Indian Government Sets Up USD 1.6B Fund to Support Startups

Indian Finance minister, Arun Jaitley unveiled a USD 1.6 billion fund to support startups in India during the new government’s first budget presentation in the Indian Parliament on Thursday. The fund will be used to provide “equity through venture capital funds, quasi-equity, soft loans and other risk capital specially to encourage new startups by youth to be set up.” The other terms and conditions like how will the funds get disbursed and administered are still undisclosed. Untitled A few weeks before, the Indian Software Product Industry Round Table (iSPIRT), an industry think tank was in talks with Ravi Shankar Prasad, India’s minister for information technology, telecom, and law, suggested for launching an USD 50 million fund for tech Startup along the lines of the Yozma fund in Israel.

iSPIRT had told the minister that India had the tech talent to overtake Israel in four years, if a startup fund were to be set up just as Israel had done. Naveen Tewari, CEO of one of the Indian startup InMobi, has believe that this move is expected to comes as a boost for the Indian startup scene. Kailash Katkar, CEO of anti-virus software maker QuickHeal, says “The Software Product Industry (SPI) needs privileged access to strategic technologies. Today’s announcement about the special focus on the SPI by the government clears the path for this happening in the near future.

Sharad Sharma, CEO of BrandSigma and co-founder of iSPIRT, notes the budget is a good first move: The Finance Minister has done well in his maiden budget to recognize the Software Product Industry (SPI) as a distinct industry. At iSPIRT, we believe that this is the first step in giving the SPI ecosystem in India the much needed impetus juxtaposed with the recent assurances of the Minister of IT and Communications about making India a Product Nation. (As covered by Tech in Asia)

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TechinAsia says: This is the first time that such a fund has been set up by the government in India though the earlier government had launched a INR 5 billion (US$83 million) India Inclusive Innovation fund, which wasn’t specifically for startups. The Yozma fund began as an Israel government initiative in the nineties and seeded the venture capital ecosystem in what has become popularly known as Startup Nation.

Today, the Israeli tech startup scene is way ahead of that in India, even though India is a world leader in software services. At iSPIRT’s meeting in Bangalore with the IT minister on July 1, Tech in Asia had specifically asked the minister if the time had come to have separate policy frameworks for the software services and products industries. Prasad replied diplomatically that he did not want to think in silos, but he would do everything in his power to create an environment for innovation. That he intends to walk the talk was evident just nine days later, because it found its way into the finance minister’s budget speech and gave a new direction to India’s tech industry.

TheNextWeb says: Late last year, Facebook made its very first acquisition in India, purchasing Little Eye Labs, a Bangalore-based company that produces a mobile app crash testing service, for an estimated $10-$15 million. All these are proof points for startup advocates in the country, such as GSF Indiafounder Rajesh Sawhney, who told TNW he believes that India can provide world-class technology and services. To contact the author, email at sujata@iamwire.com.

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  • Ritu

    I fear that by the time the blueprint of this project is out and details of eligibility are shared with all, the deals and favours would already be done with behind doors, and invitations to the common entrepreneur community would only be an eyewash. I fear this, because I as a first gen entrepreneur has no godfathers, no contacts, no links with the decision makers. I hope the whole exercise is genuine, transparent and gives equal chance to one and all based on merit and potential.

    • joshi

      Hi Ritu,

      I am Joshi ,We are 3 people working in MNC companies,we have a dream to start android apps,applications which are useful for People.we have planned it.

      But Due to lack of Financial support we could not able to start.You got any ideas and have Zeal to work,Kindly contact me 9849461314.

  • raj

    I’m apprehensive about the efficacy of an Indian Government fund. Who will decide which startups get funding? Will it be a for-profit fund or a grant-making fund? If it’s a grant-making fund, what’s to ensure the money won’t be given away to political appointees?If it’s a for-profit fund, what will be the tenure of the fund? What are the success metrics of this fund??

    I think more urgent requirements for startups in India are:
    1) Relief from draconian Service tax regime that makes it uneconomical for Indian clients to buy software/services from startups (rather than build on their own)
    2) Rationality in taxation of ESOPs in the hands of employees (currently at the time of issue)