The Centre is targeting an investment of about ₹2,200 crore by 2019 in start-ups working on new technologies in the electronic sector under the Electronics Development Fund (EDF), a senior government official said.
The EDF is a ‘fund of funds’ that works with venture capitalists to create funds, known as ‘daughter funds,’ which provide risk capital to companies developing new technologies in the area of electronics, nano-electronics and IT.
The EDF would put in 10% of the capital in ‘daughter funds’ and the rest would be invested by venture capitalists. Hence, a targeted investment of ₹2,200 crore by the government will help mobilise ₹22,000 crore for the ‘daughter funds,’ which will then invest primarily in start-ups.
“One of the major issues that we have had in India is that we have not had big VC funding coming in,” IT Secretary Aruna Sundararajan said. “Mostly it has gone into e-commerce and e-tailing. That is not enough. We need to create IPR also. To create IPR… there are a large number of tech start-ups, people working in nano-technology etc… but the problem is who will fund them, because it is almost like R&D, until they commercialise,” she added.
The aim of the EDF was to move from a government-funded model to private-funded model where a start-up can raise money from the market, she said. “But that will not happen on its own. So the idea is to seed the market… Government putting in 10% doesn’t seem to be a big deal but it is a big deal because that is what builds a certain degree of confidence in the investors who put money into the venture fund,” Ms Sundararajan explained.
She said that the results had been very encouraging as, in one year, the government had been able to mobilise ₹6,870 crore, of which the government’s share has been ₹687 crore. “Our eventual plan is to go up to ₹ 22,000 crore by 2019, of which government’s share will be ₹ 2,200 crore,” the Secretary said.
The fund is an attempt to develop the electronics system design and manufacturing sector in the country to achieve “net zero imports” by 2020.
