Hyderabad: Telangana State will soon come out with a Fund of Funds (FoF) to support the startup ecosystem. This move will also help the State better its ease of doing business ratings. While the size and components of the fund are yet to be finalised, it is likely to ready by October, said IT Principal Secretary Jayesh Ranjan.
“We are now in the process of finalising the FoF. Funding is one of the criteria, the Union Government looks into while ranking States on startup ecosystem. And we don’t want to lag,” Ranjan said at the HS-X, the annual entrepreneurship conclave held by HeadStart, a startup enabler.
The idea for a FoF has been around for some time. The rise of startup ecosystem in the State, particularly through the T-Hub and other agencies, has brought back the focus on the fund. The Government so far has not invested in any startup directly but instead focused on creating an enabling ecosystem like the T-Hub, WeHub, RICH, T-Works and the related agencies for startups.
“Access to funds by startup is not difficult now. However, we want to ease the process further by creating a FoF,” he said.
FoF will provide a predictable and stable source of funding for the startups and thereby facilitate employment creation.
How will this help?
According to Viiveck Verma, co-founder and investor, IIIT Seed Fund, the FoF will mean that Government will lend its weight to the startup ecosystem.
“Investors are not sure about their investments. But starting a FoF gives a clear signal to the investor community that government is backing the startups. This will boost the confidence of investors and will come forward to invest,” he explained.
The investment decisions in a FoF are generally done by the investment committee, which will comprise of investors and Government invitees, he said.
FoF will accelerate innovation-driven entrepreneurship and business creation and also address challenges faced by startups such as limited availability of domestic risk capital and constraints of conventional bank finance and lack of handholding support. This will also encourage greater participation of private capital and help leverage mobilisation of larger resources to build scalable busineses from startups, he said.