Access to funds and capital is the biggest problem of startups and entrepreneurs world over. India is no exception to this rule. For instance, in the year 2015 we witnessed a tremendous growth of e-commerce startups. However, in the year 2016, many of them shut their businesses due to non availability of funds to sustain their business. In fact, the startups and entrepreneurship trends of India 2017
have already outlined the challenges and possibilities for Indian startups and entrepreneurs. So startups and entrepreneurs are heading for a rough year ahead.
As per media reports, the Department of Industrial Policy and Promotion (DIPP) has started discussions with financial sector regulators like the IRDAI and the PFRDA on allowing insurance companies like LIC as well as pension funds to invest in startups. It is a common complaint of startups and entrepreneurs that large insurance firms invest mainly in risky assets like stocks and they do not fund startups and entrepreneurs.
DIPP is aware of this issue and has already had preliminary discussions with regulators and will take up the discussions further in 2017. For instance, the DIPP has already convened a meeting with SIDBI, venture capitalists, various incubators and accelerators associated with startups, etc. SIDBI manages the “fund of funds” of Rs10,000 crore, which was part of the package announced by Prime Minister Narendra Modi last year to help startups. The fund is supposed to invest in SEBI-registered Alternative Investment Funds which, in turn, will invest in startups. DIPP is also working in the direction of tweaking the regulations of these authorities.
DIPP is also working upon a project that would create a Rs 2,000 crore credit guarantee fund for budding entrepreneurs. It would soon approach the Cabinet for its approval. Currently, the DIPP is in the process of getting the approval of the Expenditure Finance Committee.
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