Cabinet sanctions Rs 10,000 crore for startups

To provide a push to Startup India Action Plan, on Wednesday the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the establishment of "Fund of Funds for Startups" at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF) to fund startups, said a Press Information Bureau release.

The corpus of FFS will be of Rs 10,000 crore will be built up over the 14th and 15th Finance Commission cycles. The government has already funded Rs 500 crore in 2015-16 and Rs 600 crore will be provided in 2016-17. 

As per the release, the fund is expected to generate employment for 18 lakh people on full deployment. 

"A corpus of Rs. 10,000 crore could potentially be the nucleus for catalyzing Rs. 60,000 crore of equity investment and twice as much debt investment. This would provide a stable and predictable source of funding for Startup enterprises and thereby facilitate large scale job creation", said the release.

Why Fund of Funds for Startups?

As per the release, as startups face challenges to get initial funding, a dedicated fund for carrying out Fund of Funds operations will enable flow of assistance to "innovative Startups through their journey to becoming full fledged business entities".

The SIDBI experts manages the day to day operations of FFS. This Fund is expected to encourage greater private capital and thus help leverage mobilization of larger resources.