Fund of Funds for Startups (FFS), launched under Startup India initiative in 2016 by Prime Minister Narendra Modi, has committed ₹7,385 crore to 88 Alternative Investment Funds (AIFs) as of September 24, 2022.
These AIFs in turn have invested ₹11,206 crore in 720 startups, the Ministry of Commerce & Industry says in a statement.
Fund of Funds for Startups, which was announced with a corpus of ₹10,000 crore, has been mobilising domestic capital in the Indian startup ecosystem. The corpus is to be built up over 14th and 15th Finance Commission Cycles (FY 2016-2020 and FY 2021-2025) through budgetary support by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry, Government of India. Under FFS, support is extended to SEBI registered Alternative Investment Funds (AIFs), which in turn invest in startups.
This comes at a time when India is witnessing a funding winter, a downturn in investors' confidence towards startups, which is expected to continue for the next 12-18 months, according to a report by market intelligence platform Tracxn. In August, the Indian startup ecosystem witnessed $885 million in funding, 102 funding rounds and 9 acquisitions, down by 20%, 8%, 18% respectively compared to July 2022.
"FFS has not only made capital available for startups at early stage, seed stage and growth stage but also played a catalytic role in terms of facilitating raising of domestic capital, reducing dependence on foreign capital and encouraging home grown and new venture capital funds," the ministry says.
Collectively, the AIFs supported by FFS have a target corpus of over ₹48,000 crore. Among the prominent AIFs of leading startup investment firms supported under FFS are Chiratae Ventures, India Quotient, Blume Ventures, IvyCap, Waterbridge, Omnivore, Aavishkaar, JM Financial, Fireside Ventures, and more.
The amount committed under FFS has seen a notable growth over the years recording a CAGR of over 21% since the launch of the scheme, the government says, adding that the Small Industries Development Bank of India (SIDBI) is responsible for operationalising the scheme.
Fund of Funds for Startups has helped anchor 67 AIFs out of 88 AIFs supported and 38 of these are first time fund managers which is in line with FFS's core objective of anchoring venture capital investments for Indian startups.
Investments into eligible startups are 3.7 times of FFS disbursements, which is well above the minimum stipulated 2 times under the scheme. Performing startups supported through FFS are showing valuation increase by more than 10 times with a number of them even achieving unicorn status (valuation of over $1 billion).
Dunzo, CureFit, FreshToHome, Jumbotail, Unacademy, Uniphore, Vogo, Zostel,Zetwerk etc. are some of the notable startups funded through FFS.
The returns generated from the success of these startups and innovation created will remain within the country and facilitate generation of employment and creation of wealth, the ministry says.