Startup India Scheme–Finance & Credit Guarantee Support
Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore
To provide funding support for development and growth of innovation driven enterprises
One of key challenges faced by Startups in India has been access to finance. Often Startups, due to lack of collaterals or existing cash flows, fail to justify the loans. Besides, the high risk nature of Startups wherein a significant percentage fail to take-off, hampers their investment attractiveness.
In order to provide funding support to Startups, Government will set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) .
The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.
Key features of the Fund of Funds are highlighted below:
• The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups
• Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
• The Fund of Funds shall contribute to a maximum of 50% of the stated daughter fund size. In order to be able to receive the contribution, the daughter fund should have already raised the balance 50% or more of the stated fund size as the case maybe. The Fund of Funds shall have representation on the governance structure/ board of the venture fund based on the contribution made.
• The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health,
Credit Guarantee Fund for Startups
To catalyse enterpreneurship by providing credit to innovators accross all sections of society
In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System.
Debt funding to Startups is also perceived as high risk area and to encourage Banks and other Lenders to provide Venture Debts to Startups, Credit guarantee mechanism through National Credit Guarantee
Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years.