Fund of Funds for Startups (FFS), launched under the Startup India initiative in 2016 by the Prime Minister, Shri Narendra Modi has committed Rs. 7,385 crores to 88 Alternative Investment Funds (AIFs) as of 24th September 2022. These AIFs in turn have invested Rs. 11,206 crores in 720 startups. FFS has been playing a monumental role in mobilizing domestic capital in the Indian startup ecosystem.
FFS has announced a corpus of Rs. 10,000 crores. The corpus is to be built up over the 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.
FFS has not only made capital available for startups at the 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. Collectively, the AIFs supported by FFS has a target corpus of over Rs. 48,000 crores. 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 notable growth over the years recording a CAGR of over 21% in since the launch of the Scheme. Furthermore, the Small Industries Development Bank of India (SIDBI) which is responsible for operationalizing the Scheme has undertaken a series of reforms recently to expedite the drawdowns to enable AIFs assisted under FFS to avail accelerated drawdowns. This has created a positive impact and has resulted in year on year (Q1 FY 2021-22 vis-à-vis Q1 FY 2022-23) surge of 100% in the amount of drawdowns.
FFS has helped anchor 67 AIFs out of 88 AIFs supported and 38 of these are first time fund managers which is line with FFS’s core objective of anchoring venture capital investments for Indian startups.
Investments into eligible startups is approximately 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 increases by more than 10 times with a number of them even achieving unicorn status (valuation of over USD 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 the innovation created will remain within the country and facilitate the generation of employment and the creation of wealth.