The previous Rs 10,000-crore cohort, announced back in 2016, has yielded a 15% gain, bringing the total corpus to Rs 11,000 crore, as per official data. However, a significant challenge was the long timelines for product companies, which take six to eight years to give exits.
“This meant a substantial capital would remain locked-in for a long period, missing out on fresh opportunities,” said Anand Saklecha, an angel investor in AIFs. “The primary goal of the FFS scheme is not to grow the funds corpus, but to increase capital availability, catalyse private investments and bring more startups under the umbrella,” he said, adding that this time the government has put special emphasis on value creation in tier-2 and tier-3 cities, women empowerment, etc.
Capital access
This time the entire AIFs can be resold at a higher valuation and reinvested, benefitting more startups, experts said.
The FFS does not directly invest in startups but instead provides capital to SEBI-registered AIFs, also known as daughter funds, which then invest in high-potential startups.
Discover the stories of your interest
As of September 2024, SIDBI has committed Rs 10,913 crore to 141 AIFs, which have further invested a total of Rs 19,992 crore to boost 1,120 startups, as per official data.
“The government’s participation is usually capped to a pre-agreed number at the time of participation — ranging from 20-35% typically,” said Abhishek Prasad, managing director, Cornerstone Ventures, which has invested in 19 startups from Fund-I such as Wigzo, IntelligenceNode, Credit Nirvana, EnParadigm, Blubirch.
“We made three exits from Fund-I, with a few more in the works for this year,” Prasad said. “We expect allocations to be on the higher side with this new Fund of Funds, i.e. from a per cent share of fund corpus perspective.”
Long-term impact
Ankita Vashistha, managing partner at Arise Ventures, noted that the co-investment model has been effective in mobilising private capital alongside government contributions, though compliance and reporting can sometimes be time consuming.
“While private capital typically chases high-growth, scalable businesses with potential for rapid exits, the SIDBI initiative also promotes investments in underrepresented sectors, deep tech and regional entrepreneurship,” she added.
Some notable investments by Arise Ventures include staffing company J2W (Joules to Watts) and fitness platform Fitternity, which was acquired by Cult.Fit.
Regarding suggestions, Vashistha mentioned, “Currently, SISF funding is limited to startups less than 24 months old. This should be extended to 36 months, as startups typically need more time to become fundable by venture capital funds.”
