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Below The Impact of Budget on Startup Funding and Venture Capital Ecosystem By Mr. Harsh Bhuta, Partner, Bhuta Shah and Co LLP.

Between January and November 2023, Indian startups raised $6.9 billion through 1,013 venture capital deals, marking a 66% decline from the $20.2 billion raised during the same period in 2022, as per GlobalData. To bolster startup funding, Alternative Investment Funds (AIFs) have secured commitments exceeding Rs.91,000 crore, backed by a Rs.10,000 crore Fund of Funds (FFS) set up by the Indian government.

Building on this initiative, Finance Minister Nirmala Sitharaman announced a new Fund of Funds scheme with an expanded scope and an additional Rs.10,000 crore contribution. Initially launched in 2016, the FFS has played a crucial role in supporting startups across different growth stages while reducing reliance on foreign capital. Sitharaman emphasized that the new fund will not only aid emerging entrepreneurs but also drive domestic capital investment, strengthening India's position in the global startup ecosystem and fostering homegrown venture capital funds.

The Rs.10,000 crore Fund of Funds (FFS) will boost startup growth, raising their GDP contribution from 3-4% currently. The new FFS will catalyze domestic capital and encourage long-term investment in India’s startup ecosystem. By focusing on early-stage and growth-stage startups, it can drive innovation, create jobs, and ensure economic resilience. This initiative, coupled with the expected revival of global VC funding by 2025, positions India for sustained long-term growth in the startup sector.

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