Mr. Arun Jaitley, Hon’ble Finance Minister of India presented the Union Budget for the year 2014-15, the first of the newly elected Government on July 10, 2014. In a major push to promote entrepreneurship and start-ups, the finance minister announced setting up of an INR 10,000Cr venture capital fund in the hope of boosting capital flow to the SME sector. Welcoming this provision, Aditi Shrivastava was quoted in leading business newspapers including Hindu Business Line and DNA.
Key Points from Aditi’s commentary:
- The fund could be most effective if it creates an inexpensive debt or mezzanine solution for start-ups
- While some may argue that INR 10,000Cr is not a sizable corpus compared to the size of the Indian SME segment, we believe that it is a major uptick to the mere INR 200Cr of total reported angel investments in India in the last eight years
- It is a big positive that the government has decided to deploy this corpus as a 'Fund of Funds' instead of direct investment into start-ups. This means that the funds will be deployed through existing players/intermediaries that have the expertise to evaluate and mentor start-ups. It remains to be seen how these intermediaries will be selected