Public funding landscape in India for new venture startups

Abstract

1) The scarcity of VC funding establishments, angel funding networks and incubators as of todayis limiting India’s potential of the vast amount of talent and ideas that the country can generate. To do straight comparison with US on the early-stage funding space, US has 350K angel investors worth USD 30 bn into 60K new ventures, whereas in India, only USD 22 mn out of the USD 2 bn went into start-ups. 2) Even if we look at the entire start-up funding space, the share of angel funding is alarmingly low. The purpose of angel funding is to encourage potential ideas so that a project is not killed at its very initial stages itself due to the lack of funds. Angel funding helps not only in providing the seed fund but also to see though the initial developments e.g., the prototype building stage. The lack of sufficient amount of angel funding can curb innovation at its very initial stages which could have otherwise become potential business opportunities. However, India lacks the support from the investors for angel funding. 3) Also, to cater to the regulatory requirements of the venture capital organizations, we see more investments coming through for projects which would need a crore plus investment and not so much for sub-crore start-ups. 4) Also the Indian start-up space being a regulated regime, only few financially sound investors can participate in this market. The smaller investors who are very prevalent in the public capital markets don’t have much of role as the start-ups can’t have sustainable benefits with these small investments.