Government of India May Allow LIC, EPFO to Invest in Startups

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It’s raining money for Indian startups. After SEBI relaxed its guidelines for listing a company in the stock market, many startup unicorns have started gearing up to float their IPO. The humongous success of Zomato, the first startup unicorn in India that went public, has fueled the fire, and now more than 10 startup unicorns, including Paytm, Nykaa, PolicyBazaar, are ready to float their IPO this year. Industry experts believe that the list would be even much longer next year as many more startups in India are buys in raising a pre-IPO round of investment this year, aiming 2022 to go for listing in the stock market. Guess, who is minting the most of such craziness, excitement, and overwhelming response to stocks of startups? Not founders, it is investors who invested in startups at an early stage!

Realizing the enormous potential in startups, albeit late, and to reap the benefits of market sentiments, the government of India is preparing a strategy to bring together investors and startups on a single platform. LIC and Employees Provident Fund Organization (EPFO), are two of the many organizations that will fund startups.

Sidbi is currently preparing the platform. Sidbi already manages a fund to support Indian startups. LIC and EPFO have now come forward expressing their interest at a meeting of the National Startup Advisory Council, chaired by Piyush Goyal, commerce and industry minister.

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LIC, EPGO Fund Startups: Big Picture

  • The key focus of the government is to invest in startups in the early stages.
  • The efforts are being made to build a stronger ecosystem of angel investors in India. To put things in perspective, India has just 6,000 angel investors while the US has over 3 lakh angel investors who invest in startups during the early stage.
  • The government is reportedly considering a mentorship program also. The idea is to set up a match-making platform, something similar to YCombinator.
  • The platform will help entrepreneurs and investors for matchmaking and expands the field. 
  • These moves were made amid renewed support for startups by government policies.
  • Investors are bullish about the growth of indian stratups in future. In 1H 2021, a whopping $12.1 billion was poured by Venture Capitislsts, which is much more than the total VC investment made in the whole 2020.

“The government is committed to cut red tape, improve ease of doing business, provide financial assistance through startup seed fund, supporting incubators, enhancing skills and this holistic approach has intended to resolve the issues relating to capital mobilisation, support innovation with tinkering labs, and meet the capacity and capability requirements of startups,” Piyush Goyal, said at the meeting.

Food For Thought

Undoubtedly, the government’s initiative, if executed in a well-defined manner, would help a lot to thousands of aspiring startup entrepreneurs in India who find it difficult to sail especially at the early stage due to the non-availability of funds. The increasing demand for talent in India has made the journey for bootstrapping and early-stage startup entrepreneurs even more difficult as the hiring cost and salaries have gone through the roof.

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