Financial Express: March 2, 2013
Finance minister P Chidambarams new measures to support the countrys start-up ecosystem, including recognising angel investment, giving CSR status to tech incubators within academic institutions and providing a pass through status for venture capital funds, has struck the right chords.
Chidambaram said that angel investors, who currently do not qualify under any category of Securities and Exchange Board of Indias (Sebi) alternative investment funds (AIFs), will now be recognised under Category-1 of the same, joining venture capital funds, social venture and SME funds.
This will encourage local fund managers to set up AIFs for raising risk capital for startups within India. This move will definitely support the startup scene in the country, said Sunil Goyal, CEO, YourNest Angel Fund.
Angel investment is critical for the country in terms of job creation and investments and is a free flowing activity around the world, Padmaja Ruparel, president, Indian Angel Network (IAN) told FE, adding that We will work with Sebi to see in what manner AIF Category-1 can be applied to angel investors.
Booting startups may now become easier due to the announcement of granting CSR status to technology incubation funding within education institutions. The industry however feels that currently more such incubation activities take seed outside educational institutions, and hence want this provision to apply to private incubators as well.
But the government sees this as a first step towards that. This will provide the commercial knowledge that is required for the budding entrepreneurs at the academic institutions. If the corporates give money they will monitor those incubators and foster a partnership there. We are looking beyond capital here, Harkesh Mittal, secretary, Technology Development Board (TDB), told FE.
He added that since the government has announced its plan to develop 1,000 incubators in the country over the next five years from the current 120 this will give the resources and capital for achieving that target.
The FM also pointed out that, venture capital funds have been allowed pass through status under the Income-Tax Act. TCM Sundaram, founder and MD, IDG Ventures India Advisors, says this doesnt change anything at the ground level as VCs have already got pass through status last year. This is just a transfer from domestic VC funds to AIFs, he said.