Cabinet approves of proposal to establish a Fund of Fund for Start-ups
The Union Cabinet has approved proposals to tweak Fund of Funds of Start-ups (FFS) rules to enable greater flow of resources. FFS was established in June 2016 with a corpus of Rs. 1,000 crores.
The proposals approved are
- Alternate Investment Funds (AIFs) supported by FFS shall invest at least twice the amount of contribution received from FFS in Start-ups.
- Further, if the amount committed for a Start-up in whole has not been released before a Start-up ceases to be so, the balance funding can continue thereafter.
- The operating expenses for carrying out due diligence, legal and technical appraisal, convening meeting of Venture Capital Investment Committee, etc. will be met out of the FFS.
- These expenses will be to an extent of 0.50% of the commitments made to AIFs and outstanding. This will be debited to the fund at the beginning of each half year i.e. April 1 and October 1.
- The Union Cabinet in June 2016 had approved the proposal to establish a Fund of Funds for Start-ups (FFS) with a total corpus of Rs.10000 crore.
- It was approved with contribution spread over the 14th & 15th Finance Commission (FC) cycles based on progress of implementation and availability of funds.
- It was decided that the FFS shall contribute to the corpus of AIFs for investing in equity and equity linked instruments of various start-ups at early stage, seed stage and growth stages.
- The FFS is being managed and operated by Small Industries Development Bank of India (SIDBI). It contributes to SEBI registered AIFs that may go up to maximum of 35% of the corpus of the AIF concerned.