SIDBI broadens its North-East focus with Assam Startup Venture Fund

Having travelled the length and breadth of the country looking for startup stories, I have noticed that Northeast India doesn’t make it to the headlines very often. During my conversation with Sivasubramanian Ramann, the chairman of SIDBI, I realised that he had a similar view. 

With a population of over 45 million and a literacy rate that exceeds the national average, India’s Northeast region holds immense growth potential. The culturally rich region is a fertile ground for entrepreneurship to grow and thrive. While there are over 900 startups from Northeast India, it is merely a drop in the ocean. SIDBI recognised this early and vowed to initiate a transformation. 

As an institution tasked with the financing and development of MSMEs, SIDBI has taken a conscious effort to catalyse entrepreneurship in Northeast India. Sivasubramanian Ramann, the chairman and managing director of SIDBI, believes that entrepreneurial activities in the region have only scratched the surface. 

“The Northeast region is a focus for us because we feel that not enough has happened. We see a hunger amongst the people to build. The rich cultural and educational progress is a signal that a lot more can happen,” he says in an exclusive interview to YourStory.  

SIDBI is keen to energise the region’s startups. It has partnered with several state governments in Northeast India to build a funding ecosystem for entrepreneurship. In fact, Himanta Biswa Sarma, the chief minister of Assam, was among the first officials to seek collaboration with SIDBI. 

Ramann adds that SIDBI has committed Rs 50 crore to the Assam Startup Venture Capital Fund while the state government will pitch in with Rs 100 crore. The funding has already been approved and the documentation is being formalised at present.

A similar initiative has been launched in Tripura as well, where the state government has contributed Rs 15 crore, and SIDBI will offer Rs 10 crore. 

Building the fund of funds 

The Fund of Funds for Startups (FFS) scheme, approved in 2016, is operated by SIDBI. This scheme does not directly invest in startups but provides capital to Alternative Investment Funds (AIFs) or daughter funds. These AIFs, registered with market regulator Sebi, invest money into startups through equity and equity-linked instruments. SIDBI is responsible for the selection of these daughter funds and overseeing the disbursal of committed capital. 

As of December 31, 2022, ~Rs. 3,400 crore has been disbursed to 72 AIFs which have, in turn, made investments of Rs 14,077 crore in 791 startups. Ramann explains that SIDBI is on the quest to identify eligible startups in the Northeast to deploy AIF funds. 

“IIM Calcutta has a satellite in Guwahati, where they are running an incubation centre for startups. SIDBI is making use of their expertise and selecting startups from their centre for funding possibilities,” he adds. 

While Assam’s startup fund will be fully operational in the next few months, the Tripura funds are ready for disbursement. Ramann explains that it will be disbursed in multiple tranches. 

SIDBI’s “Look East” policy has expanded to include locations such as Odisha as well. Startup Odisha, a flagship scheme of the state government to promote entrepreneurship, has roped in SIDBI to manage its funds. Ramann says that SIDBI will also contribute towards this mission and enable a vibrant ecosystem for startups in Odisha. 

“Odisha can be cited as an example of transformation in the country. Take essential services such as healthcare where the primary health centres in the state are widely preferred over private facilities. To boost innovation and entrepreneurship, we will run the startup fund for the state,” says Ramann. 

Reiterating the fair process of selection, he adds that SIDBI follows a transparent system of identifying and vetting AIFs. This is followed by fund disbursal to the AIFs where SIDBI takes the role of a Limited Partner or LP. In effect, he believes that the model enables the creation of sustainable institutions that run like a well-oiled funding machine. 

Enabling viable business runways 

Early-stage startups typically approach venture capital firms to seek investments. However, the high barriers to entry and stringent investment conditions sometimes act as a deterrent for grassroots entrepreneurs. SIDBI has decided to take the road less travelled. 

“SIDBI’s FFS scheme is respected in the country because we don’t really care who you are. As an entrepreneur, if you check the boxes and do the right things, you will get the money,” he adds. 

With ~15 million businesses registered under the Goods and Services Tax (GST) regime, Ramann understands that at least one-third of these entities are in need of discoverability and visibility. 

“It is our job to ensure that these ventures get the visibility that they deserve. Hence, the message that I give my team is ‘Get out of our glass cabins. Go meet people and understand their needs’. That is what SIDBI is here for,” he says. 

As SIDBI makes deeper inroads into Bharat, Ramann and his organisation, have a long way to go. He considers his role fruitful when a startup graduates from being an MSME into a large company.

“When entrepreneurs come to me and say that they are no longer eligible for SIDBI funding because their startup’s revenue exceeds Rs 250 crore, that is success,” he says. 

Slowly but surely, SIDBI is helping thousands of startups shed the MSME tag. It is a signal that Ramann’s bets are working well.