Since its launch in January 2016 by Prime Minister Narendra Modi, the Fund of Funds for Startups (FFS) scheme, a cornerstone of the Startup India programme, has proven to be a catalyst for growth in India’s startup ecosystem. According to a recent assessment named Prabhaav by SIDBI, investments totaling Rs 17,534 crore have been channelled into 938 startups, marking a substantial growth multiplier of nearly four times the initial investment.
Fostering Innovation: A Closer Look at the Numbers
As of November 30, 2023, the scheme has sanctioned commitments to 129 Alternative Investment Funds (AIFs) across various segments, facilitating crucial capital infusion into burgeoning startups. Notably, the report highlights the emergence of 18 unicorns among the startups supported by FFS, underscoring its role in nurturing high-potential ventures.
The Mechanism Behind the Success
While FFS, overseen by SIDBI, primarily targets early-stage funding for young companies, it does not directly invest in startups. Instead, capital is allocated to SEBI-registered AIFs, known as daughter funds, which subsequently deploy funds into promising Indian startups through equity and equity-linked instruments.
Inclusive Growth: Extending Support Beyond Tier 1 Cities
A significant aspect of FFS’s impact lies in its reach beyond Tier 1 cities, with 129 startups from non-metro locations receiving investments totaling Rs 1,590 crore. This democratisation of funding opportunities underscores the scheme’s commitment to fostering entrepreneurship across the country.
Validating Success: Insights from CRISIL’s Survey
A survey conducted as part of the assessment reaffirms the pivotal role of FFS in facilitating fundraising endeavours, with 89 percent of respondents acknowledging the scheme’s instrumental support. Moreover, the report highlights that 35 percent of the supported AIFs are helmed by first-time fund managers, contributing to the diversification and expansion of the AIF/VC funding landscape.
Building Momentum: Startup India’s Broader Impact
Beyond the FFS, the Startup India initiative has garnered significant traction, with over 1.20 lakh startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) as of February 9, 2024. This recognition opens doors to a plethora of benefits, including tax exemptions, streamlined compliance procedures, expedited Intellectual Property Rights (IPR) processes, among others.
Empowering Entrepreneurs: Streamlining Compliance and Beyond
Among the numerous benefits conferred by the Startup India programme, startups enjoy the privilege of self-certifying compliance with six labour laws and three environmental regulations. Additionally, 2,978 startups have availed tax exemptions under the initiative, further incentivizing innovation and entrepreneurial endeavours in the country.
As India continues to foster a conducive environment for startups to thrive, initiatives like FFS and Startup India exemplify the government’s commitment to nurturing innovation, driving economic growth, and fostering a vibrant entrepreneurial ecosystem.
