The idea of a multi-billion-dollar desi fund, floated by Kris Gopalakrishnan, is to bridge the local funding gap in the Indian startup ecosystem.

Indian billionaires mull desi startup fund to counter foreign investorsImage for representation
Atom Fund Raising Thursday, January 04, 2018 - 10:08
Written by  S. Mahadevan

The disproportionate amount of investments pouring into Indian startups from overseas sources is being seen as a cause for concern, especially when compared to homegrown entities loosening their purse-strings. This has caused some of the prominent Indian investors like Kris Gopalakrishnan to start a campaign to encourage high net worth individuals and families to invest in Indian startups, according to a report in VCCircle.

To put this in perspective, in a country like China, over 60% of the capital raised by local startups has come from local investors, whereas the corresponding figure in the Indian context is only around 10%. The remaining 90% is being picked up by foreign investors led by SoftBank from Japan and Tencent from China and others.

The idea now being floated is that of setting up a multi-billion-dollar desi fund that can take care of this huge gap. Kris Gopalakrishnan himself runs an investment firm Axilor Ventures and has invested in over 60 companies through this and also through networks like Indian Angel Network and so on.

The report states that Indian venture capital funds and individual investors have been backing early-stage startups, writing cheques with an average size of $2 million or so but investments at the growth stage typically come from foreign investors.

Secondly, their individual investments are of a small ticket in nature. Examples are being cited of the investments in Indian startups like Paytm, Ola and Flipkart total a whopping $6.3 billion a majority came from these foreign investors like SoftBank and Tencent. There are many more such startups which need such huge funds of similar order and as of now no Indian investor may be prepared to come up with the funds. Hence the idea of a large fund.

Besides just the financial involvement by the foreign investors, there are also fears of these startups growing in the Indian ecosystem but turning out to be foreign owned in due course of time. People like T.V. Mohandas Pai, an avid investor of funds in Indian startups are quite vocal about such fears and feel some drastic actions need to be initiated.

In his assessment, India is poised to create a wealth of over 100,000 startups turned active companies, with a valuation of around $500 million and could be employing 3.5 million people. He wishes that a major portion of this value should be in the hands of Indians.

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