The VC Industry Has Been Asked To Submit A Paper Enlisting The Problems In A Startup Ecosystem


India’s venture capital industry has been asked to submit a white paper with policy recommendations to the regulators to help address a number of issues raised by the stakeholders in the startup landscape, a media report claimed.


The development comes after a roundtable organised by Startup India, the government-sponsored initiative under the Ministry of Commerce, which was chaired by Union Commerce Minister Suresh Prabhu and attended by country’s top venture capital and debt funds as well as representatives of Department of Industrial Policy and Promotion (DIPP), Small Industries Development Bank of India (Sidbi), markets regulator Securities and Exchange Board of India (Sebi), Department of Revenue and Department of Economic Affairs.

The recommendations will be submitted by the Indian Private Equity and Venture Capital Association (IVCA), a nodal body for the risk capital sector in India.

Previously, too industry representatives have met regulatory bodies. Investment funds, such as Blume Ventures and Trifecta Capital, have been beneficiaries of capital from Sidbi, Electronic Development Fund, and Technology Development Board, among others.

Last year, NITI Aayog had also organised the Champions of Change event, which focussed on both the startup as well as the investor ecosystem.

What are the issues that are being focussed on?

The recommendations are expected to be around taxation issues, change in employee stock options treatment, greater availability of capital and easing of the fund-of-funds regime.

Other key issues raised by the fund managers during the brainstorming session included taxation of alternative investment funds (AIFs) as a pooled vehicle, their potential listing to enhance liquidity for investors, increasing for investors, increasing the availability of domestic pool of capital, investment in AIFs by different entities which have not been covered so far and supporting the environment for ease of doing business for startups.

The VC industry also raised the issue of possible allocation of capital by various ministries to AIFs.

As of now, the various pools of capital available from the government have multiple end-use requirements, making it operationally difficult for money managers It leads to a low drawdown of capital.

What can be expected from this?

“The idea was to understand the different regulatory issues faced by venture capital firms so that they can be taken up by the concerned authorities for further resolution,”

said Mohammad Mustafa, chairman, Sidbi.

Hasty actions have been promised by those in power.

“The minister said whatever we are proposing, should be done as a white paper or policy recommendations, and presented to the respective stakeholders,”

said Karthik Reddy, managing partner, Blume Ventures.

Rahul Khanna, managing partner, Trifecta Capital is of the opinion that this was an excellent move by the government.

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