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Interview: ‘Trying to get non-resident HNIs to invest directly in startups based out of Kerala’

Kerala’s Secretary to Chief Minister and Secretary to the Department of Electronics & IT, M Sivasankaran said that the state government set up a fund of funds to provide better financing options to home-grown startups.

Written by Pranav Mukul | Updated: September 29, 2019 12:30:11 am
interview: Secretary to Department of Electronics & IT, kerala M Sivasankaran

Educational-tech startup Byju’s may have a Kerala-born founder in Byju Raveendran but the company — valued at around
$6 billion — is based out of Bengaluru. This is one of the concerns that the Kerala government faced when it came to entrepreneurship — while in the early stage, the companies would be nurtured in the state, eventually the search for better access to funds would lead them out to Bengaluru or Mumbai.

Speaking with The Indian Express on the sidelines of Huddle Kerala event in Thiruvananthapuram, Kerala’s Secretary to Chief Minister and Secretary to the Department of Electronics & IT, M Sivasankaran said that the state government set up a fund of funds to provide better financing options to home-grown startups. Going ahead, he said, the state is also planning to tap high-net worth individuals in the Middle East, the US and Europe to invest in various projects in Kerala, including in startups.

What concerns, specific to Kerala, did the state government face in its attempt to boost the startup ecosystem?

Earlier, we used to have a large number of startups coming from educational institutes. The model that we had was that we would have a touch point in every professional college — we started with tech colleges and extended to arts and science colleges. A student who has an idea would come to IED (innovation, entrepreneurship development) cell and they would assess whether the idea is worth pursuing. They would take to the next level, some evaluation would happen and they would take it to state level where some tie-up would happen. But we realised that the students per se will not be able to run in a sustained way. So, the first challenge that we had was to how to change this IED cell-oriented, student-dominated startups to more serious and sustainable startups. We started working with companies and asked them to incubate startups.

Were there issues relating to fundraising as well?

When startups became of a particular size, they needed to have funds to grow. This funding system here is very limited — banks, collaterals, etc. So companies moved to either Bengaluru or Mumbai to access the funding ecosystem. That we tried to solve by setting up a fund of funds, where government would invest X amount and the startup also invests X amount, and so 2X amount is available. State government initially gave Rs 15 crore and we had two Sebi-accredited funds that brought in an equal amount of money. So put together a corpus of Rs 30 crore was set up in 2017-18 and this money was supposed to be used in three years but got over in just a year. Now, we have started a second round where instead of Rs 15 crore, we will put in Rs 25 crore, and the funds are bringing in Rs 50 crore. This was approved in 2018-19.

Is that amount enough?

We are also trying to get high-net worth individuals (HNIs) to do this investment directly. That process has started and we are primarily looking at NRIs — in the Middle East, the US and Europe. The first interaction is happening in the Middle East from October 1-5 — the Chief Minister is taking a delegation there. For the US and Europe also, we have started the process and we will have this built up over the years.

Do you have a target amount in mind that you hope to raise from HNIs abroad?

There was a proposal that overseas non-resident Keralites can put together a corpus and invest in specific projects. These specific projects will be discussed with the Chief Minister’s delegation. There’s a semi-high speed rail project called Silverline, which is a Rs 55,000-crore project. These kind of projects will be showcased. To what extent will they be able to invest is not known but these are big projects. We will also tell them that the deposit of non-resident Keralites in Indian banks amounts to Rs 42,000 crore. If we use 10 per cent of that — Rs 4,200 crore — to be invested in startups over a period of time, it is a big amount. How to enable them to work on that is what we are trying to do.

(The correspondent was in Thiruvananthapuram at the invite of Kerala Startup Mission)

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