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Two cheers for sarkari tech startups

columns Updated: Jul 16, 2014 15:56 IST
N Madhavan
Financing start-ups

Financing start-ups is a romantic idea – and when the government does it, one begins to wonder about the details.

Finance Minister Arun Jaitley’s first budget has proposed a Rs. 10,000-crore fund for start-ups and entrepreneurs, and has been welcomed with cheers.

But this is not the first time the BJP has walked on this path. The Small Industries Development Bank of India (SIDBI) had launched a Rs. 100-crore fund (not a small amount then) called the National Venture Fund for Software and IT Industry (NFSIT) and it was launched by none other than Prime Minister Shri Atal Behari Vajpayee on December 10, 1999 in the presence of the then finance minister Yashwant Sinha and then IT minister, late Pramod Mahajan.

It would be interesting to find out what really happened to that fund. Did it succeed?

I am a bit sceptical about government funding start-ups without a clear idea of what it seeks to achieve. In Silicon Valley, venture funds are not mere financiers. They add value through advice, relationships and strategic support. It is simply not clear how a sarkari set-up in India will do it.

Also, there is an upside needed for the government, if it plays venture capitalist. If the funding of a start-up leads to big gains, will the government ensure that it also gets a windfall? As a taxpayer whose money goes into such a fund, I would not mind that.

The government owes it to us to explain how it will do this.