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Fund of Funds for Start-up (FFS) scheme

  • IASbaba
  • September 29, 2022
  • 0
Governance
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In news: Govt commits Rs. 7,385 crores under Fund of Funds for Start-up India Investment scheme for 88 Alternative Investment Funds (AIFs) and 720 start-ups supported by AIFs.

  • CAGR of over 21% since launch
  • Valuation increases by more than 10 times
  • Year on year surge of 100% in amount of drawdowns
  • Investments into eligible start-ups is approximately 3.7 times of FFS disbursements; well above minimum stipulated 2 times under the Scheme

About:

  • Fund of Funds for Start-ups (FFS) was launched under Start-up India initiative in 2016.
  • Small Industries Development Bank of India (SIDBI) is responsible for operationalising the scheme. It has undertaken a series of reforms to expedite the drawdowns.
  • Corpus of funds: FFS was announced with a corpus of Rs. 10,000 cr., to be built up

through budgetary support by DPIIT, Ministry of Commerce & Industry

  • Methodology: FFS supports SEBI registered AIFs, which in turn invest in start-ups.

Significance:

  • FFS has been playing a monumental role in mobilizing domestic capital in Indian start-up ecosystem.
  • It has also played a catalytic role in terms of reducing dependence on foreign capital and encouraging home grown and new venture capital funds.
  • Innovation created will remain within the country and facilitate generation of employment and creation of wealth.
  • Unicorn status (valuation of over USD 1 billion) has been achieved by start-ups funded through FFS like Dunzo, CureFit, FreshToHome, Jumbotail, Unacademy, Uniphore, Vogo, Zostel,Zetwerk etc.,

About Alternative Investment Fund (AIF):

  • It means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
  • Applicants can seek registration as an AIF in one of the following categories,
  • Category I AIF: Venture capital funds (Including Angel Funds), SME Funds, Social Venture Funds, Infrastructure funds
  • Category II AIF
  • Category III AIF
  • Fund of Funds is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of AIFs, a Fund of Fund is an AIF which invest in another AIF.

Source:  PIB              

Previous Year Question

Q.1) What does venture capital mean? (2014)

  1. A short-term capital provided to industries
  2. A long-term start-up capital provided to new entrepreneurs
  3. Funds provided to industries at times of incurring losses
  4. Funds provided for replacement and renovation of industries

 

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