Bangalore: India’s software lobby group National Association of Software and Service Companies (Nasscom) hopes to stimulate early-stage investment in the country with an innovation fund it has started with ICICI Knowledge Park (IKP).
The Nasscom-ICICI Knowledge Park Innovation Fund (NIIF) has already mopped up about half of the targeted Rs100 crore from companies that include Tata Consultancy Services Ltd (TCS) and Bharti Enterprises Ltd, and IKP. The government is also pitching in with a matching contribution through its science and technology department.
NIIF aims at encouraging entrepreneurs who do not have easy access to seed funding. The fund will invest in emerging mass-market technologies such as speech recognition, which are relevant in domestic sectors such as automotive, wireless, medical devices and bio-informatics, said Rajdeep Sahrawat, vice-president at Nasscom.
TCS has contributed Rs10 crore, and Bharti and IKP have invested Rs5 crore each in NIIF, while a Mumbai-based large auto firm and a Hyderabad-based IT services firm have shown interest, he said.
NIIF will approach domestic finanical institutions to raise the remaining Rs50 crore, and may even raise the fund size to Rs250 crore if it succeeds in its initial investments, Sahrawat said.
Venture capitalists (VCs) have traditionally avoided seed funding because they think it is too risky. “It’s only in the past two-three years that seed funding has been looked at seriously by VCs,” said Arun Natarajan, founder of Venture Intelligence, a service owned by TSJ Media Pvt. Ltd that tracks VC investments in the country.
Experts say most VC firms do not fund a firm starting from scratch. Also, as most VC funds invest above $3 million (Rs12.42 crore), they do not want to make deals that are below the million-dollar mark. In India, VCs such as Erasmic Venture Fund, Seed Fund of Seed Advisors Pvt. Ltd and Venture East are among those that are active in seed funding in the past couple of years.
Nasscom’s fund will soon start investing, aiming to help start-ups become “VC ready” by providing them with seed funding at the idea stage and nurture them to a level when VCs can invest in them, Sahrawat said. NIIF aims to stay invested for four-seven years in the companies.
NIIF is currently registering itself with markets regulator Securities and Exchange Board of India and would have a professional team to execute investments.
“We are already getting a lot of queries from entrepreneurs, and our target is to have three-four good quality investments in the first 12 months,” Sahrawat said. As the fund is backed by large technology firms, entrepreneurs can look forward to strong mentoring from domain experts in these companies. “Once people see the viability of the model, we expect more companies to participate in the fund,” he added.