The government on Saturday announced a host of measures for the start-up sector such as setting up of a new Fund of Funds Scheme (FFS) with ₹10,000 crore corpus and extension of the period of incorporation by five years.
In 2016, the government had launched a similar scheme, with a corpus of ₹10,000 crore. It is operationalised by Sidbi, which provides capital to Securities and Exchange Board of India (Sebi)-registered AIFs, which in turn invest in start-ups.
The credit guarantee cover will be enhanced from ₹10 crore to ₹20 crore.
Besides, a Deep Tech Fund of Funds will be explored. “Given that deeptech is being seen as an area for growth at the national level, with a China+1 macro and creation of the PLI/DLI schemes of the government, this is a great step,” said Bhaskar Majumdar, managing partner, Unicorn India Ventures.
“The increase in credit guarantee will not only enable start-ups to have access to debt capital it will also help them scale faster with less equity dilution.
"Hence, it will lead to a virtuous cycle of higher top line, less equity dilution, better valuation and better fundraising,” said Mayuresh Raut, managing partner, Seafund.
“While equity funding through AIFs is essential, there is an urgent need for debt financing for startups. The introduction of a credit guarantee will help startups achieve a balanced mix of equity and debt funding,” said Sridhar Parthasarathy, co-founder and general partner at Bluehill.VC.
