New Delhi, June 23 (KNN) 'Fund of Funds for Start-ups’ (FFS) approved by the Government on Wednesday has been welcomed with open arms by the start-up world experts. However, the experts said they are looking forward to a transparent, healthy and flexible execution of FFS by SIDBI.

The Union Cabinet on Wednesday approved a Rs. 10, 000 crore FFS with an aim to generate the employment for 18 lakh people.

The Cabinet said, “Corpus of Rs.10,000 crore could potentially be the nucleus for catalysing Rs 60000 crore of equity investment and twice as much debt investment.”

Cabinet has approved the establishment of FFS at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF) registered with Securities and Exchange Board of India (SEBI) which would extend funding support to Start-ups.

This is in line with the ‘Start-up India Action Plan’ unveiled by the government in January.

An amount of Rs. 500 crore has already been provided to the corpus of FFS in 2015-16 and Rs 600 crore is earmarked for the year 2016-17. The expertise of SIDBI would be utilized to manage the day to day operations of the FFS.  

Rajesh Dubey, Founding Partner, SME Business Outsourcing & Training Solutions LLP, while talking to KNN, expressed his concern on the actual implementation and execution of the fund by SEBI approved AIF.

“SIDBI should not dictate the usage of funds; it should rather be open to offering flexibility to the AIFs, especially for the start-ups at the growth stage,” Dubey, a Financial Expert, opined.

“The ones at the seed stage or early stage could however be subjected to upper fund ceilings but for the start-ups at growth stage no rigid limitations should be dictated by SIDBI,” he added.

Secondly, he said, “There should be more transparency on the method and nature of fund provisions by AIFs in the private sector and a focus on extending equal opportunity to private AIFs and angel funds based on their past performance as an assessment parameter”.

Angel funds being ‘loosely structured entities’ are not registered with SEBI as AIFs but SIDBI could take an initiative to consider the interested successful Angel investors to come together and form an AIF collectively.

“This not only provides a platform to angel investors who are currently investing out of their own funds but turning them into AIFs backed by FFS  but also assures delivery of  much more promising results as compared to the current Public sector AIFs like Rajasthan Venture Capital Fund, Gujarat Venture Finance Ltd, AP Venture, etc. Especially considering the fact that Angels till now have backed many successful start-ups at the very initial phase or the seed and early stages, they need to be encouraged.” he added.

Thus, FFS can certainly be a stable and predictable source of funding start-ups but could be turned into a revolutionary measure if executed in a novel, flexible and transparent manner. (KNN/ GK)