Venture capital fund for software

NEW DELHI, Mar 22: Having set an ambitious 10 billion dollar software export target by the end of the Ninth Five Year Plan period, the go...

NEW DELHI, Mar 22: Having set an ambitious 10 billion dollar software export target by the end of the Ninth Five Year Plan period, the government is launching a venture capital fund to give the much-needed financial prop to the software industry.

Armed with a global Information Technology IT industry analysis which reveals that access to venture capital funds is pivotal in giving a thrust to the IT industry and developing a higher level of software industry, the Department of Electronics is ready with a scheme to promote the venture capital fund.

One reason for the lack of financing, the single biggest bottleneck for the full-throttle growth of the IT industry, is that the banking industry in India is security-oriented and conservative.

quot;Unlike other sectors, the software industry has no stocks or securities to pledge which is why this venture capital fund will be so importantquot;, says Ravindra Gupta, Secretary, Department of Electronics DoE.

Among other steps, the DoE expects the Reserve Bank ofIndia to issue shortly a circular to all banks to facilitate financing of software enterprises. quot;What was lacking was a proper framework. Amending the Companies Act to bring in the concept of sweat equity and amendments to the income tax guidelines are next on the anvil,quot; said Gupta. According to the DoE, both Sidbi and ICICI are agreeable to small and medium enterprises with a tentative size of Rs 100 crore. Sidbi is currently working on a two-tier structure, comprising of a trust management and assets management company, both of which should be ticking within a couple of months.

With potential entrepreneurs unaware of the pitfalls that could come their way, one idea that has caught on is to rope in successful non-resident Indian IT professionals with experience in managing venture capital funds in Silicon Valley.

Gupta proposes to bring in quot;angelsquot;, working professionals from the IT industry, the kind of cyber and management wizkids rolled into one that Silicon Valley abounds in. quot;These will be the guyswith the quot;big ideasquot; who would promote the start-ups of software projects, do some hand-holding to help avoid the usual potholes and kick-start the project,quot; he said.