A committee comprising the bigwigs from alternative investment fund community has estimated that the Indian entrepreneurial ecosystem would require $55 billion over the next decade and half of the amount should come as debt to support entrepreneurial activities in the country. The committee has also called for a cap of Rs 5 crore to define angel investment by an individual, besides asking for a government-sponsored fund of fund worth Rs 5,000 crore and measures to allow pension and insurance funds to invest 1-2 per cent of their corpus in early-stage VC funds among various other measures.
The committee consisted of key individuals across investment stages (angel, venture capital and private equity) including Saurabh Srivastava (Indian Angel Network), Anand Ladsariya (Mumbai Angels), Alok Mittal (Canaan Partners), Jayant Sinha (Omidyar Network), Ashish Dhawan (founder of ChrysCapital) and Sumir Chadha (Westbridge Capital), among others.
In its report presented two months ago, the committee has pointed out that India has the potential to build 2,500 successful startups, which would require at least 10,000 startups in the ecosystem (assuming one out of four startups would be able to develop a scalable venture). It has, however, added that the current system is far below the potential as just around Rs 100 crore worth of angel investments were recorded in 2011 in the country, which would need to grow to Rs 3,500 crore annually over the course of next 10 years.
Even early-stage VC investments (sub-$10 million deals) were much below the potential, having clocked Rs 1,200 crore in 2011, as against Rs 29,000 crore in comparable investments in the US and Rs 3,000 crore in China. The report states that such investments might grow to Rs 14,000 crore annually in India in the next decade.
Here are the key measures proposed by the committee: