Dunzo, CureFit, FreshToHome, Jumbotail, Unacademy, Uniphore, Vedantu, Vogo, Zostel, etc., were some of the notable startups funded through FFS while Chiratae Ventures, India Quotient, Blume Ventures, India Angel Network Fund, Kalaari Capital, Fireside Ventures, and more were some of the top startup funds under FFS.
Prime Minister Narendra Modi’s ambitious Rs 10,000-crore Fund of Funds for Startups (FFS) under the Startup India initiative, launched in January 2016, has enabled Rs 5,089.55 crore funding into 391 government-recognised startups as of January 31, 2021, according to the data from the Commerce Ministry. However, the jump in the number of funded startups has been only 22 per cent from 320 startups backed under the programme as of February 18, 2020, as per the earlier available government data. On the other hand, the growth in the amount deployed was 50.6 per cent from Rs 3,378.47 crore as of February 18, 2020. The latest data on the number of funded startups was shared by Commerce Ministry MoS Som Parkash in a written reply to a question in the Lok Sabha. Dunzo, CureFit, FreshToHome, Jumbotail, Unacademy, Uniphore, Vedantu, Vogo, Zostel, etc., were some of the notable startups funded through FFS.
Managed by SIDBI, FFS will be deployed over the 14th and 15th Finance Commission cycles corresponding to FY16-FY20 and FY21-FY25 periods respectively. FFS contributes to the capital of SEBI-registered Alternative Investment Funds (AIF) instead of investing directly into startups registered under the Department for Promotion of Industry and Internal Trade (DPPIT). SIDBI had committed Rs 4376.95 crore to 62 AIFs as of January 31, 2021, up from Rs 3123.20 crore committed to 47 AIFs as of February 18, 2020. Among the prominent AIFs of leading startup investment firms registered with FFS were Chiratae Ventures, India Quotient, Blume Ventures, India Angel Network Fund, Kalaari Capital, Fireside Ventures, and more.
Currently, other than angel funds, no AIFs can have over 1,000 investors. AIFs are of three categories: AIF I backs early-stage startups, social ventures, small businesses, and sectors considered by the government as socially or economically desirable. AIF I funds include venture capital funds, SME Funds, social venture funds, infrastructure funds, according to Care Ratings. Under AIF II, real estate funds, PE funds, funds for distressed assets, etc., are categorised and such funds cannot leverage or borrow capital other than to meet day-to-day operational requirements. Importantly, debt funds investing primarily in debt or debt securities of listed or unlisted investee companies are registered under AIF II. AIF III funds involve hedge funds, PIPE Funds, etc.
In order to have a dedicated fund focusing on investment requirements of startups at the seed stage of their businesses, PM Modi had announced the Startup India Seed Fund with the target corpus of Rs 945 crore in January. The fund will be disbursed over the five-year period to support around 3,600 entrepreneurs through 300 incubators. The investment will be made in eligible startups in order to support their proof of concept, prototype development, product trials, market-entry, and commercialization.