Fund of Funds Scheme

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Overview:

According to a Crisil assessment called Prabhaav, the Fund of Funds for Startups (FFS) scheme has enabled investments to the tune of around 4x of the amount drawn with Rs 17,534 crore invested in 938 startups.

About Fund of Funds Scheme

  • The Fund of Funds for Startups (FFS) Scheme was approved and established in 2016 with a corpus of Rs 10,000 crore,
  • Funding to start ups: Under FFS, the Scheme does not directly invest in startups, instead provides capital to SEBI-registered AIFs, known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments.
  • Small Industries Development Bank of India (SIDBI) has been given the mandate of operating this Fund through selection of suitable daughter funds and overseeing the disbursal of committed capital.
  • AIFs supported under FFS are required to invest at least 2 times of the amount committed under FFS in startups.

Key facts about Small Industries Development Bank of India (SIDBI)

  • It was established under an Act of Parliament in 1990.
  • It is the Principal Financial Institution engaged in the promotion, financing & development of the Micro, Small and Medium Enterprises (MSMEs) sector and the coordination of the functions of the various institutions engaged in similar activities.
  • Objective: To offer loans (both direct and indirect) to MSMEs to help in addressing the development and financial gaps in the ecosystem of MSMEs. 
  • It helps MSMEs in acquiring the funds they require to grow the market, develop and commercialize their technologies and innovative products. 
  • It was made responsible for administering the Small Industries Development Fund and National Equity Fund.

Q1) What is Startup India Scheme?

It is an initiative launched by the Indian Government in January 2016 to promote entrepreneurship and startups in India. The scheme is designed to create a favorable environment for startup businesses to grow and thrive in the country.

Source: Govt’s Fund of Funds for Startups scheme: Rs 17,534 crore invested in 938 startups, says Crisil-SIDBI report