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Kerala to catalyse venture capital fund for startups

Proposal to raise investment of H250 cr through a govt-backed trust

Published: 23rd June 2022 06:20 AM  |   Last Updated: 23rd June 2022 06:20 AM   |  A+A-

Startups, meets

Image used for representational purpose only.

Express News Service

THIRUVANANTHAPURAM: In a major boost to the startup ecosystem in state, the state cabinet on Wednesday gave green signal to set up a dedicated Venture Capital (VC) fund for the growth of startups. The decision was announced in the 2021-22 budget as a special scheme of sponsoring venture capital funds to startups. VC funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small- to medium-sized enterprises with strong growth potential. These investments are generally characterised as very high-risk/high-return opportunities.

An amount of `1 crore was earmarked for the initial expenditure. The proposal is to raise funds of `250 crore through a jointly sponsored trust backed by KFC, KSFE, KSIDC or any other financial institution owned and controlled by the state government. Startups operating in Kerala or basing most of their operations in Kerala will benefit from the scheme.

Kerala has around 2,900 startups spread across 14 districts. In 2021, Kerala startup companies raised a funding of 226 million dollars (`1,718 crore). In the first six months of this year, the funding raised by Kerala start-up companies was around 193 million dollars (` 1,467 crore).

Experts said that this is a novel model to bring business to startups through the government. “This will be a game changer in the startup investment scenario. The Fund of Fund initiated by Kerala Startup Mission has supported the first unicorn from Kerala Open Financial Technologies at their initial growth and this move will definitely help startups at the scale up stage to grow exponentially, “ said Ashok Kurian Panjikkaran, head, business development and incubation, Kerala Start-up Mission.

During a recent interaction with CM Pinarayi Vijayan, around 100 startup founders made suggestions and demands for further strengthening the startup ecosystem in state. Krishnan R V Iyer, CEO of Technopark-based startup, Waybeo Technologies (p) Ltd, said the growth beyond a point has been a challenge for many startups. “One of the primary reasons for this is the lack of availability of funds at the right time to scale their offerings. Startups need to expand their offerings to grow and serve a larger target market,” Iyer said. 



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