“India has emerged as the third largest startup ecosystem globally. For the growth of startups, India is big on opportunities. But whatever money is coming into India, 90% of that is international money and only 10% is domestic. This means we are relying heavily on international money instead of domestic, as far as investments in startups are concerned,” he said while speaking on the sidelines of an event organised by IVCA for the first time fund managers in the capital.
Featuring over 100 attendees, the Delhi chapter sought to educate FTFMs on strategic portfolio management, corporate governance, exits, and returns. This year, the aim of IVCA’s Venture Capital Council is to strengthen fund management practices for VCs and improve the venture capital environment in India.
ET OnlineTandon adds that there are certain roadblocks that play up in more domestic money coming in. “If, as an investor, put money into this asset class – the taxation is much higher. So, the appetite becomes less. As an association, we have put together advocacy in place and have presented our submissions so that this particular asset class gets more domestic investment,” he states.
The industry body says the government has taken steps to encourage more investments from domestic investors. For instance, the blended finance model was announced in Budget 2023 through multiple Fund of Funds (FoFs) to promote funding in sunrise opportunities and agriculture and rural enterprises through NABARD. Besides this, it highlights that the Insurance Regulatory and Development Authority of India (IRDA) permitted both general and life insurance companies to invest in Category I and II Alternate Investment Funds (AIF). IRDA has also allowed insurers to invest in Fund of Funds (FoF), thereby enabling more domestic institutional capital inflows to AIFs.
Tandon states that even those sectors have to be promoted where foreigners may not be putting in money, but the government will have to look at certain fund of funds structures. “India can be the fund capital of the world. That’s what every Indian should think about,” he says.Explaining about the investor profile, he states these are typically sovereign funds, Canadian Pension Funds or huge family offices. “They can see the returns. That’s the irony that Indians don’t trust Indian fund managers while international investors do,” he adds.Elaborating on the next wave of growth, Tandon highlighted that sunrise sectors such as deep tech, drones, health and biotech and climate and sustainability will emerge as significant areas in the future. “India is great at developing tech. Fintech and UPI is a success story. From now on, the sunrise sectors need to be supported and looked at more closely,” he states.
As per a Nasscom report, India added over 1300 active tech startups last year, taking up the count of active tech startups to 25,000-27,000.
