Union Cabinet approves proposal to establish a Fund of Funds for Start-ups

The Union Cabinet on 22 March 2017 approved the proposal to establish the Fund of Funds of Start-ups (FFS).

The Union Cabinet in 2016 approved the proposal to establish a Fund of Funds for Start-ups (FFS) with a total corpus of Rs 10000 crore.

Key Highlights
• Alternate Investment Funds (AIFs) supported by FFS shall invest at least twice the amount of contribution received from FFS in Start-ups.
• If the amount committed for a Start-up in whole has not been released before a Start-up ceases to be so, the balance funding can continue thereafter.
• It was also decided that operating expenses will be met out of the FFS to the extent of 0.50 per cent of the commitments made to AIFs and outstanding.
• The operating expenses including carrying out due diligence, legal and technical appraisal, convening meeting of Venture Capital Investment Committee, etc.
• The operating expenses will be debited to the fund at the beginning of each half year that is on 1 April and 1 October.

About Fund of Funds for Start-ups
• The Fund of Funds for Start-ups was approved by Union Government in the year 2016 itself.
• It was decided that the FFS shall contribute to the corpus of Alternative Investment Funds (AIFs) for investing in equity and equity linked instruments.
• The FFS is being managed and operated by Small Industries Development Bank of India (SIDBI).  
• FFS contributes to SEBI registered Alternative Investment Funds (AIFs) that may go up to a maximum of 35 per cent of the corpus of the AIF concerned.