Large corporations establishing dedicated venture capital arms and the introduction of simplified financing structures — similar to US start-up accelerator Y Combinator’s SAFE (Simple Agreement for Future Equity) — could prove critical in deepening early-stage start-up funding in India, industry executives said on Wednesday.

Private equity and venture capital investments in India have expanded sharply over the past decade, rising from $15.1 billion in 2014 to $42.9 billion in 2024, according to data compiled by Bain Capital.

Yet, access to capital at the early stage remains constrained, contributing to a high mortality rate among young enterprises. Government data shows that more than 5,000 start-ups recognised by the DPIIT had been dissolved or struck off according to MCA records as of December 5, 2024.

“It is important for more corporate venture capital arms to be set up. Large global enterprises incubate companies and continue to fund them for long periods. In Korea and Japan, co-investments between VC funds and corporate venture arms are common,” said Saharsh Sharma, vice-president – investments at Chirate Ventures, at a CII event in Calcutta.

Corporate Venture Capital (CVC) units — investment vehicles created by large companies to back start-ups with strategic alignment — remain a relatively small part of India’s start-up funding landscape, with data compiled by PwC indicating that CVC investments stood at $8.2 billion in 2024.

Sharma added that Indian early-stage companies stand to benefit from a financing structure similar to Y Combinator’s SAFE, where early investors defer ownership until the start-up’s first priced round. The model reduces friction, speeds up capital deployment and limits downside implications for founders if the venture performs poorly.

“In the US, Y Combinator has popularised SAFE, but it is not well structured in India. A templatised, regulator-backed version would ease capital flow,” Sharma said.

In India, early-stage venture capital 100X.VC has floated iSAFE to bridge the gap between SAFE and traditional regulated instruments like convertible notes or CCPS (Compulsorily Convertible Preference Shares).