A startup industry collective founded by leading homegrown entrepreneurs has requested the government to create a Rs 25,000-crore fund to help the digital ecosystem tide over a liquidity crisis triggered by the Covid-19 pandemic.
The Delhi-based Startup Association of India (SAI) wrote to Minister of Commerce and Industry Piyush Goyal on April 28, suggesting that the proposed Startup India Fund should be set up on priority, with the government contributing Rs 15,000 crore.
An existing Rs 10,000 crore fund-of-funds, which is currently being administered by the Small Industries Development Board of India (Sidbi), should be rolled into it as well, it suggested.
“As you are aware, out of the corpus of Rs 10,000 crore with Sidbi, only Rs 3,798 crore has been committed out of which just Rs 1,025 crore has been disbursed till June 2019. The proposed Fund would then constitute a total corpus of over Rs 25,000 crore,” the letter, reviewed by ET, stated.
The current situation called for extraordinary measures, it added.
The letter has also been addressed to Guruprasad Mohapatra, secretary in the Department for Promotion of Industry and Internal Trade (DPIIT).
SAI was set up in 2018 and counts leading entrepreneurs, including Deep Kalra, group chief executive of India’s largest online travel company MakeMyTrip; Sanjeev Bikhchandani, executive vice-chairman of Info Edge; Dinesh Agarwal, chief executive of home-grown B2B marketplace major Indiamart as well as Mahendra Swarup, founder of early-stage investment company Venture Gurukool, among its board members.
The industry collective also recommended that the Fund be registered as an Alternative Investment category-II Fund, on the lines of the National Investment and Infrastructure Fund and be managed by professional fund managers.
“The government’s contribution can come over a period of three years as the sponsor of the Fund and this Fund will have the ability to become a $10 billion fund over this period by raising money both domestic and foreign institutional investors and sovereign funds,” the letter said.
SAI also sought an exception for startups from a recent government amendment that requires prior approval for any investment from China.
It said this should not be applicable for capital calls from existing investors in ventures where they have already invested or impact subsequent investment by an existing shareholder in a startup.
Chinese investors – both, strategic and financial – have pumped in $3.9 billion in 2019, almost double the $2 billion they invested into Asia’s third-largest economy in the year before, as ET reported earlier, emerging as the biggest backers of the country’s fast-growing digital economy.
Alibaba Group and affiliate Ant Financial, Tencent Holdings and Fosun RZ Capital have poured in several hundred millions into a large number of Indian startups, including its unicorns, such as Paytm, Zomato, Delhivery, BigBasket, PolicyBazar, Udaan, Oyo Hotels & Homes, Ola and Dream11, among others.
SAI also requested that investments in startups coming from Hong Kong-based venture funds be exempt from government approvals, given that Hong Kong is a Special Administrative Region with whom India has a separate tax treaty.
“We are writing to draw your kind attention to some of the nuances of the recently released Amendment (under the Foreign Exchange Management Act) and the far-reaching impact it has created as well for requesting you to grant certain leeway for the startup community,” the letter stated.