On 16th January of 2016; the Indian government launched the Start-up India initiative with the purpose of supporting the Indian startup ecosystem and encouraging the innovative and creative minds of our nation.
The plan was put into action by following these three strong pillars:
- handholding and simplifying
- Funding, Support, and Incentives
- Industry-Academia Partnership and Incubation
To reduce the dependence of Indian startups on foreign sources, the government implemented the Fund of Funds for Start-ups (FFS) and the Start-up India Seed Fund Scheme (SISFS). It was to provide investments to startups that are required at various stages.
The idea of a FFS is that it does not directly invest in startups but instead gives the capital to SEBI-registered alternative investment funds (AIFs), which in turn invest in growing startups across the country through equity and equity-linked methods.
This was popularly known as the “daughter fund.”
FFS is essential to the Indian startup ecosystem’s ability to motivate domestic funding. The government has committed the FFS of the corpus of INR 10,000 crore and INR 7,527.95 crore to the AIFs.
According to the Ministry of Commerce, this will be the case as of November 30, 2022.These AIFs, in turn, have invested cores in performing startups, and their valuation has increased more than tenfold with the help of the FFS, with some achieving unicorn status.
The Small Industries Development Bank of India, abbreviated as SIDBI, is tasked with overseeing the proper distribution of committed capital and the appropriate investment of daughter funds in appropriate ideas.
The SISFS, on the other hand, has a corpus of INR 945 crore with the mission to provide investment and assistance to startups to develop prototypes, conduct trials of products, enter the market, and commercialize their products and ideas. INR 455.25 crore has been approved for 126 incubators, of which INR 186.15 crore has been disbursed.
The current status of the Indian startup ecosystem shows that a total of 84,012 start-ups have been recognized by the government; nearly 60% of the total government-recognized start-ups are from states like Maharashtra, which takes the lead with 15,571
Apart from Maharashtra, Karnataka has 9,904 startups, Delhi has 9,588 startups, Gujarat has 7,719 startups, and Uttar Pradesh has 5,877 startups, becoming the top 5 states to have growing startups.