPP has written to MCA to notify Startups as Fast Track Firms.

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